Korea Housing Finance Corporation issued the first Asian sustainable covered bond and the first Korean euro benchmark today (Wednesday), a EUR500m no-grow five year social issue that attracted EUR1.5bn of demand on the back of eye-catching IPTs to ultimately achieve funding inside dollars.

Korea Housing Finance Corporation (KHFC) roadshowed earlier this month with a view to issuing a benchmark backed by affordable housing loans in either euros or US dollars. The South Korean state-owned issuer has issued in dollars since its debut in 2010, and had previously indicated an interest in diversifying into euros.

Yesterday (Tuesday) it was announced that the issuer was planning to launch a EUR500m no-grow five year social covered bond via leads BNP Paribas, DBS, ING and SG, and KHFC entered the market this morning.

Initial price thoughts of the 50bp over mid-swaps area were given, and a syndicate banker at one of the leads said that this was based on investor feedback, which nonetheless included “very different views”. She said that some investors looked at KHFC’s dollar curve, which swapped into euros indicated fair value of the high 40s or 50bp over mid-swaps, with others looking at where Korean agencies Korea Development Bank (KDB) and Kexim were trading in euros, which was in the low 30s.

“This explains why there was such a large movement in pricing,” she said.

On the back of some EUR1.5bn of demand guidance was revised to 40bp-45bp over, will price in range, and with the EUR1.5bn book holding up at the tight end of guidance, the deal was re-offered at 40bp over.

“We were very glad to see many European accounts getting involved here, which is very positive for the issuer,” said the lead syndicate banker. “One of the key objectives for the issuer was to have new investors involved in their funding.”

However, she said that – while distribution statistics were still being finalised – it appeared that interest from SRI accounts in the social covered bond had not made such a significant contribution as it does to some sustainable bond issues.