I discovered covenant city but no quest related to it yet. Is it possible to kill all the inhabitants and make it one of my settlements?
It is possible to technically settle this place. You will have to complete the Human Error Quest and kill everyone but Deezer and the house cat or complete the quest via speech challenges if you can do so (however, this will leave everyone alive).
Here is what the Wiki states:
It is possible to settle in Covenant if the player character completes the Human Error side quest. If the Sole Survivor sides against Covenant then returns after completion, it will initiate a battle with the residents and settlers, after which it is possible to use the workshop. In order to settle, everyone must be killed, except the house cat and Deezer. If the Sole Survivor decides to side with Covenant and completes the quest with speech checks then the town will allow the Sole Survivor to join without any conflict.
After doing either of these, you should be able to use the workbench at the settlement.