BNZ is set to launch a seven year euro benchmark covered bond tomorrow (Tuesday) while Commerzbank and Oma have lined up taps. Despite a quiet start, primary markets are expected to be active this week, with covered bonds potentially at the forefront amid volatility.

Only one euro deal was live in the FIG space today, a green senior benchmark for Handelsbanken. The quiet start to the week was attributed partly to new US-China trade war headlines, as the US draws up restrictions on Chinese investments, which has hit global equities.

“Risk assets are down across Europe and Asia today on the back of increased volatility upon the comments made out of the US, so it isn’t surprising that there’s only one resilient product – with the green element attached to it – that went live today,” said a syndicate banker. “Markets are very shifty right now, we’re talking one day up, one day down.”

Syndicate bankers still expect an active week in the primary market, with some issuers said to be keen to print deals before markets slow down into the summer break, which is widely expected to take effect in around two weeks. They said that in the changeable market environment, covered bonds are likely to be prominent.

“Considering the backlog, I think there’s a number of issuers that are looking at the market and potentially will go ahead at the first sign of stability,” said one. “If markets continue with this kind of sentiment, low beta covered bonds and green bonds will be at the forefront.”

Indeed, BNZ International Funding Limited opted for covereds over senior when announcing a mandate today for its seven year euro benchmark. The New Zealand issuer completed a roadshow marketing a senior unsecured or covered bond euro benchmark transaction on Friday.

The deal is expected to be launched tomorrow, subject to market conditions. Barclays, DZ Bank, HSBC and NAB have the mandate.

It will be the first euro benchmark covered bond from New Zealand since October 2017, when ASB Finance Limited sold a EUR500m seven year, and BNZ’s first since June 2017.

Commerzbank has mandated ABN Amro, Commerzbank, DZ, Santander and SG to lead manage a minimum EUR250m tap of its outstanding May 2025 Pfandbrief.

The EUR500m deal was priced at mid-swaps minus 9bp on 18 May and seen trading at around minus 11bp today.

Oma Savings Bank also announced a mandate this morning, for a EUR100m tap of its EUR250m December 2022 covered bond, via leads Danske, LBBW and Nordea. Syndicate bankers at the leads said the tap is expected to be tomorrow’s business, subject to market conditions.

The outstanding deal is Oma’s first and to date only sub-benchmark covered bond. It was priced at 1bp over mid-swaps last December and seen at around 2bp, mid, today.