HDFC Bank, the second largest private sector lender whose shares command the highest premium in the market across the world, has successfully sold a $ 500- million five-year bond at 3 per cent coupon, its lowest yet.

The $ 500-million unsecured senior bond issue, which saw 10-times demand or $ 5 billion, over the issue size, is part of HDFC Bank's $ 1-billion overseas bond sale (medium term note). The money was raised through its Bahrain branch over the last weekend, StanChart, one of the merchant bankers to the issue told PTI.

At 3 per cent coupon makes it the lowest for the bank ever and also the cheapest this fiscal, StanChart said.

"HDFC Bank achieved the lowest ever coupon/YTM (yield- to-maturity) achieved for any domestic issuer and the tightest bank issuance spread in recent months, for a five-and- half-year issuance," Jujhar Singh, MD, capital markets at StanChart India, told PTI over the weekend.

"The final spread was tighter than fair value for a new five-year US dollar-bond issuance for SBI implied by the secondary trading levels (222 bps over US treasury now), which is a feat for a debut $ bond issuance," Singh said.

The fixed rate senior unsecured notes or Regulation S bonds (RegS bonds) raised in US dollar, carry a coupon of 3 per cent per annum payable half yearly and mature in 2018, he said, adding, "The pricing got tightened by 25 bps from the initial guidance and 5 bps from the final guidance to 230 bps over the US treasury as investors lapped the opportunity to buy into the domestic banking sector."

Regulation S bonds or RegS bonds are those offered to non- US residents and qualified institutional buyers (under an exception to US securities laws enacted in 1990) and do not enjoy the same legal protection as other issues enjoy.

The bonds attract a coupon of 3 per cent and are priced at 99.687 to yield 3.068 per cent, which represents a 230 bps spread over the US treasuries, he added.

However, HDFC Bank refused to comment on this.

"The T+230 bps spread confirms investor recognition of HDFC Bank's strongest credit metrics (vis-a-vis all other domestic banks), and establishes a new tight benchmark for domestic private sector bank issuers," he said, adding that it was able to get such a tight deal thanks to the $ 5-billion worth of demand from more than 250 accounts.