Italian covered bond new issue projects are on the cards again, syndicate officials said this (Thursday) morning, after the country’s coalition government survived a challenge (that wasn’t) from ex-prime minister Berlusconi that made for a volatile week for Italian assets.

Italy’s ruling coalition was endorsed by the country’s parliament in a vote of confidence yesterday (Wednesday), which prime minister Enrico Letta had called after Silvio Berlusconi over the weekend withdrew ministers from his party from the government. Berlusconi had initially announced that his party would vote against the ruling coalition, but when it became clear that many members would not toe the party line he performed a volte face to state that his party would support the government.

RBS analysts said that the news that the government could have survived despite Berlusconi’s intentions was welcomed by the market, although the survival of Letta’s administration had been priced in by the time Berlusconi announced his U-turn.

A syndicate official said that Italian assets outperformed yesterday, with government bonds 5bp tighter and senior unsecured and covered bond spreads also tightening, and stocks gaining. Another said that BTP spreads are roughly back to where they were toward the end of last week, but that they went through quite some volatility this week. Italian covered bond spreads have been more stable on the back of little flow and, although somewhat wider, the move was not material, he said.

After the political situation in Italy earlier this week looked like it would pull the rug from under covered bond new issue projects from Italian banks, the resolution of this week’s crisis has cleared the path again for OBG issuance, according to syndicate bankers.

This is seen as most relevant to Banca Popolare dell’Emilia Romagna (BPER) and Mediobanca, which have been roadshowing covered bond programmes – BPER finished its investor meetings on Wednesday, for which it mandated Citi, Mediobanca, RBS, Société Générale and UBS, while Mediobanca is still on the road, working with Barclays, Société Générale and UniCredit in addition to its own investment bank. Neither BPER nor Mediobanca have issued benchmark covered bonds before.

UBI Banca has also been mentioned as a possible new issue candidate.

A syndicate banker involved in one of the OBG roadshows said it was too early to make decisions about new issues and that US non-farm payrolls on Friday and negotiations surrounding the federal government shutdown in the US will need to be taken into account as well as feedback from the roadshow.

However, the likelihood of Italian covered bond issuance hitting the market is “significantly” higher than it was earlier this week following the improvement in sentiment, he said.

Another syndicate banker was also positive about the possibility of OBG supply being launched in the near future.

“I don’t see why Mediobanca and BPER wouldn’t come, or at least have the intention to do so,” he said. “The market is open for OBG names.”

However, he suggested that coming to market next week will not be a straightforward exercise, with many deals being lined up across asset classes, a planned Italian government bond sale also something to negotiate, and the political situation in the US still a risk.

“I expect next week to be very busy across the board and maturity spectrum,” he said. “People are betting that we will still be in this US mess by the middle of next week so you will probably see a rush to market.”