Korea Housing Finance Corporation (KFHC) is looking into what would be its first euro-denominated covered bond issuance and plans to increase its activity in the market, a spokesperson told The CBR following a $500m issue last week that they said showed Korea’s resilience to geopolitical tensions.

The new $500m (Eu424m, Won567tr) five year issue was priced at 100bp over Treasuries last Wednesday on the back of over $1.2bn of demand, and was the first benchmark covered bond from South Korea in a year.

“Despite the geopolitical tensions surrounding Korea, we have continued to see resilience in overall global credit markets and strong demand for recent bond issuances out of Korea,” a KHFC spokesperson told The CBR. “Also, with international rating agencies’ affirmation of current Korea credit ratings with stable outlook, we decided the timing was optimal to enter the market with a new US dollar covered bond issue.”

Before pricing the deal at 100bp, leads BNP Paribas, Citi, ING, Mirae Asset Daewoo and Standard Chartered had launched the Reg S/144A deal with initial price thoughts of the 125bp area, then set guidance at 100bp-105bp, will price within range, on the back of over $1.2bn of orders.

“The transaction met with strong interest from high quality and geographically diversified investors,” said the KHFC spokesperson. “We also saw significant participation from new investors, displaying growing interest in Korean covered bonds in the global investor community.

“On the back of this strong investor interest, we were able to price the bonds with 25bp tightening from the initial price guidance, again showing Korea’s resilience to ongoing geopolitical tensions.”

The spokesperson said KHFC is now looking at euro covered bond issuance, in order to expand its investor base, and also has plans to increase its issuance volume in the future.

Benchmark Korean covered bond issuance has to date been denominated only in US dollars. Singapore’s United Overseas Bank launched the first euro-denominated benchmark Asian covered bond in February 2016, and has been followed by compatriots DBS Bank and Oversea Chinese Banking Corporation.

KHFC’s new issue is its sixth cross-border benchmark, the last being a $500m five year in October 2016. Kookmin Bank is the only other benchmark issuer from the country, having sold two $500m five year deals.

The KHFC spokesperson said that since the issuer’s inaugural covered bond in 2010 – launched under legislation specific to the state-owned issuer – there has been growing interest in covered bonds in Korea on the government level as well as on the private level. This, they added, led to the enactment of a dedicated Korean covered bond law in 2014, under which Kookmin issued its covered bonds.

“With the structural protection that covered bonds offer from the cover pool and as evinced by Europe during the financial crisis, we expect wider use of covered bonds by financial institutions in Korea as a funding alternative,” they said.