United Overseas Bank (UOB) issued a dual-tranche, US$500m three year and Eu500m five year covered bond today (Wednesday), with the two deals attracting roughly similar demand and achieving equivalent pricing, while the spread of the euro tranche was seen as being flat to fair value.

Having announced a mandate for a five year euro and/or three year US dollar benchmark Reg S issue yesterday (Tuesday), UOB leads Deutsche, DZ, HSBC, UBS and UOB launched the dual-tranche deal this morning.

A Eu500m (S$750m) no-grow five year tranche was launched with guidance of the 14bp over mid-swaps area. Guidance was later revised to the 12bp area on the back of books in excess of Eu1bn, before the deal was re-offered at 10bp.

The US dollar benchmark tranche was launched with guidance of the 50bp over mid-swaps area, before guidance was revised to the 47bp area on the back of books in excess of $900m. The spread was later set at 45bp and the size at $500m (Eu473, S$710m).

“Both deals look very strong, attracting roughly similar demand, allowing for similar tightening of the spreads, and with similarly slim premiums,” said a banker away from the leads. “I think UOB will be very satisfied by the result of this exercise.”

The deal is the first dual-tranche, dual-currency covered bond offering from Asia, and the dollar issue is UOB’s first covered bond in the currency. Its only other benchmark covered bond is a Eu500m five year debut sold in March 2016.

Bankers said the pricing of the two tranches – which matched exactly with the estimated final spreads suggested by syndicates away from the deal yesterday – was roughly in line, allowing for the differences in maturity. The pricing of the longer euro tranche was seen as being equivalent to a dollar spread of around 60bp over mid-swaps, which was considered to be roughly where a five year dollar benchmark would have been priced.

The Eu500m tranche offered little to no new issue premium according to bankers at and away from the leads, who cited UOB’s March 2021s at 8.5bp, mid, and DBS January 2024s at 14bp.

They noted, however, that if offered a pick-up versus the curves of Australian issuers, with 2022-2023 paper from Westpac, National Australia Bank and Australia New Zealand Bank quoted between 4bp and 7bp.

“The pick-up offered by previous Singaporean deals versus the Australians looks about 6bp across the curve,” added a banker away from the deals. “Looking at the wider end of that range of Aussies, UOB have narrowed the differential slightly, and given the quality of these Singaporean banks I wouldn’t be surprised to see that come down further.”

Bankers said fair value for the dollar tranche was harder to estimate, as there is only one Singaporean US dollar benchmark outstanding, an August 2018 issue for DBS that was seen at 20bp, mid. They estimated that the premium was also slim, however, noting that Australian 2020 paper was seen in the high 30s to 40bp.

“I’d say it’s in the low single digits,” said a banker away from the deal, “which is impressive in the dollar market.”

In the senior unsecured market, UOB’s dollar March 2020s were quoted at 51bp, mid, pre-announcement.

The last benchmark covered bond from Singapore was a Eu750m seven year for DBS on 16 January at 15bp over mid-swaps. DBS chose dollars when issuing the first Singaporean covered bond, a $1bn three year issue in July 2015, and also sold a A$750m three year last May.

Oversea-Chinese Banking Corporation (OCBC) is expected to become the third Singaporean issuer to issue covered bonds, having registered a $10bn programme and joined the Covered Bond Label last week.