Supply could pick up this week on the back of improving spread dynamics, with some European issuers circling, according to bankers, who said the successful execution and tightening of a €1.25bn seven year CRH deal issued on Thursday had imbued the market with confidence.

Caisse de Refinancement de l’Habitat’s transaction was the first new euro benchmark in over two weeks and attracted a book of more than €4.5bn, as well as achieving the tightest pricing and longest maturity in over a month.

DZ Bank analyst Thorsten Euler said CRH’s deal should encourage others to issue, considering it is the first euro benchmark with a maturity beyond five years since the beginning of March, and further, because it achieved a 5bp move from guidance to pricing.

“The allocation statistics of the CRH bond suggest a revival of demand from commercial banks and asset managers,” he added. “Compared to other French new issues in recent weeks, their allocation has increased noticeably and the allocation to central banks has decreased significantly in return.

“In this respect, at least the demand side appears to be willing to act on the primary market at current spread levels.”

As of this (Monday) morning the new issue had tightened some 5bp in the secondary market from its 31bp over mid-swaps re-offer spread, to trade at around 25bp-26bp over.

Following CRH’s execution, it is now far easier to calculate where names from other jurisdictions should price, said a syndicate banker, and the pipeline is subsequently filling up with some core and semi-core European.

“It’s a clear sign for price-sensitive names that they can issue,” he added, “as I can imagine they are a lot more familiar with the levels than they were a few weeks ago when you had to pay up plus 40bp. So I wouldn’t be surprised to see them approaching the market this week and next.”

He said the dislocated primary and secondary levels of around three weeks ago have been becoming more aligned, displaying signs of a “healthier” market.

“The point I would mention here is that there are buyers coming back in secondary,” he added, “compared to when only the central banks were buying there. Now we see flows on both ends – the buy-side as well as sell-side – and I think this will continue in the next few trading sessions.”

Only French and Canadian issuers have issued euro benchmarks since 6 March, and as a result the spread levels of most jurisdictions have not repriced to the same extent. Another syndicate banker said other curves will likely re-price fully following new issuance, but that the limited supply combined with the strength of demand should mean new issues are well received.

However, another banker said levels are probably still too wide for some issuers to consider launching a deal.

“The only thing I know for certain is that the Germans won’t play,” he added.

Many parts of continental Europe will officially and unofficially close this Friday due to May Day public and regional holidays, which the syndicate banker said will essentially make this a four day week for many countries.

“Let’s see whether investors and issuers alike take this as another non-week,” he said, “or whether there is someone who feels like sneaking in before the long weekend.”

Another suggested the ongoing reporting season could prove more of an impediment.

“With the lockdown, it’s not as if people are going to travel, so they might leave work a little bit early on the Thursday, but it’s not going to change the overall picture,” he said.

“I’d say it’s more at this point linked to how banks are going to start to communicate on earnings and the impact of Covid-19 rather than hurrying up with a covered bond transaction.”

He noted that although the last six Eurozone euro benchmarks have come from France, a couple of French issuers have not yet issued since the pandemic arose, but will soon emerge from blackouts – BNP Paribas and Société Générale report on Tuesday and Wednesday of next week (5 and 6 May).