Westpac issued the first US dollar benchmark covered bond of the year on Monday, a $1.75bn five year that attracted a peak $3bn of demand at pricing competitive with euros, suggesting the market again offers an attractive strategic alternative.

The deal was announced into Asia at around 11am Hong Kong time with initial price thoughts of the mid-swaps plus 97bp area for the May 2028 Australian covered bond, expected rating Aaa. By New York open, demand totalled some $2bn, according to a banker at one of the leads.

“That put us in a position of strength,” he said, “and we moved to 95bp given this momentum.”

Anchor orders were complemented by granular demand, he added, and the book peaked at around $3bn. The $1.75bn (€1.62bn, A$2.63bn) deal was ultimately priced at 92bp.

“It went super-well,” said a lead syndicate banker. “It’s probably as good a dollar covered bond as I’ve worked on in 10 years or so in terms of the breadth of investor audience and number of accounts involved, everything from central banks and bank treasuries through Asia and Europe and also some reasonable US involvement.”

The UK and Ireland were allocated 36% of the paper, Asia 30%, the Americas 20%, EMEA 9% and Australia 3%. Banks and financial institutions took 59%, central banks and official institutions 30%, and asset managers and insurers 11%.

HSBC, Lloyds, RBC, TD and Westpac were active bookrunners, and DBS a passive bookrunner.

The lack of recent dollar supply contributed to the relatively large 5bp move from IPTs to final pricing, according to the lead bankers.

“There was a reasonable amount of price discovery through the process,” said the syndicate banker, “hence, why we moved from 97bp to 92bp, which is quite a lot for a covered bond from a mainstay jurisdiction, but reflective of the fact that secondary instruments are quite stale, while this this was an opportunity to buy this asset class in some size.

“That did leads to a bit of a re-racking of prices.”

The leads said the final pricing was appropriate, noting that a smaller deal might have been possible at an even tighter spread. The $1.75bn size was meanwhile the top end of what Westpac had been seeking.

They put the pricing roughly flat to euros, noting that euros’ pricing advantage had eased this year, with both the ECB’s winding down of CBPP3 and a move in cross-currency basis swaps in favour of dollars contributing to this.

“There’s been an interesting sort of shifting of tectonic plates in this regard,” said the syndicate banker. “There’s a range of opinions around just where a five year Aussie would price in euros, but Westpac didn’t pay up relative to euros.

“So dollars is once again an appealing choice relative to other markets, and for those issuers who want to diversify and retain a strategic foothold in the dollar market, that’s helpful – as well as to alleviate some supply pressure from the euro market.”

Further supply could be forthcoming after Westpac’s success, suggested bankers, particularly with Canadian banks coming out of blackouts next week.