Euro covered bond supply could continue deeper into the summer with potential seen for opportunistic issuance next week, after relatively encouraging results this week and with some issuers set to exit blackout periods, although liquidity is said to be tangibly drying up.

Two euro benchmark covered bonds were brought to market this week, a EUR750m five year issue for National Bank of Canada on Tuesday and a EUR500m long five year for Banco BPM on Wednesday.

Both deals were judged to have been relatively successful given the time of year and, in the case of Banco BPM, the ongoing difficulties specific to Italian paper. NBC’s deal was priced upon a final book of EUR1.1bn despite offering one of the smaller new issue premiums in recent weeks, while Banco BPM received more than EUR600m of orders, more than the previous two benchmarks from Italy.

Although no mandates have been announced for next week as of yet, bankers said there are potential candidates, as some Nordic banks reported their results this week and other European banks will follow next week, including issuers from Spain. They said this week’s results could encourage other issuers to come to market on an opportunistic basis before the summer break.

“The book for National was actually bigger than the one they got in March for a deal of the same size, so this week’s trades show the primary covered bond market is still constructive, as are markets overall,” said a syndicate banker who worked on both trades. “With some banks also coming out of blackout next week, there is potential for further supply next week, despite the traditional summer slowdown.

“The holiday is cancelled!”

The pace of supply is expected to remain slow, however, given that many banks will still be in their blackout periods and that some market participants will be on holiday.

“When we did the NBC transaction, we got the feeling that some portfolio managers were already on holiday,” said another syndicate banker at one of NBC’s leads. “Liquidity is dropping.

“There is still the possibility of deals, but it will be relatively quiet.”

So far this month, EUR10bn of euro benchmark covered bonds have been issued, including taps, making it the third busiest month of July in the history of the market.

Issuance has already continued deeper into the summer than it did last year, when the last euro benchmark before the summer break was launched on 11 July. In 2016 the last deal came on 20 July, but in 2015 – the second busiest July in the market’s history – the summer break did not come until the start of August.

Bankers said it is hard to predict when the market will pause this year, given that issuers contemplating when they should enter the market must this year consider unique drivers, including an anticipated widening of spreads and greater susceptibility to volatility later in the year as the end of the ECB’s QE programme nears.

Other factors could also push issuers to make use of the market sooner rather than later, say bankers, such as the need to replace TLTRO II funding.