New Issue Pricing and Allocations

Question 1

A five-year senior issue is marketed at 160 bp over benchmarks. Comparable same-issuer senior bonds at four and six years are at 135 and 155 bp. Use linear interpolation, with 5 bp total estimated execution cost for buying the new issue. What is the interpolated five-year spread?

Accepted Answer

145 bp

Question 2

A five-year senior issue is marketed at 160 bp over benchmarks. Comparable same-issuer senior bonds at four and six years are at 135 and 155 bp. Use linear interpolation, with 5 bp total estimated execution cost for buying the new issue. What gross new issue concession follows?

Accepted Answer

15 bp

Question 3

A five-year senior issue is marketed at 160 bp over benchmarks. Comparable same-issuer senior bonds at four and six years are at 135 and 155 bp. Use linear interpolation, with 5 bp total estimated execution cost for buying the new issue. After the stated cost, what concession remains on this screen?

Accepted Answer

10 bp

Question 4

A five-year senior issue is marketed at 160 bp over benchmarks. Comparable same-issuer senior bonds at four and six years are at 135 and 155 bp. Use linear interpolation, with 5 bp total estimated execution cost for buying the new issue. If final terms tighten to 150 bp, what net concession remains?

Accepted Answer

Zero.

Question 5

A five-year senior issue is marketed at 160 bp over benchmarks. Comparable same-issuer senior bonds at four and six years are at 135 and 155 bp. Use linear interpolation, with 5 bp total estimated execution cost for buying the new issue. What if the closest bond is callable and the new issue is not?

Accepted Answer

Adjust the comparison for the option.

Question 6

A five-year senior issue is marketed at 160 bp over benchmarks. Comparable same-issuer senior bonds at four and six years are at 135 and 155 bp. Use linear interpolation, with 5 bp total estimated execution cost for buying the new issue. What if the reference bond last traded a week ago?

Accepted Answer

Check executable pricing.

Question 7

A five-year senior issue is marketed at 160 bp over benchmarks. Comparable same-issuer senior bonds at four and six years are at 135 and 155 bp. Use linear interpolation, with 5 bp total estimated execution cost for buying the new issue. Why check the same rank and guarantees?

Accepted Answer

Recovery rights can differ.

Question 8

A five-year senior issue is marketed at 160 bp over benchmarks. Comparable same-issuer senior bonds at four and six years are at 135 and 155 bp. Use linear interpolation, with 5 bp total estimated execution cost for buying the new issue. How should an indicated concession be communicated before final pricing?

Accepted Answer

As conditional on current terms and comparable marks.

Question 9

A five-year senior issue is marketed at 160 bp over benchmarks. Comparable same-issuer senior bonds at four and six years are at 135 and 155 bp. Use linear interpolation, with 5 bp total estimated execution cost for buying the new issue. What if a client requires 12 bp after costs?

Accepted Answer

Seek at least 162 bp at the same reference.

Question 10

A five-year senior issue is marketed at 160 bp over benchmarks. Comparable same-issuer senior bonds at four and six years are at 135 and 155 bp. Use linear interpolation, with 5 bp total estimated execution cost for buying the new issue. Which evidence belongs in the client pitch?

Accepted Answer

Comparable issues, terms, pricing basis, and liquidity.

Question 11

A client wants $12m exposure, with a hard $12m cap across primary and secondary. The primary allocates 40% of the submitted amount in the planning case. A submitted order can still fill in full. Can sales submit $30m without additional client authority?

Accepted Answer

No.

Question 12

A client wants $12m exposure, with a hard $12m cap across primary and secondary. The primary allocates 40% of the submitted amount in the planning case. A submitted order can still fill in full. What is expected allocation on an authorized $12m order at 40%?

Accepted Answer

$4.8m

Question 13

A client wants $12m exposure, with a hard $12m cap across primary and secondary. The primary allocates 40% of the submitted amount in the planning case. A submitted order can still fill in full. What expected secondary balance remains after that allocation?

Accepted Answer

$7.2m

Question 14

A client wants $12m exposure, with a hard $12m cap across primary and secondary. The primary allocates 40% of the submitted amount in the planning case. A submitted order can still fill in full. If actual allocation is $6m, what balance remains?

Accepted Answer

$6m

Question 15

A client wants $12m exposure, with a hard $12m cap across primary and secondary. The primary allocates 40% of the submitted amount in the planning case. A submitted order can still fill in full. If $4m secondary is already live and may fill, what maximum further primary allocation fits?

