Oversea-Chinese Banking Corporation (OCBC) took over Eu1bn of orders for its first benchmark covered bond today (Tuesday), a Eu500m five year issue that was deemed to have been priced with only a marginal premium versus other Singaporean paper and well inside the levels achievable in US dollars.

Following a European investor roadshow, OCBC announced a mandate yesterday (Monday) morning for a Eu500m (SGD754m) no-grow five year covered bond offering, via leads Barclays, BNP Paribas, Crédit Agricole, JP Morgan and OCBC.

The deal was launched this morning with initial price thoughts of the 11bp over mid-swaps area, before guidance was revised to the 8bp area plus or minus 1bp on the back of over Eu1bn of orders. The spread was later fixed at 7bp.

“It’s a great outcome, being easily twice subscribed and achieving a spread tightening of 4bp,” said a banker away from the deal. “It’s a very good start, coming pretty flat to the Singaporean comparables.”

OCBC is now the third covered bond issuer from Singapore, following DBS Bank and United Overseas Bank (UOB). Both have issued euro benchmark covered bonds this year, DBS a Eu750m seven year on 16 January and UOB a Eu500m five year on 22 February, as part of a dual tranche offering also including a $500m three year.

Bankers said there is little credit differential between the three issuers, as all three have the same issuer ratings (Aa1/AA-/AA-) and their covered bonds are all rated triple-A.

“Therefore, the only really relevant difference is that OCBC is a debut issuer, whereas the other two are slightly further along in building up their curves,” said one.

The new issue was seen as offering a new issue premium of at most 1bp, with bankers citing UOB March 2021s at around 5bp, mid, pre-announcement, and March 2022s at around 6bp. DBS’ January 2024s were also seen at 14bp.

“That’s a good pricing outcome for them as a new issuer, paying very little newcomer premium,” said another banker away from the leads. “Well done to them.”

Bankers said the deal nevertheless offered an attractive pick-up versus the curves of Australian issuers, which they said were comparable in terms of credit quality, with 2022 paper from ANZ, CBA, NAB and Westpac all quoted at minus 1bp, mid.

They added that the demand for the deal was likely further boosted because of the deal’s five year maturity, where investor demand is deemed to be deepest.

When announcing its European roadshow on 24 February, OCBC said the debut deal would be denominated in either euros or US dollars. Bankers said the decision to print a euro trade was likely informed by the more attractive funding levels available in the euro market.

“The pricing looks particularly aggressive versus the dollar market, on the basis that plus 7bp would be around dollar Libor plus 54bp,” said a syndicate banker away from the leads. “That is comfortably through where a dollar transaction would land for OCBC at the moment, which would be more like the high 50s.”