This apparently unrecorded drawing almost certainly illustrates William Morris's poem Sigurd the Volsung. The clue is the tree, which must be the Branstock which grows in the Volsungs' hall. As for the figures, one of whom wears a crown, they may simply correspond to a line in the description of the hall at the beginning of Book 1: 'Earls' wives were the weaving-women, queens' daughters strewed its floors'. The poem was published in November 1876, and the watercolour would appear on stylistic grounds to date from a few years later.
No other illustrations to Sigurd by Burne-Jones are known except those he made for the Kelmscott Press edition in the 1890s. He undertook the work reluctantly, complaining that many of the subjects were 'quite impossible'; and when the book appeared in 1898, two years after Morris's death, it contained only two illustrations. The frontispiece seems to echo the present watercolour since it shows the Branstock flourishing in the Volsungs' hall