Taking advantage of cash buffers in the most affordable format, Asia Pacific banks chase to sell covered bonds in the EU and U.S. markets. Triple A rated covered bonds have been raised as much as $7.6bn from five banks of Australia and Singapore. OCBC credit analyst, Andrew Wong argued that banks are building buffers as a weapon against higher volatility, although liquidity is a concern.
Debt market has been in a critical phase. Spikes in oil prices led issuers and investors to navigate volatile rates due to heightened geopolitical risks. Australia, New Zealand Banking Group, and WESTPAC did $917m four year floating rate covered trade at Sonia plus 45bp, said IFR Asia. National Australia Bank followed. It poured five year covered sales as much as €1.5bn.
Singaporeans also hit other records. United Overseas Bank sold euro-denominated Singaporean covered bonds with €1.5bn, a three-year deal. It has been the largest transaction in Singapore despite a challenging market, said Koh Chin Chin, UOB’s head. DBS bank sold $1.5bn in the U.S. market.
The U.S. dollar covered note shows significant maturity since November last year. So, DBS dealmaker decided to tap U.S. dollars to improve the investor base in dollar currency. High quality investors from supranationals and bank treasuries deal in up to $1.5bn orders. In trying to survive the volatile market, DBS decided to capture the market size to measure the future funding.
In theory, short term covered bonds are popular among investors. Because it has low risk instruments. UOB deal for instance has benefited from investors bidding for euro covered bonds, because the valuation is attractive. Bankers agreed that covered bonds are more attractive than government papers. In the UOB case, the firm has given the investors’ satisfying demand.
