Westpac opened the US dollar covered bond market on Thursday, with a $1.75bn 144A/Reg S five year transaction that attracted peak orders above $3bn and was part of a $4bn four-tranche senior and covered bond transaction.

Leads Citi, HSBC, RBC, TD and Westpac opened books for the US dollar benchmark with initial price thoughts of the mid-swaps plus 45bp area, and after books peaked at over $3.1bn, moved straight to pricing at 40bp. The size was ultimately set at $1.75bn (€1.58bn, A$2.54bn).

A syndicate banker at one of the leads said a combination of factors enabled the Australian issuer to attract one of the largest order books of the year so far for a covered bond in any currency.

“The dollar market is structurally undersupplied,” he said, “and when you have a high quality name from a high quality jurisdiction, in a particularly rare tenor for the currency, you expect a good response.”

He said that given the level of oversubscription received, the leads were able to confidently move straight to the pricing figure, rather than through any guidance revision, which constituted a flat to slightly negative new issue premium, based on its outstanding January 2024 paper at plus 33bp.

“It was basically flat to fair value,” he added, “but it’s quite difficult to put an exact number on it, given there’s no real five year maturities to compare with – it’s a market that primarily saw three year issuance until the tail-end of last year.”

The lead banker said that given longer dated maturities are at present the market default, Westpac’s trade would invariably attract the attention of issuers looking to navigate shorter maturities than the euro market is currently offering.

“If you’re a European institution,” he said, “euros are the most natural market for entry – and the Eurosystem is buying in full at the moment.

“However, this trade will certainly raise a few eyebrows.”

The pricing of 40bp over mid-swaps in dollars was roughly equivalent to 17bp over mid-swaps in euros, according to the lead banker.

The $4bn transaction also comprised $750m fixed and floating rate three year tranches and a $750m 10 year. The three year fixed rate tranche was priced at 42bp over mid-swaps and the 10 year at 80bp over, which both represented pricing flat to fair value.