Primary activity is this week expected to slow from last week’s heights, despite the segment holding firm against a downturn in broader market sentiment sparked by fresh lockdown fears. Bausparkasse Schwäbisch Hall is meanwhile targeting a debut benchmark later this year.

A syndicate banker said that while the covered bond landscape remains favourable, he expects supply to be limited, after last week nine issuers rushed to take advantage of robust market conditions with €7bn of supply in what was the busiest week for the primary market since mid-January.

“I don’t see a huge pipeline,” he said, “so while there might be a few, it will not be near the same pace as last week.”

Another syndicate banker echoed this sentiment.

“We’re not going to see anything close to what we saw last week,” he said.

Overall market sentiment was weaker this morning, as European stocks tumbled by the most in three months amid fears surrounding the imposition of tighter coronavirus restrictions, but another banker said the covered bond segment remained largely unaffected.

“It is something we have not seen for some time,” he said, “so it’s clearly news which needs to be digested, although covereds are holding pretty strong.”

A syndicate banker said that while it is almost certain that deals can still get done, it remains to be seen whether any issuer wishes to approach the market in the risk-off environment.

The last three euro benchmarks launched, a CCDJ €500m five year, CFF €1.25bn 10 year and Sparebanken Vest €500m long five year were trading around 0.5bp-2bp tighter than their re-offer levels, according to the banker.

“The euro ones were a bit less frenetic,” he said, “as the Canadian is 2bp tighter.

“it’s fair to say the market needed to take a breather for a moment,” he added. “I’m not saying whoever comes next will be late to the party – it’s OK to be a little late, but at some point there’s not much left besides getting drunk.”

Sumitomo Mitsui Trust Bank is possibly the most concrete prospect in the pipeline, having completed a European non-deal roadshow on Wednesday, ahead of a potential debut covered bond. Goldman Sachs, BNP Paribas and Crédit Agricole had the roadshow mandate.

Bausparkasse Schwäbisch Hall, Germany’s largest building society, is preparing to launch its inaugural euro benchmark covered bond in the next couple of months.

DZ Bank – which is part of the same group as the issuer – has been mandated to hold a series of fixed income investor calls tomorrow (Tuesday) and Wednesday. A banker said further investor calls would likely take place in October, with the issue expected to follow later that month or in early November.