What Are Bond Deals Made Of?

O'Leary, Christopher
June 2003
Investment Dealers' Digest;6/30/2003, Vol. 69 Issue 26, p24
Trade Publication
Bankers privately admit that many issuers are unable to achieve truly tight pricing these days. On the surface, the intricacies of interest rates, plus pricing benchmarks like swap spreads and other technical market factors such as how heavy the new issue calendar is, appear to be the overriding factors in how a deal is priced. Yet the pricing of a bond is also heavily affected by less measurable influences, such as underwriter politics, issuer/underwriter relationships and buy-side perceptions, bankers add. In some cases, the need to preserve banking relationships is more important. For example the recent $13 billion debt offering from General Motors Corp., in which the auto company named nearly every top-ranked debt underwriter on the Street in some sort of co-lead manager capacity. The pricing issuers get "really varies by issuer name," says Peter Goettler, head of investment banking and debt capital markets at Barclays Capital. Yet as more bond operations became subsumed into larger commercial/investment bank hybrids, politics, risk management and issuer relationships all became more important than competition for underwriting mandates via pricing wars.


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