The euro benchmark covered bond market took a breather today (Monday), after supply in the first fortnight of the year beat last year’s market reopening, with only a Santander Consumer Pfandbrief EUR250m Pfandbrief tap publicly announced, and mixed views around a rumoured MPS OBG.

Although the financial markets experienced an inauspicious first couple of days’ trading in the new year, sentiment recovered to the extent that issuance in the first two weeks of the year slightly exceeded the corresponding period of 2018, despite being one day shorter. Issuance to last Friday totalled EUR16.75bn, versus EUR16.25bn last year.

An analyst noted that this is a more impressive difference than the raw number suggests, given that the Eurosystem was in January 2018 still regularly taking 50% of CBPP3-eligible new issues, whereas this month it has typically been buying around 5% or lower.

A syndicate banker suggested that after this busy period a brief hiatus should come as no surprise – particularly with the UK parliament set to vote on the government’s EU withdrawal agreement tomorrow (Tuesday).

“Those who felt they should move more quickly are done, and the others who are not in such a rush are maybe waiting for new issue premiums to come down and even for the widening we have been seeing to ease,” he said. “And, of course, there are the usual suspects in the background – Brexit, Italy, Trump, etc – if you are looking for excuses.”

However, bankers said that the UK vote was not necessarily an obstacle, given that neither the vote nor the likely outcome were a surprise.

Speculation that Monte dei Paschi di Siena (Banca MPS) could sell a covered bond in the coming days met with a mixed response among covered bond bankers. A Bloomberg report on Friday suggested this was possible, while a Reuters article the same day suggested MPS would be revisiting a Tier 2 issue postponed late last year – the reports emerged after the Italian bank flagged ECB concerns about its capital position and profitability.

A banker involved in a EUR750m seven year reopening of the Italian market by Credem on Thursday said an OBG from MPS would be too high beta a credit for the current market, in spite of its compatriot’s success. But another syndicate banker – who said he was not involved in or aware of any concrete plans by MPS – was more optimistic.

“Why shouldn’t they?” he said. “The market sustained Credem and if they put a decent spread on it, I’m convinced it should work.”

The only publicly announced covered bond pipeline as of this morning was a tap for Santander Consumer Bank AG, which is expected tomorrow (Tuesday) with a EUR250m no-grow tap of its debut sub-benchmark Pfandbrief, a EUR250m 0.25% December 2024 mortgage-backed issue from November 2017. LBBW, Santander, SG and UniCredit are joint leads.