#Singapore #Euro #Covered Bonds #UOB

UOB Prices €1 Billion Covered Bond Transaction

In a significant move for the financial market, United Overseas Bank (UOB) has successfully priced a €1 billion transaction consisting of covered bonds in two distinct tranches. This is a remarkable moment as it marks UOB's first issuance of Euro-denominated covered bonds for 2026 and notably represents the first transaction with two tranches by an Asian issuer in this arena.

The transaction is divided into two parts: a €500 million tranche with a 2-year maturity priced at EUR-Mid-Swap plus 7 basis points (bps), and another €500 million tranche with a 5-year maturity priced at EUR-Mid-Swap plus 24 bps. This strategic pricing reflects UOB’s proactive approach in a competitive market, with the shorter duration catering to the current investor preference.

The issuance garnered unprecedented interest from investors, achieving over €4.25 billion in orders within just four hours after the opening of the subscription period. Ultimately, the combined books closed at approximately €3.9 billion, indicating a staggering oversubscription rate of more than four times the initial offer. This significant demand underscores the solid reputation of UOB among institutional investors, including bank treasuries, central banks, and asset managers.

According to Koh Chin Chin, head of Group Treasury, Research and Customer Advocacy at UOB, “The strong demand for our covered bonds from Singapore enhances Singapore's position in the global capital markets. The success of our recent GBP issuance was mirrored in our current Euro-covered bond deal, reflecting investor confidence in UOB. The two-tranche structure allowed us to meet varying investor preferences while ensuring efficient refinancing.”

The strong demand enabled UOB to tighten the spreads significantly from the original pricing indications: by 8 bps for the 2-year tranche and 6 bps for the 5-year tranche. Additionally, the 2-year tranche was priced approximately 5 bps tighter than comparable Singaporean issuers in the secondary market, showcasing a robust interest level and quality from investors. The transaction encapsulates an average weighted maturity of 3.5 years, thus allowing UOB to secure attractive refinancing costs and historically tight refinancing spreads.

The market response elucidates the need for diversification in funding sources and emphasizes UOB's strategic financial management tailored to the evolving preferences of investors. The covered bond market, particularly in Euro, remains a resilient avenue for issuing financial instruments, demonstrating substantial liquidity and a willingness from diverse investor segments to engage.

Highlights of the Offering:

• - First Asian issuer conducting a dual-tranche Euro-covered bond transaction.
• - The 2-year tranche aligned with current market conditions favoring shorter maturities while also drawing interest from bank treasuries and central banks; the 5-year tranche attracted traditional real-money investors.
• - The demand peaked at over €4.25 billion, reflecting robust institutional backing.
• - The issuance further solidifies UOB's foothold in the Euro covered bond market and strengthens its diversified refinancing base.
• - The new issue premium was estimated based on recent comparable primary market transactions, with the 2-year tranche at -1 to -2 bps and the 5-year tranche at 0 bps, showcasing solid market positioning.

In summary, UOB's successful pricing of this €1 billion covered bond transaction not only reflects the bank's adept positioning in the capital markets but also highlights the resilience and adaptability of financial institutions in meeting investor demands across diverse currencies and structures. It signifies a step towards enhancing Singapore's stature in the global financial landscape and reaffirms the confidence in UOB as a pivotal player in the Asian banking sector.