UBS is set to reopen the US market today (Thursday) with a three year dollar benchmark covered bond that will be the first since a $2bn three year issue for Canada’s CIBC that was priced on 5 December.

Barclays Capital, HSBC, RBS, Scotia Bank and UBS are lead managing the transaction, which The Covered Bond Report understands is being marketed in the mid-130s over swaps. The leads have officially opened order books, but pricing guidance was not publicly available by the press time. The deal is UBS’s first dollar benchmark covered bond.

A syndicate official close to the deal said that the dollar level was roughly in line with where a euro benchmark from the issuer would come.

“So there is no arbitrage per se,” he said, adding that the issuer was aiming for its transaction to fare better than some of the non-Canadian dollar benchmarks that hit the US market toward the end of 2011. Then, inaugural Australian supply and some Nordic issues underperformed.

He said that the UBS transaction had got off to a good start.

A banker away from the deal said that sentiment had improved in the secondary market for US dollar covered bonds, with a Credit Suisse May 2016 issue indicated at 128bp over swaps mid representing “quite a rally”. Several European issuers are monitoring the US market, he added.

A syndicate banker away from the leads said that dollar covered bond spreads had been fairly stable over the past few weeks, with the dollar/euro basis swap also not having changed much. It was at 65bp at the end of September and has narrowed to 55bp, he said.

He added that UBS appears to be paying a slight new issue premium, based on 135bp/120bp secondary market level for a Credit Suisse $1bn May 2016 issue.

An analyst said that several US dollar covered bonds issued by European banks look attractive versus Canadian deals, citing a Nordea Eiendomskreditt 2.125% September 2016 issue indicated at around 172bp over US Treasuries, compared with a Bank of Nova Scotia 2.15% August 2016 deal indicated at around 92bp over Treasuries. The Nordea Eiendomskreditt issue was priced at 120.88bp over Treasuries, and Bank of Nova Scotia’s at 69bp over Treasuries.