Accepted Answer

$8m

Question 16

A client wants $12m exposure, with a hard $12m cap across primary and secondary. The primary allocates 40% of the submitted amount in the planning case. A submitted order can still fill in full. Why avoid buying the expected balance before allocations confirm by default?

Accepted Answer

It can create excess exposure.

Question 17

A client wants $12m exposure, with a hard $12m cap across primary and secondary. The primary allocates 40% of the submitted amount in the planning case. A submitted order can still fill in full. What does the recap need about partial allocations?

Accepted Answer

A residual plan and price authority.

Question 18

A client wants $12m exposure, with a hard $12m cap across primary and secondary. The primary allocates 40% of the submitted amount in the planning case. A submitted order can still fill in full. Why check issuer limits at the portfolio level?

Accepted Answer

Other holdings may already consume capacity.

Question 19

A client wants $12m exposure, with a hard $12m cap across primary and secondary. The primary allocates 40% of the submitted amount in the planning case. A submitted order can still fill in full. What if the client authorizes a lower maximum after submission?

Accepted Answer

Amend under book terms and confirm effectiveness.

Question 20

A client wants $12m exposure, with a hard $12m cap across primary and secondary. The primary allocates 40% of the submitted amount in the planning case. A submitted order can still fill in full. What should be reported at allocation?

Accepted Answer

Confirmed amount, terms, and remaining authorized exposure.

Question 21

Initial price thoughts are 210 bp. Guidance moves to 190–195 bp. A client authorizes up to $8m only at 195 bp or wider. Final pricing is 192 bp. Was the authorized threshold met?

Accepted Answer

No.

Question 22

Initial price thoughts are 210 bp. Guidance moves to 190–195 bp. A client authorizes up to $8m only at 195 bp or wider. Final pricing is 192 bp. How far is final pricing inside the minimum?

Accepted Answer

3 bp

Question 23

Initial price thoughts are 210 bp. Guidance moves to 190–195 bp. A client authorizes up to $8m only at 195 bp or wider. Final pricing is 192 bp. How far did spread tighten from initial thoughts?

Accepted Answer

18 bp

Question 24

Initial price thoughts are 210 bp. Guidance moves to 190–195 bp. A client authorizes up to $8m only at 195 bp or wider. Final pricing is 192 bp. What should sales do if asked to reconfirm at 192?

Accepted Answer

Seek fresh authority or decline.

Question 25

Initial price thoughts are 210 bp. Guidance moves to 190–195 bp. A client authorizes up to $8m only at 195 bp or wider. Final pricing is 192 bp. Why restate price direction in a spread limit?

Accepted Answer

Wider spread means more compensation on that basis.

Question 26

Initial price thoughts are 210 bp. Guidance moves to 190–195 bp. A client authorizes up to $8m only at 195 bp or wider. Final pricing is 192 bp. If benchmark yield rises 10 bp while spread tightens 18 bp, what all-in yield change follows versus initial thoughts?

Accepted Answer

−8 bp

Question 27

Initial price thoughts are 210 bp. Guidance moves to 190–195 bp. A client authorizes up to $8m only at 195 bp or wider. Final pricing is 192 bp. What if the client also has a minimum yield?

Accepted Answer

Check both limits at final terms.

Question 28

Initial price thoughts are 210 bp. Guidance moves to 190–195 bp. A client authorizes up to $8m only at 195 bp or wider. Final pricing is 192 bp. When is the order binding?

Accepted Answer

According to the documented book and client instructions.

Question 29

Initial price thoughts are 210 bp. Guidance moves to 190–195 bp. A client authorizes up to $8m only at 195 bp or wider. Final pricing is 192 bp. What is useful when passing on final pricing?

Accepted Answer

Explain the limit and eligible secondary alternatives.

Question 30

Initial price thoughts are 210 bp. Guidance moves to 190–195 bp. A client authorizes up to $8m only at 195 bp or wider. Final pricing is 192 bp. Which fact should a confirmation capture?

Accepted Answer

The final approved terms and any amendment timing.

Question 31

A client receives $7m face at 98.50 clean. Accrued interest is 0.40 per 100 face, and charges total $8,000. It has $6.9m free settlement cash. What is clean consideration?

Accepted Answer

$6.895m

Question 32

A client receives $7m face at 98.50 clean. Accrued interest is 0.40 per 100 face, and charges total $8,000. It has $6.9m free settlement cash. What accrued cash is owed?

Accepted Answer

$28,000

Question 33

A client receives $7m face at 98.50 clean. Accrued interest is 0.40 per 100 face, and charges total $8,000. It has $6.9m free settlement cash. What cash is due before charges?

