CFA Level I · CFA Level I Exam · Fixed-Income Issuance and Trading
When a bond issue is sold by a syndicate of investment banks in a public offering, the offering price and coupon are most likely set during the:
Pricing is most likely set during bookbuilding. The syndicate collects investors' indications of interest and demand at various yields, then uses that information to finalize the offer price, coupon and size before the bonds are issued and settled.
- Abookbuilding period, based on investor indications of interestCorrect
- Bsecondary market trading period, based on dealer quotes
- Cpost-settlement period, based on the issuer's credit rating changes
Explanation
In a syndicated offering, the underwriters gather indications of interest from investors during bookbuilding and use this demand information to finalize pricing and size before the bonds are issued. Secondary market trading happens only after the primary sale. Post-settlement events cannot determine the original offer terms.
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