DBS Bank issued the largest ever covered bond from Asia today (Monday), selling a $1.25bn three year 144A/Reg S trade that attracted over $1.65bn of demand. HSBC Canada is expected to be the next to enter the dollar market in the same maturity.

DBS announced the mandate for its transaction on 8 November, and last week premarketed the deal to Asia, Europe and the US.

Leads DBS, Barclays, HSBC, ING, TD and UBS then went out into Asian markets today with initial guidance of the 33bp over mid-swaps area for the Singaporean deal. This compares with a re-offer of 32bp over paid by the UK’s Lloyds on a $750m three year Reg S-only trade on 5 November and 35bp for a Deutsche Pfandbriefbank $600m three year Reg S issue on Tuesday, and spreads of 25bp over paid by Canadian’s RBC and TD on $1.7bn and $2bn issues, respectively, in mid-October.

The lead syndicate banker said that recent new dollar issues had softened amid the recent market volatility and that this was reflected in feedback from investors ahead of the new issue. However, he said that positive feedback from investors last week made the issuer and leads comfortable to proceed with the trade today, particularly with it being a relatively defensive short-dated triple-A covered bond.

The issuer had kept open the option of issuing a three or five year deal, with a three year its preference, according to the lead syndicate banker, and went ahead with the shorter maturity when feedback proved indifferent between the two, or slightly stronger for threes, allaying any concerns that the level of supply in the shorter maturity might be a factor – as well as the aforementioned preceding supply, HSBC Canada is also in the pipeline with a three year US dollar covered bond debut, which is said to be ready for launch as early as tomorrow (Tuesday).

After the launch into Asian markets, European demand proved “pretty solid”, said the lead banker, surpassing $1bn before the US open, with anchor demand identified during the roadshow materialising as expected. In the last pre-pricing update orders totalled more than $1.45bn, with guidance revised to 32bp plus or minus 1bp.

Pricing was ultimately set at 31bp over mid-swaps and the size at $1.25bn (EUR1.09bn, SGD1.72bn) on the back of more than $1.65bn of orders, including $75m of joint lead manager interest.

“It’s been a good outcome,” he said.

Today’s deal is only DBS’s second US dollar benchmark, following its debut, $1bn three year covered bond in July 2015.

The previous largest covered bond from Singapore was a dual-tranche, $500m and EUR500m deal for United Overseas Bank (UOB) in February 2017. The largest previous Asian covered bond was a EUR1bn five year deal for Sumitomo Mitsui Banking Corporation (SMBC) on 30 October.