Accepted Answer

$6.923m

Question 34

A client receives $7m face at 98.50 clean. Accrued interest is 0.40 per 100 face, and charges total $8,000. It has $6.9m free settlement cash. What is total cash due including charges?

Accepted Answer

$6.931m

Question 35

A client receives $7m face at 98.50 clean. Accrued interest is 0.40 per 100 face, and charges total $8,000. It has $6.9m free settlement cash. What funding gap remains?

Accepted Answer

$31,000

Question 36

A client receives $7m face at 98.50 clean. Accrued interest is 0.40 per 100 face, and charges total $8,000. It has $6.9m free settlement cash. What if proceeds from a planned sale arrive one day afterward?

Accepted Answer

They do not fund settlement without a bridge.

Question 37

A client receives $7m face at 98.50 clean. Accrued interest is 0.40 per 100 face, and charges total $8,000. It has $6.9m free settlement cash. Why discuss clean price and accrued separately?

Accepted Answer

Clean valuation and settlement cash answer different questions.

Question 38

A client receives $7m face at 98.50 clean. Accrued interest is 0.40 per 100 face, and charges total $8,000. It has $6.9m free settlement cash. If the allocation were only $5m and charges unchanged, what total cash is due?

Accepted Answer

$4.953m

Question 39

A client receives $7m face at 98.50 clean. Accrued interest is 0.40 per 100 face, and charges total $8,000. It has $6.9m free settlement cash. If a sale funds the primary purchase but allocation is small, what risk arises?

Accepted Answer

The client may sell more exposure than needed.

Question 40

A client receives $7m face at 98.50 clean. Accrued interest is 0.40 per 100 face, and charges total $8,000. It has $6.9m free settlement cash. What should the client see before ordering?

Accepted Answer

Settlement date, cash needs, and funding fallback.

Question 41

Two otherwise comparable five-year noncallable bonds have $100 face. New A has 6% coupon at 99 and existing B has 7% coupon at 104. Use current yield = annual coupon divided by clean price. What current yield does A have?

Accepted Answer

About 6.06%

Question 42

Two otherwise comparable five-year noncallable bonds have $100 face. New A has 6% coupon at 99 and existing B has 7% coupon at 104. Use current yield = annual coupon divided by clean price. What current yield does B have?

Accepted Answer

About 6.73%

Question 43

Two otherwise comparable five-year noncallable bonds have $100 face. New A has 6% coupon at 99 and existing B has 7% coupon at 104. Use current yield = annual coupon divided by clean price. Which has more annual coupon per $100 face?

Accepted Answer

B by $1.

Question 44

Two otherwise comparable five-year noncallable bonds have $100 face. New A has 6% coupon at 99 and existing B has 7% coupon at 104. Use current yield = annual coupon divided by clean price. What principal gain or loss follows for A at par redemption?

Accepted Answer

+$1

Question 45

Two otherwise comparable five-year noncallable bonds have $100 face. New A has 6% coupon at 99 and existing B has 7% coupon at 104. Use current yield = annual coupon divided by clean price. What principal gain or loss follows for B?

Accepted Answer

−$4

Question 46

Two otherwise comparable five-year noncallable bonds have $100 face. New A has 6% coupon at 99 and existing B has 7% coupon at 104. Use current yield = annual coupon divided by clean price. Why avoid ranking using current yield alone?

Accepted Answer

It omits redemption and timing.

Question 47

Two otherwise comparable five-year noncallable bonds have $100 face. New A has 6% coupon at 99 and existing B has 7% coupon at 104. Use current yield = annual coupon divided by clean price. If terms include an early call, what changes?

Accepted Answer

Test yield to call and likely cash flow paths.

Question 48

Two otherwise comparable five-year noncallable bonds have $100 face. New A has 6% coupon at 99 and existing B has 7% coupon at 104. Use current yield = annual coupon divided by clean price. Which cost may differ at the intended order size?

Accepted Answer

Bid-ask and price impact.

Question 49

Two otherwise comparable five-year noncallable bonds have $100 face. New A has 6% coupon at 99 and existing B has 7% coupon at 104. Use current yield = annual coupon divided by clean price. How should fixed coupon income be discussed for a short hold?

Accepted Answer

Pair it with resale-price risk.

Question 50

Two otherwise comparable five-year noncallable bonds have $100 face. New A has 6% coupon at 99 and existing B has 7% coupon at 104. Use current yield = annual coupon divided by clean price. What analysis helps if the client wants cash income today?

