DBS priced its first Australian dollar-denominated covered bond today (Wednesday), a A$750m three year FRN, and an official at the issuer said an APAC-dominated book of over A$1bn included many new investors, continuing diversification begun by the Singapore bank’s US dollar debut.

DBS’s new issue tapped into strong demand for Australian dollar paper, being only the second benchmark covered bond in the currency to be launched this year, following a A$400m five year FRN for CIBC on 12 April.

DBS Bank leads Barclays, DBS, NAB, RBC and Westpac launched the benchmark three year FRN with initial price thoughts of the three month BBSW plus 80bp area yesterday (Tuesday). After the European open they announced that books had surpassed A$500m, with the guidance maintained at the 80bp area. The leads then reported the books of over A$900m later yesterday morning, citing strong initial interest from Asia-Pacific.

Guidance was revised to the 77bp area on the back of over A$1bn of orders after the Australian open this morning, before the spread was fixed at 77bp and the size at A$750m (Eu481m, SGD744m).

“It was a very good deal and a very good outcome for the issuer,” said Yeoh Hong Nam, head of wholesale and structured funding at DBS Bank. “The level of demand surprised to the upside.

“We acted on the back of feedback we received on the roadshow for our US dollar offering last year, when we found that there was significant demand in the Asia-Pacific area for Aussie dollar-denominated covereds – and that demand was clearly reflected in the order book.”

Full distribution statistics were not available when The CBR went to press, but he said that some 90% of the deal was allocated to accounts from Australia and Asia.

Yeoh added that most of the Australian accounts were new investors in DBS, including accounts that could not establish lines in time to participate in the bank’s inaugural covered bond last year.

“This continues the trend of opening up communications with new clients that were familiar with the DBS name and were happy to take on our covered issuance,” he said.

Yeoh said DBS also chose to issue in Australian dollars because of DBS’s familiarity in the APAC region, and said that the price represented a saving compared with what the issuer would have been able to achieve with an equivalent covered bond in alternative currencies.

DBS in July of last year sold Singapore’s first covered bond, a $1bn (Eu891m, S$1.38bn) three year issue. It was followed by an inaugural, Eu500m (S$773m) five year issue for United Overseas Bank on 2 March.

Fellow Singaporean bank Oversea-Chinese banking Corporation (OCBC) has also confirmed it is working on a covered bond programme.