Bond issues: Art or science?
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Bond issues: Art or science?

Arguments over how to price a deal will never go away, even for frequent borrowers. Most have 15 or more investment banks chasing the mandates, offering the issuer all sorts of advice and inducements. A treasurer who chooses an aggressively priced deal might save his institution a few thousand dollars over 10 years and make himself look good to his bosses, but if it's too aggressive and investors don't buy it, could this harm his future issues? And if the deal is too generous, why should investors bother to buy paper issued later that might be more accurately priced?

One man who thinks he might have a solution is Brian Mooyaart. A former banker on the buy side, he now runs his own company, Mooyaart Consult, which tracks large liquid benchmark issues in each of the major capital markets. It also tracks the price performance of new issues in syndicate and primary trading and from this builds issuer-specific term structures for 200 regular issuers in the major currencies. "In this way issuers can see at a glance how the daily fluctuations of the market affect their issuing strategy, and can be guided to the optimal time to issue, both as regards the spread over the benchmark and the swap rates," says Mooyaart.

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