The European covered bond primary market saw €13.5 billion of benchmark deals issued over the last five trading days.

According Societe Generale analysts, three benchmark deals are being marketed and two are being offered with long-dated maturities.

With total issuance at nearly €50 billion, 2011 volumes are ahead of what SocGen analysts predicted for the start of the year.

"We might be forced to raise our issuance forecast for 2011 in the near future due to the quick fall in risk aversion," analysts said in a note.

The falling risk aversion from the buyside means that even Spanish banks have found willing investors.

According to SocGen researchers, the Banco Bilbao Vizcaya Argentaria five-year covered bond issued last week was received positively. The transaction was initially opened at 225/220 basis points over mid-swaps and the deal priced at 200 basis points over mid-swaps.

"This illustrates the bullishness of the market," analysts said. "However, not all markets are open yet. We believe due to the wide spreads it is still far too expensive for Portuguese or Irish issuer to tap the market. The same is true for most Spanish Cajas."

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