Banco Santander Chile has sold the first covered bond under a new legislative framework introduced in the Latin American country last year, issuing UF1.5m ($67m, Eu50m) of 15 year paper domestically yesterday (Thursday).

Chile’s bono hipotecarias framework was updated in 2012 by the Chilean central bank and regulator Superintendencia de Bancos e Instituciones Financieras Chile (SBIF) to enable the country to share in the benefits of covered bond issuance.

“We believe that today marks a milestone with the return of ‘secured funding’ for the Chilean mortgage industry,” said Emiliano Muratore, manager, financial management department at Santander Chile. “We have successfully issued this mortgage backed bond at an attractive spread.

“In addition, investors have a new investment product of the highest quality, supported by an issuer with among the best ratings in emerging markets supported by a low risk pool of mortgages. Hopefully more banks join us in this market, which in turn will be very beneficial for clients, issuers and investors.”

Sold via a Dutch auction with Santander Global Banking & Markets as placement agent, the issuance attracted UF3m of demand.

“We had an excellent distribution among pension fund managers, banks and mutual funds,” said Andres Bertens, treasury sales manager at lead manager Santander Chile.

This enabled the deal to be priced at 16bp through Santander Chile’s senior unsecured debt. Muratore told The CBR ahead of the sale that the starting point for the sale would be 10bp through, so the end result was 6bp tighter. The 15 year paper was sold at a yield of 3.39%.