CFA Level I · CFA Level I Exam · Fixed-Income Markets for Government Issuers
A government wants to issue a new 10-year bond and, in the primary market, sells it directly to a pool of dealers who compete by submitting yield bids and then distribute it to investors. This issuance method is best described as a:
This is best described as an auction, either single-price or multiple-price. Dealers compete with bids for a new issue, which is the standard sovereign primary market method. A tap adds to an existing bond, and a private placement avoids competitive public bidding.
- Atap sale of an existing issue
- Bsingle-price or multiple-price auctionCorrect
- Cprivate placement with a single investor
Explanation
Competitive bidding by dealers for a new issue is an auction, which may be single-price or multiple-price. A tap sale adds to an existing outstanding issue, and a private placement is sold to a small set of investors without public bidding.
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