At least two peripheral issuers could sell benchmark covered bonds in September, say bankers, even though peripheral banks are likely to be focussed on unsecured markets after recent well-received senior deals from Italy and Spain.

On Thursday of last week Intesa Sanpaolo issued the first Italian senior unsecured bond since April and the first since Italian debt was hit hard by political uncertainties in the wake of its general election. It printed a EUR1bn seven year deal that attracted more than EUR1.7bn of orders.

Bankers said the issuer’s timing was wise, getting its deal done ahead of a potential renewal of volatility in the coming weeks, with Fitch to review Italy’s sovereign rating today (Friday) and the government set to update its deficit and growth forecasts on 27 September, while investors look ahead with uncertainty to the unveiling of the Italian government’s 2019 budget, due by 15 October.

Intesa Sanpaolo had earlier, on 4 June, reopened the Italian covered bond market, which had remained dormant after May’s political instability. While Intesa’s EUR1bn seven year reopener was well received, attracting demand of over EUR1.5bn, shorter-dated trades that followed from Mediobanca, BPER and Banco BPM paid successively wider spreads and attracted much less demand.

This Wednesday, Spain’s Banco de Sabadell launched the latest peripheral deal, printing a EUR750m long five year senior preferred on the back of EUR1bn of orders.

No benchmark covered bonds have emerged from the periphery since Banco BPM rounded off the wave of Italian supply on 18 July.

Syndicate bankers said peripheral covered bond issuance will remain limited for as long as peripheral issuers can continue to access the senior unsecured market continues at reasonable spread levels.

“As long as the market is open for unsecured funding, it makes sense for these issuers to focus on filling their MREL needs or building up additional loss-absorbing capacity,” said one. “Therefore I think we will not see a lot of covered bond supply from southern Europe, where for some issuers available covered bond collateral is limited anyway.

“We must wait and see how well the market can absorb these deals in unsecured format.”

However, at least two peripheral issuers are said to be considering potential covered bond issuances.

“There are not many, but there are at least two deals from southern Europe that are likely to materialise,” said a syndicate banker. “There is a question mark over whether these are for immediate execution, but they are likely to emerge at some point in September.”

Syndicate bankers said the covered bond market could in September still represent an attractive option for non-top tier issuers or issuers from countries where senior unsecured issuance would prove challenging.