Korea Housing Finance Corporation (KHFC) is set to launch its latest euro-denominated social covered bond early next week and a couple of European issuers are eyeing the market, according to syndicate bankers, but supply is expected to remain limited as thoughts turn to seasonal preoccupations.

After announcing the mandate on Monday and engaging with investors this week, KHFC is expected to launch a five year Reg S/144A euro social covered bond early next week, subject to market conditions. BNP Paribas, DBS, HSBC and ING have the mandate.

A syndicate banker at one of the leads said KHFC’s €1bn five year social bond launched on 29 January was trading at 32bp over mid-swaps.

Only one euro benchmark hit the market this week, a €1.25bn 10 year for Rabobank on Wednesday, representing a sharp slowdown on the six issues for €4.75bn the previous week, which had been the busiest since mid-January. A syndicate banker said recent issues were generally trading slightly softer, suggesting the market is somewhat saturated.

“Bonds are defending their levels, but they don’t improve anymore,” he said. “So you may bring bonds, but don’t expect any fireworks here.”

He said a couple of European issuers are considering launching deals next week.

“I would be surprised if it were a no-trade week,” he added, “but I would also be surprised if it were a 10-trade week.”

Another syndicate banker said that although the market is solid, supply will remain limited, fuelling some scarcity demand for the asset class.

“There’s little reason to think things will get meaningfully disrupted from here,” he added.

He noted the approaching US public holiday next Friday (3 July) and quarter-end on Tuesday.

“Many European issuers are looking forward to booking their holidays and not worrying about getting more funding in at the moment,” he said. “Once you’ve squared up your book position for the quarter, you’re not really that bothered about putting on new positions.”

With the Eurosystem continuing to buy under its asset purchasing programmes, spreads will grind tighter over the course of the summer, the syndicate banker suggested, before an issuance window opens after the summer holidays.

“The prospect of a close US election may spook the market a bit,” he added, “as well as the prospect of a second wave. If you’re doing a transaction in the second half of the year, you might want to do it in September rather than November.”