Fixed-Income Markets Issuance Trading and Funding Part 2 Flashcards
Primary bond markets
Markets in which bonds are sold for the first time by issuers to investors to raise capital
Private placement or
public offering
Public offering
Underwriter offering
Best effort offering
Shelf-registration
Auction
Underwriter offering
Investment bank negotiates an offering price with the issuer
Firm commitment offering
Underwriting offering process
Determine how much funding is needed
select the underwriter
structure the bond issue (announce T&Cs of issue)
pricing
issuance
closing
Best effort offering
Investment banks act as brokers and only sell as many securities as they can instead of committing to sell 100% of the issue
Shelf-registration
A type of public offering where the issuer is not required to sell the entire issue at once
Auction
A public offering method that involves bidding and is helpful in price discovery and allocating securities
Private placements
Sold to a select group of investors
Characteristics of private placement
A non-underwritten, unregistered offering of bonds
exempt from securities laws
accomplished directly between the issuer and the investor through an investment bank
include institutional investors
Secondary bond market
Markets in which existing bonds are subsequently traded among investors
Structure of secondary bond markets
Organised exchange
over-the-counter markets
Organised exchange
Where buyers and sellers meet to arrange trade and comply with the rules of the exchange
Over-the-counter markets
Buy and sell orders are matched through a communication network
liquidity
A measure of how quickly an investor can sell the bond and turn it into cash
bid-ask or bid-offer spread
Lower spread means better liquidity
Settlement
Process that occurs after a trade is made
T + 1: government and quasi-government
T + 3: corporate bond
