Securities Markets - Issuing Bonds


How Do Investment Banks Issue Bonds?
In the new issuance of bonds, an investment bank has options with respect to how to place the bonds in the market. These options are as follows:

1. Competitive Bids
Competitive bids are the process in which the bond issuer solicits bids from the underwriting of various investment banks. This is typically used in dealing with municipal bonds.

2. Negotiated Sales
A negotiated sale is the process whereby a bond issuer negotiates with the investment bank with respect to the pricing of underwriting services.

3. Private Placements
A private placement is the process whereby an investment bank "places" the new bond issue with a small number of buyers, typically large institutions. Private placements are not registered with the SEC for public sale.
Types of Markets


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RELATED TERMS
  1. Private Placement

    The sale of securities to a relatively small number of select ...
  2. Bond Purchase Agreement

    A legally binding document between a bond issuer and an underwriter ...
  3. Negotiated Sale

    A method of offering municipal bonds or similar financial instruments ...
  4. Issue

    1. The process of offering securities as an attempt to raise ...
  5. Bond Option

    An option contract in which the underlying asset is a bond. Other ...
  6. Term Bond

    Bonds from the same issue that share the same maturity dates. ...
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