DBS returned to the euro benchmark covered bond market after an absence of almost four years last Tuesday, with the issuer keen to maintain its profile in the product and market, after having emphasised other tasks during the pandemic, according to DBS’s Colin Chen.

After launching its last euro benchmark, a €500m seven year in October 2017, the Singaporean bank issued a US$1.25bn three year covered bond in November 2018 and a A$750m three year in November 2019, but since then had been absent from benchmark covered bond issuance for two years.

“Like many banks in this region, funding was not such an immediate issue in the pandemic, and we were very fortunate in that sense,” Chen, head of structured debt solutions, treasury and markets, at DBS, told The CBR. “We were focused on working with the government to ensure that the various segments of the economy could have access to liquidity and funding, both SMEs and large corporates, as well as consumers. Other than that, it was a question of ensuring that the credit quality of the loan book was not deteriorating.”

The new issue comes as Eurozone banks are refocusing on post-TLTRO market-based funding and Australian and Canadian banks move away from central bank facilities, but Chen said DBS’s return is not part of the same trend.

“We didn’t have the same central bank intervention during the pandemic,” he said. “The encumbrance limit was increased from 4% to 10% last October to facilitate banks being able to potentially access covered bond funding, and the central bank introduced emergency repo eligibility for covered bonds, but I suspect these were not broadly used at that point in time.

“Nevertheless, certainly from a market standpoint these two changes to legislation augur well for the development of the covered bond product in Singapore,” he added.

Factors playing into the timing of DBS’s return included the upcoming redemption next month of the US$1bn issue launched in 2018, and the issuer’s strategic view of the euro covered bond market, according to Chen.

“Notwithstanding that the maturing bond is a dollar, we wanted to at least have some form of product for product replacement from a refinancing standpoint,” he said. “But we also recognise that we have been out of the euro market for a very long time, and the issuer felt that it should maintain its presence, and it therefore took the decision to come to the market.”

DBS’s mandate was announced on Monday of last week (18 October) amid ongoing brisk supply.

“We approached the market in a week that we expected to be relatively busy, but there weren’t really any direct competitors in terms of Canadians, Australians, or other Asia-Pacific issuance,” said Chen, “so in that sense we were quite fortunate – September had been unexpectedly busy, I have to say.”

On Tuesday, leads BNP Paribas, DBS, LBBW, Societe Generale and UBS opened books with initial guidance of the 10bp over mid-swaps area for the October 2026 issue and ultimately priced the deal at 6bp on the back of a final order book of €1.35bn.

“We had a book of more than €1.8bn and when we came up with the revised pricing the book was still in excess of €1.3bn,” said Chen. “So in terms of demand, a big tick on the checkbox. All in all, the issuer is pretty pleased, and also grateful that despite our absence from the market we still have such a following.

“In terms of pricing, we saw it at fair value, with no NIP,” he added. “Importantly for the issuer, we priced in the context of the Canadians and the Aussies, which is generally where the Singapore issuers tend to comp themselves.”