UOB launches US$8b global covered bond programme

UNITED Overseas Bank (UOB) on Monday launched its US$8 billion covered bond programme.

The covered bonds issued under the programme will be backed by a selected portfolio of mortgage loans linked to properties in Singapore. They are expected to be rated AAA by Standard and Poor's Ratings Services and Aaa by Moody's Investors Service.

Lee Wai Fai, group chief financial officer at UOB, said the global covered bond programme will ensure that the Bank maintains a solid funding base that can support its clients through business cycles.

"Through our covered bonds programme, we can efficiently diversify our funding sources and broaden our investor base while offering investors another avenue to participate in the growth of the Bank," Mr Lee said.

Covered bonds are most comparable to mortgage-backed securities (MBS). Banks can package assets such as mortgages into securities that yield a cash payment, which are then sold to investors. The yield would reflect the credit quality of the underlying assets.

The difference is that unlike MBS, covered bonds' assets remain on the bank's balance sheets.

DBS was the first Singapore bank to sell covered bonds this year.