Accepted Answer

Dated coupons, executable entry, and exit risks.

Question 51

Deal A gives 20 bp gross concession and has estimated 12 bp cost to exit at size. Deal B gives 13 bp concession and has 3 bp expected exit cost. Assume the client will likely exit soon and other differences are held equal. What is A's net concession?

Accepted Answer

8 bp

Question 52

Deal A gives 20 bp gross concession and has estimated 12 bp cost to exit at size. Deal B gives 13 bp concession and has 3 bp expected exit cost. Assume the client will likely exit soon and other differences are held equal. What is B's net concession?

Accepted Answer

10 bp

Question 53

Deal A gives 20 bp gross concession and has estimated 12 bp cost to exit at size. Deal B gives 13 bp concession and has 3 bp expected exit cost. Assume the client will likely exit soon and other differences are held equal. Which leads on the stated screen?

Accepted Answer

B by 2 bp.

Question 54

Deal A gives 20 bp gross concession and has estimated 12 bp cost to exit at size. Deal B gives 13 bp concession and has 3 bp expected exit cost. Assume the client will likely exit soon and other differences are held equal. At what exit cost for A would it tie B?

Accepted Answer

10 bp

Question 55

Deal A gives 20 bp gross concession and has estimated 12 bp cost to exit at size. Deal B gives 13 bp concession and has 3 bp expected exit cost. Assume the client will likely exit soon and other differences are held equal. What if the client plans to hold to maturity?

Accepted Answer

Revisit assumed exit cost and horizon risks.

Question 56

Deal A gives 20 bp gross concession and has estimated 12 bp cost to exit at size. Deal B gives 13 bp concession and has 3 bp expected exit cost. Assume the client will likely exit soon and other differences are held equal. What if the issuer expects to tap A often in future?

Accepted Answer

Consider both supply and potential liquidity effects.

Question 57

Deal A gives 20 bp gross concession and has estimated 12 bp cost to exit at size. Deal B gives 13 bp concession and has 3 bp expected exit cost. Assume the client will likely exit soon and other differences are held equal. What should be comparable across quotes?

Accepted Answer

Side, size, and timestamp.

Question 58

Deal A gives 20 bp gross concession and has estimated 12 bp cost to exit at size. Deal B gives 13 bp concession and has 3 bp expected exit cost. Assume the client will likely exit soon and other differences are held equal. Why discuss the weakest exit scenario?

Accepted Answer

A good concession can be outweighed by poor liquidity.

Question 59

Deal A gives 20 bp gross concession and has estimated 12 bp cost to exit at size. Deal B gives 13 bp concession and has 3 bp expected exit cost. Assume the client will likely exit soon and other differences are held equal. What other risk could outweigh the 2 bp edge?

Accepted Answer

Differences in terms or credit exposure.

Question 60

Deal A gives 20 bp gross concession and has estimated 12 bp cost to exit at size. Deal B gives 13 bp concession and has 3 bp expected exit cost. Assume the client will likely exit soon and other differences are held equal. What recommendation fits stated assumptions?

Accepted Answer

Prefer B and flag the exit-cost assumption.

Question 61

A client considers $10m face of a new bond versus $6m face of a secondary issue. Unit spread DV01 is $420 per $1m for new and $700 per $1m for secondary. Compare only spread sensitivity initially. What spread DV01 does the full primary target create?

Accepted Answer

$4,200

Question 62

A client considers $10m face of a new bond versus $6m face of a secondary issue. Unit spread DV01 is $420 per $1m for new and $700 per $1m for secondary. Compare only spread sensitivity initially. What spread DV01 does the proposed secondary size create?

Accepted Answer

$4,200

Question 63

A client considers $10m face of a new bond versus $6m face of a secondary issue. Unit spread DV01 is $420 per $1m for new and $700 per $1m for secondary. Compare only spread sensitivity initially. What first-order loss follows 25 bp widening for either target?

Accepted Answer

$105,000

Question 64

A client considers $10m face of a new bond versus $6m face of a secondary issue. Unit spread DV01 is $420 per $1m for new and $700 per $1m for secondary. Compare only spread sensitivity initially. If only $5m new face allocates, how much DV01 is obtained?

Accepted Answer

$2,100

New Issue Pricing and Allocations

Making the curve comparison

Order and allocation sizing

Yield guidance and limits

Funding the purchase

Coupon, price, and yield

A larger headline concession

Fees, sizing, and duration

Currency comparison

Order book dynamics

Client decision under uncertainty