That Was The Week: My word is not my bond

Richard Jory, 02 February 2018

Bonds are simple, aren't they? The answer is yes. A company, often a bank decides they want to raise money from those most exotic capital markets and ask a bank or several to arrange a new issue. Those arrangers have a look around at a yield curve based on the issuer's outstanding bond issues, or find a comparable company, in terms of credit quality or rating. The leads take this idea of pricing and make it a range around their market-derived assumption to a load of usually institutional investors and make sure that all parties are generally agreed on a price point, or coupon.

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