DBS sold the largest ever single-tranche covered bond from Asia today (Tuesday), a £1bn four year Sonia-linked trade that a lead banker said reflected the strength of the sterling market and the issuer, which was able to achieve the upper end of its size aspirations close to fair value.

After a mandate announcement yesterday (Monday), DBS Bank leads DBS, HSBC, NAB and RBC opened books this morning with initial guidance of the Sonia plus 30bp area for the November 2025 sterling issue, expected ratings triple-A. After two hours, the spread was set at Sonia plus 28bp on the back of order books above £1bn. The size was ultimately set at £1bn (€1.17bn, SGD1.82bn), with the book closing above £1.1bn.

The new issue is the largest single-tranche covered bond from Asia, surpassing a $1.25bn three year deal from DBS in November 2018. The £1bn deal comes after compatriot United Overseas Bank (UOB) priced a £850m five year Sonia-linked deal on 14 September.

A syndicate banker at one of DBS’s leads said the issuer had set a precedent for the region by taking out such volume.

“It went super-well,” he said. “They took a yard out of the market – the absolute upper end of their size aspirations – which in itself is a very impressive amount, but bearing in mind this is their first sterling print, it clearly speaks very strongly for the credit and the overall state of the market.

“Their peer UOB were the last Singaporean to come and took out £850m,” he added, “so DBS managed to get a feather in their cap by getting to that £1bn marker.”

Noting that UOB trades around 2bp wider than Australian and Canadian names and seeing a new Aussie or Canadian four year Sonia trade at around 26bp over, the lead banker put fair value at 27bp-28bp.

“There are a couple of different ways you can cut it, but this has come kind of on top of fair value, maybe a basis point back,” he said. “That’s a very decent pricing outcome, and we didn’t really see any attrition in the book on the way down – we had a book of over £1bn and when we moved down from 30bp to 28bp we actually saw a bit of growth there.”

The order book included a mix of UK real money and international demand, according to the lead banker, with strong official institution and central bank tickets alongside accounts such as bank treasuries.

“So very healthy diversification,” he added. “All in all, a really successful inaugural transaction.”

DBS’s sterling issue is its second benchmark covered bond in less than a month, after it ended a near four year absence from the market on 19 October with a €750m five year deal.