A fall of more than 6% in the Nikkei overnight set a negative tone for European markets today (Thursday), but covered bond bankers said that deals remain possible, just with wider spreads and concessions, and that issuers should take a fresh look at conditions on Monday.

More than a week has passed without any new benchmark covered bond supply, and more than two since the last senior unsecured deal in euros, as fears that the end of quantitative easing is nigh contributed to a sell-off across markets.

According to one syndicate official go/no-go calls were cancelled this morning, while another said the wider situation is “definitely concerning”.

Secondary market covered bond spreads have experienced their most pronounced widening since the early stages of the third quarter of 2012, according to analysts. One noted that only a few sectors have shown a positive week-on-week performance, and then only marginally.

“On the widening side, however, the list of segments is quite broad and the losses are quite substantial, led by Spanish, Italian and Portuguese paper,” he added, also saying that a week-on-week widening of 4bp on French covered bonds was notable given the levels at which they have been trading.

A syndicate banker said that moves in the secondary market are only a limited indicator, however, and that the situation is balanced.

“You see buying and selling,” he said. “No-one is freaking out.”

And with net covered bond supply still strongly negative and issuers in deleveraging mode, investor appetite should ultimately remain steadfast, he said.

“I think everyone can do a deal, although everything looks ugly and wide now so I’m not sure it would make sense for the Italians to do it,” he said.

Credito Emiliano is one of several issuers that have been on roadshows recently. Aktia Bank finishes marketing a new programme this afternoon, New Zealand’s ASB Bank was also on the road this week, alongside Commerzbank, which has been presenting a public sector Pfandbrief programme to investors.

A syndicate banker at one of the Aktia leads – Crédit Agricole, JP Morgan, Nordea and UniCredit – said that a new issue is not this week’s business.

Other syndicate bankers were also constructive about the prospects for further supply, saying that deals for issuers in certain jurisdictions are still possible.

“Yields are still eye-watering on an historical basis, so I would think long term and lock them in,” said one.

Another said that recent deals in the corporate bond market show how new issue dynamics have changed for covered bonds, with deals coming with much wider new issue premiums and spreads, and reaching a “far more narrowly defined investor base”.

“This volatility and where senior and indices are trading does imply that levels have to be wider,” he said. “Recent pricing outcomes are not matchable.”

But deals for certain issuers would work, he added.

“The shine is not completely off,” he said, “but we have moved from a one way market to a very directional market.

“At some point there’ll be another Pfandbrief and then you’ll be off running again.”