medium · Debt Capital Markets
A DCM banker advises an issuer that its new deal will likely require a 15 basis point 'new-issue concession'.
What does this term mean in practice?
- The new bond must be priced at a spread 15 bps wider than where the issuer's existing bonds trade in the secondary market to attract sufficient demand.
- The bond's coupon will be 15 bps lower than the market-clearing yield to save the issuer money.
- The secondary market price of the bond is expected to drop by 15 bps immediately after it starts trading.
- The issuer must pay an additional 15 bps fee to the lead underwriting banks.
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