SINGAPORE - United Overseas Bank on Thursday (March 3) became the first bank in Asia to distribute euro-denominated fixed-rate covered bonds.

The issue raised 500 million euros (S$759.3 million) through global investors, UOB said in a statement.

It added that the bonds saw strong investor demand, with the order book building up to more than 1.3 billion euros or 2.6 times subscribed.

UOB said the covered bonds enable the bank to broaden its funding sources and expand its investor base to Europe.

It also provides investors, particularly those from Europe, an opportunity to diversify their portfolio with covered bonds issued out of Singapore.

The covered bonds attracted more than 75 institutional investors, predominantly from Europe - the bank's target market for the issue. Among the investors are banks (36 per cent), fund managers (31 per cent), central banks (18 per cent), insurance funds (10 per cent) and others (5 per cent).

Said Mr Lee Wai Fai, UOB's chief financial officer: "Despite the current volatility and uncertainty in the financial markets, UOB's covered bonds garnered strong investor interest, showing the confidence that global investors have in the sovereign standing of Singapore as well as the fundamentals of the country's economy and housing market.

"It also reflects the financial strength of UOB and the quality of mortgage loans that the Bank originates."

Covered bonds are debt securities backed by cash flows from mortgages or public sector loans. UOB's bonds bear a fixed coupon of 0.25 per cent per annum payable annually in arrears.

UOB said net proceeds from the issue will be used for its general business purposes.

The issuance is the first series under UOB's US$8 billion Global Covered Bond Programme set up in November last year.