Westpac priced its second and biggest US dollar benchmark covered bond of the year yesterday (Monday), a well-received $1.5bn (A$1.59bn/Eu1.11bn) five year that was priced 9bp wide of where it sold a five year in May but close to secondary market levels.

Leads Citi, JP Morgan, RBC and Westpac priced the Reg S/144A issue at 46bp over mid-swaps, in line with guidance of 46bp over. They went out with an initial whisper of the mid to high 40s. The issuer sold a $1.75bn three year dual tranche senior unsecured transaction alongside the covered bond.

The deal is Westpac Banking Corporation’s second US targeted covered bond of the year, and only the fourth such deal from an Australian bank in 2013, with total supply standing at $6.5bn, nearly half that of 2013 ($11bn).

Moody’s said in a report on Thursday that Australian issuers have so far on a simple average basis issued 37% of their total covered bond issuance capacity, based on a limit of 8% of the issuers’ assets. Since the beginning of the year they have issued 8% of their capacity, with Moody’s expecting this trend to continue in 2014. As at 13 November Australian issuers had sold A$13.4bn (US$12.62bn/Eu9.35bn) of covered bonds this year.

At 46bp over, Westpac’s deal was priced with a 2bp-3bp new issue premium, according to a syndicate banker at one of the leads, who said some market participants saw it a bit tighter.

Westpac priced a $1.25bn five year at 35bp over in May and according to the lead syndicate banker this was trading at around 43bp-44bp over.

Some 45 investors participated in the Australian issuer’s latest deal, he said, with most of the demand coming from US accounts plus Asian and European interest. The bank treasury bid was important, he added, with some central banks also involved.

There is strong demand for US dollar covered bonds, he said.

“I wish someone else would do a deal,” he said. “There seems to be cash out there.”

Fitch launched a new publication over the weekend dedicated to covered bonds in the Asia-Pacific region. It discussed the take-up of conditional pass-through (CPT) covered bonds by issuers in the region, highlighting the pros and cons of this structure for investors and issuers.

“Fitch believes that market issuance of CPT covered bonds in APAC is possible, but this depends on strong ongoing investor appetite,” it said. “We therefore feel that any likely development in CPT covered bonds in APAC will be contingent on further and sustained market issuance globally, support for the product, and acceptance of the risks by investors both domestically and in offshore markets.”