Singapore’s UOB has chosen euros for a potential covered bond debut, in contrast to other Asian issuers, with a view to tapping the deepest investor base and achieving price tension while establishing its name in the market, the bank’s head of capital markets told The CBR.

United Overseas Bank (UOB) yesterday announced a series of European investor meetings running from next Monday (22 February) to Friday, with leads BNP Paribas, Commerzbank, DZ, HSBC, Natixis, UBS and UOB. The roadshow will take in Germany, London, Zurich, Helsinki, Brussels and Amsterdam.

“Euros is an important market for first time issuers, as covered bonds originate from Europe and the investor base is the largest and deepest in that market,” said Chin Chin Koh, managing director and head of capital markets at UOB. “Tapping this market hopefully will provide us with good price tension and diversification in terms of investor base.

“A debut issue should also help UOB to establish itself in the covered bond market and provide a pricing benchmark for future issuances.”

Other Asian covered bond issuers have instead preferred the US dollar covered bond market, with none having yet tapped the euro market. DBS launched the only covered bond thus far from Singapore in July, a $1bn (Eu896m, SGD1.4bn) five year deal.

South Korea’s Kookmin also opted for dollars when launching the first covered bond under a dedicated South Korean legislation in October, printing a $500m (Won608bn) five year issue, before pricing another dollar issue of the same size and tenor on 28 January. Korea Housing Finance Corporation has also issued in dollars, its last deal a $500m five year on 12 November.

A syndicate official away from UOB’s leads said the euro market also offers attractive funding levels compared with the dollar market.

“If you look at global covered bond levels at the moment, euros does appear the most compelling option from a pricing perspective,” he said. “The differential relative to dollars, UOB’s more natural alternative, is around 20bp at the moment.

“It’s also a good thing for the euro market,” he added, “as it’s indicative that the market is in good shape, and I think investors will like that transaction very much, too. It’s an opportunity to buy what is a double-A senior unsecured banking entity without any interference from the ECB and what should be an appealing spread.”

DBS in November roadshowed ahead of a potential sterling deal, but ultimately no transaction materialised, with bankers away from the mandate suggesting that the economics did make one feasible.

UOB established its $8bn covered bond programme, which was arranged by BNP Paribas and UOB, in November.

Boudewijn Dierick, head of covered bond and ABS flow structuring at BNP Paribas, said there are few differences between UOB’s programme and that of DBS.

“There are a few minor changes in terms of the asset test and the swap – but they are not life changers,” he said. “For the rest it is very similar, with similar collateral in Singaporean prime residential mortgages, similar size and ratings in terms of the bank, and AAA ratings – although UOB’s programme is rated by S&P, showing that they can rate Singaporean covered bonds AAA as well.”

UOB’s covered bond programme is rated triple-A by Moody’s and Standard & Poor’s, whereas DBS’ programme is rated triple-A by Moody’s and Fitch.