New Bond Issue Analysis

New deal flowchart for fixed income portfolio managers:

1) IS THE DEAL HOT?                                            
2) SOME BIG ANCHOR ORDERS IN THE BOOK?                         
3) SO HOW MUCH DO I HAVE TO PUT IN TO GET MY ALLOCATION        
4) OF COURSE I'LL TRADE THE BONDS BACK TO YOU                  
5) SURE I'LL BUY BONDS AFTER THE BREAK FROM YOU                
6) THE DEAL IS STILL HOT, RIGHT?                               
7) HOW COME I DIDN'T GET A GOOD ALLOCATION?                    
8) HOW COME I GOT A FULL ALLOCATION?                           
9) WHERE IS THAT BIG GUY WHO IS SUPPOSED TO DEFEND THE DEAL?   
10) THE DEAL IS SAFELY TUCKED AWAY?  GOOD.  I STILL HOLD BONDS. GET ME BACK ON THE NEXT DEAL.

Comments

[Cerulean]

That pretty much sums it up.

Highly profitable when going is good, can very painful when caught with a bad one. Ultimate insiders business as you are effectively writing a put to the underwriters who hold all the cards

[Anonymous]

Works pretty well for seasoned equity offerings as well

[Anonymous]

new issue bonds is extremely crooked...it should be illegal - probably is..trading desk sits right next to syndicate..last year when a new deal came spreads on old paper blew out 50-100 bps..so after going to lunch with your buddy on the syndicate desk u come back and short a few hundred million bonds in the secondary..make a killing after the new deal is announced...makes me sick..not to mention soliciting orders after the deal is already 5x over....just so you can tighten and upsize and screw most people out of bonds...everyone knows this so they pad their order..then a bad deal comes and you get decorated with way more bonds than you can put away..and the dealer says "look how hard i worked on your behalf"
should be illegal!!!