Issuance of bonds.

12th August 2015
Its Wednesday people, so happy it’s my cds day. Saturday till now had been ok, been chilling, but today no work because of cds, or so I thought. I arrived at my lga by 9.10 even though we had been warned not to be coming late. Come on, I leave the house 6:00 am everyday to go to the office, reduced sleep and all. Now you are telling me to also be waking up that early just because I want to come for cds?, you must be joking. Wednesday is my day off. So they calmed down this week and didn’t stop us from putting our names down on the register to qualify for the signature.

We were having a meeting just downstairs about the projects we were going to undertake, when suddenly one of the local government people came to inform us that they would not sign unless we register people on one ureport like that. Oo, I was already pissed eehn after getting elated that I would sign this week because I didn’t sign last week.

Anyway we had no choice, we were scattered into the streets and asked to do marketing job for Ureport. Something I have never done done in my life before. It was fun sha, stopping people randomly to cajole them to join Ureport. I hated walking up to women to tell them about it because they would think you are all those chewing gum boys that want to toast them. Then they would be doing shakara for you. But as a fine boy, you know now *wink*, they gatz recognize. Anyway I was able to get 12 people to register but the Ureport was so slow in replying and  we had to put down the lga and ward of our cds place so that it counts

I got home early around 1:30, prayed, broke my fast, slept and woke up to read.

I read something on issuing of bonds. Here is the summary below. Do enjoy.

ISSUANCE OF BONDS

Primary Market:
When newly issued bonds are sold, it is termed primary market transactions. Primary market transactions can occur in two ways, which are

1) Sale to the public / public offering

2) Sale to qualified investors only/ private placements.

In the sale of bonds in the primary market, the company issuing the bond employs the services of an investment bank for the public offering of the bond. An investment bank’s expertise lies in determining the funding needs, structuring the debt security , creating the bond indenture, naming of a bond trustee, registering with security regulators, pricing the bonds and of course selling them.

Bonds can be sold through an underwritten offering or a best effort offering. In an underwritten offering, the entire bond issue is purchased from the issuing firm by the investment bank , termed the underwriter.
There is a risk the investment bank takes, and this risk is that all the bonds would not be sold. In the case of a large bond issue whereby a single investment bank cannot underwrite it, investment banks come together to underwrite it, there would be a lead underwriter who heads the syndicate of investment banks who collectively establish the pricing of the issue and are responsible for selling the bonds.

The order of things in a bond issue is that new bonds are publicized by the investment bank, and dealers indicate their interest in buying the bonds. The investment bank provides information about appropriate pricing.

In issuing by best efforts, the investment bank acts simply as an agent, it does not buy up all the issues out rightly like in the underwriting, but only agrees to do its best to sell the offering to the public and does not guarantee that the issuing company would receive any set amount of money. The investment bank sells the bond on a commission basis.

Auctions: Bonds such as the us treasury securities are sold through single price auctions, with the majority of purchases made by primary dealers that participate in purchases and sale of bonds with the federal reserve bank of new York to facilitate the open market operations of the federal reserve.
Secondary Markets
They are markets for dealing bonds that have been issued previously. Most of the secondary market operations for bonds are made in dealers market or over the counter market.

Dealers post bid prices which are purchase prices by them acting as buyers, and ask or offer prices which are prices they are willing to receive as sellers.

 

Recommended Reading 

Frank Fabozzi., Martin Leibowitz., Fixed Income Analysis