Singapore’s United Overseas Bank attracted over Eu1.3bn of demand for a long-awaited debut Eu500m five year covered bond today (Wednesday), which bankers said was priced impressively tight to Australian paper and offered more cost-effective funding than an equivalent dollar deal.

UOB’s new issue is the first euro-denominated benchmark covered bond from an Asian issuer, and the second benchmark from Singapore, following a $1bn five year deal for DBS last July. The deal had been expected after UOB announced the deal mandate yesterday, with the issuer having held a series of investor meetings last week.

Leads BNP Paribas, Commerzbank, DZ, HSBC, Natixis, UBS and UOB launched the five year issue with guidance of the high 30s over mid-swaps area, before revising guidance to the 35bp area on the back of over Eu1bn of orders. The spread was then set at 32bp, with the books closing at over Eu1.3bn, before the size was set at Eu500m ($544m, S$762m).

“It’s a great debut,” said a syndicate official away from the leads. “It’s interesting that they went for a Eu500m size in the end, given the size of the books, but they probably had one eye on performance and that seems entirely sensible.”

Syndicate officials said Australian euro issues are the best comparables for UOB’s deal, given the issuers’ equivalently strong ratings and that Australian and Singaporean covered bonds are ineligible for ECB repo. They said UOB’s new issue offered a relatively slim pick-up to these, seeing five year paper from established Australian issuers trading at around the high 20s to 30bp.

“The starting point seemed deliberately generous, which is appropriate for a debut,” said one syndicate official. “But in the end, if you consider that a new five year issue for one of the Australians would likely come at 30bp over, 32bp is a very impressive level for a debut.

“It’s a deal that has been flagged and expected long before they even went on the road, and clearly there was no shortage of investors that had been waiting to get their hands on this name.”

Syndicate officials also noted that the new issue had been priced inside the most recent Australian euro issue, a debut Eu500m five year issue for Macquarie Bank, which was priced at 40bp over mid-swaps on 16 February and was seen trading around 5bp tighter. However, they said this was justifiable given Macquarie’s lower issuer ratings of A2/A/A (Moody’s, S&P and Fitch), compared with UOB’s ratings of Aa1/AA-/AA+.

Syndicate officials added that the spread level of 32bp represented a saving relative to an equivalent dollar issue.

“I’d be surprised if they were able to get a debut done in dollars at an equivalent level,” said one. “But I think the diversity of investors is the prize they were going for here.”