United Overseas Bank (UOB) could launch a dual-tranche, three year dollar and five year euro covered bond tomorrow (Wednesday), after today announcing a mandate for a deal in one or both currencies, leapfrogging peer OCBC in the anticipated Singapore pipeline.

Oversea Chinese Banking Corporation (OCBC) had been considered the likely first Singaporean issuer of the year, after it in November established a $10bn (Eu9.4bn, SGD14bn) global covered bond programme – it also last week joined the Covered Bond Label initiative.

But UOB this morning announced its mandate for a five year euro and/or three year US dollar benchmark Reg S Singapore legislative covered bond, via leads Deutsche, DZ, HSBC, UBS and UOB, and the deal is expected tomorrow.

Several market participants said they expect the Singapore bank to tap both currencies, with funding levels seen comparable and demand deemed sufficient. One said the issuer should be keen to build on its Eu500m five year debut of last March – which was the first euro benchmark covered bond from Asia – and also pick up dollar funding.

“They invested a lot of time and effort in euros,” he said, “and dollars ought to be pretty straightforward for them to execute – there will be Asian demand for their name from bank treasuries and some central banks, plus they can top that up in Europe, where there is demand for three year triple-A dollar covered bonds.

“It may just be a question of making sure of line availability, which could be why they have flagged the deal already.”

Another syndicate banker said deals in each currency should work.

“The Singapore banks’ main criterion is always price,” he said, “and I would not rule out them choosing only the cheaper of them both, which is likely to be the three year dollar. But they have left the door open for both and my understanding is that it will be a dual-tranche exercise.”

The first banker said that – after non-CBPP3-eligible euro paper rallied in recent weeks – pricing should be quite close on both tranches, making allowances for the different maturities. He suggested that a three year dollar could come at mid-swaps plus 45bp and a five year euro at plus 10bp, equivalent to around mid-swaps plus 60bp in dollars.

“For some time there has been a decent degree of pricing homogeneity in the global covered bond market,” he said, “and both tranches offer a similar relative value. That is why they should be able to offer both in parallel – investors will then be able to choose what suits them best, rather than looking at what offers best value.”

Another syndicate banker said that 10bp for a five year euro would be a good outcome for UOB, whose March 2021s were seen at 8.5bp, mid, while DBS January 2024s were seen at 14bp over.

“The main challenge for the Singapore banks is that they still trade with a pick-up versus the Aussies, for example, even if their credit quality is the same, if not better,” he said. Single-digits looks a bit ambitious, but 10bp would already be a pretty good result.”

The last benchmark covered bond from Singapore was a Eu750m seven year for DBS on 16 January at 15bp over mid-swaps.

In dollars, DBS August 2018s were seen at around 20bp, mid, while Canadian and Australian March to May 2020 paper was seen in the high 30s to 40bp over, the Aussies trading towards the wider end of the range.

A banker suggested that further US dollar covered bond supply could follow in either Reg S or 144A format next month, once issuers have had time to update documentation to incorporate their latest results.

After a Eu1bn eight year for LBBW yesterday (Monday), no new covered bond benchmarks emerged this morning, and bankers said that, alongside UOB, there could be one other in euros this week.