The primary market for euro benchmark covered bonds could reopen as early as next week, according to some syndicate bankers, with issuers from northern Europe considering capitalising on an early end to the holidays, although they may opt for other instruments.

The last euro benchmark covered bond, a €500m five year from South Korea’s Kookmin Bank, was launched almost five weeks ago, on 8 July, while the last CBPP3-eligble benchmark, a €500m eight year from Berlin Hyp, was launched as far back as 30 June, with Norway’s Sparebanken Vest providing the only supply between the two, a €500m seven year on 1 July.

Last year Berlin Hyp reopened the primary market in the third full week of August, with a €1bn three year on 20 August, and a syndicate banker said today (Monday) that there is now an early willingness from issuers in northern Europe to look into the market, with next week potentially marking an end to the summer break.

“The feeling is that it’s not going to be quiet for a long time,” he said, “so I sense a quiet week this week, and then afterwards, let’s see.”

Having returned from their holidays, issuers from the Benelux and the Nordics, for example, are seriously considering tapping the market from Monday onwards, according to another syndicate banker, although it is not certain covered bonds will prove their weapon of choice.

“They’re more or less buying into the argument that they could have an advantage of being at their desks one to two weeks ahead of their colleagues further south,” he said.

“Would I recommend covered bonds?” Perhaps not,” he added, “because if the fall is going to be rough, I would rather have done the more difficult transactions first and leave the easier ones for a rainy day.”

Another syndicate banker said that while it is not impossible the market reopens next week, he does not expect it to do so either next week or in the last week of August, even if traditionally the first post-summer issuance occurs before September.

“It’s getting more likely that we will witness a restart,” he said, “but there is no urgency – so it’s not about to get red hot in the foreseeable future.

“From the DCM side,” he added, “it seems a clear ‘thanks, but no thanks’ attitude on behalf of the issuers we cover – but never say never.”

He noted that central bank support measures are continuing to support the market.

“We’re not going to significant widening of spreads for the weeks and months to come,” he said.

However, one of the more expectant bankers said the stability seen in the market is fragile and could be easily torn apart.

“Any headline that hits people the wrong way, or any primary market transaction that does not go as planned, could be enough to shake this stability we have seen recently,” he said.

“The stable fall window could be a short four weeks,” he added, “from mid-August to September when the European Union starts bombarding the market with offerings that are bound to get attention.”

He said the roughly €10bn of additional monthly SSA issuance could significantly divert attention from the covered bond sector, among others.

“Ours could be the first to be hit,” he said, “because if investors find they can buy 0% risk-weighted assets at an attractive spread, they will certainly rather be doing that than buying foreign covered bond debt.”