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Bond Syndication for Compliance and Middle Office Professionals
Test your knowledge
1. Syndicated bonds represent a common way of selling debt, widely used by governments, corporations, financial institutions and other entities. The syndication process involves the Issuer and Lead Managers who:
Solicit investor interest in the transaction, evaluate the level of demand in the order book, fine-tune the transaction pricing and allocate securities to selected investors.
Announce the transaction pricing in advance and allocate bonds on a first come, first served basis.
Negotiate the bond pricing with a small group of investors prior to announcing the transaction in the market-place, with the aim of increasing the initial size of the transaction.
2. Which of the following is true in respect of issuance off a Medium-Term Note (MTN) or Issuance programme?
Only one bank is able to execute debt instruments for an issuer off a programme.
Debt instruments are issued in the same form but under a different mechanism to a stand-alone debt issue.
A number of different issuers can execute debt instruments off the same MTN programme.
3. An issuer usually mandates a syndicate of lead managers to actively run a bond transaction. The mandate letter usually includes, but is not limited to, the following, except:
Duties of the mandate banks, as well as liability and indemnity
Features of the bond and the fee structure
The size and pricing details of the bond transaction
4. Once book building is completed and the order books are closed, the syndicate managers will be able to determine the launch information, including the transaction size and ‘spread’. In this context, the ‘spread’ represents:
The difference between the yield on the underlying government benchmark and the yield on the equivalent secondary market comparable, at the time of pricing.
The difference between the yield on the equivalent secondary market comparable and the yield on the new issue bond, at the time of pricing.
The difference between the yield on the underlying government benchmark and the yield on the new issue bond, at the time of pricing.
5. Stabilisation of a new bond transaction could constitute market manipulation, insider dealing and/or market abuse unless carried out:
By one bank only as other banks are restricted from participating.
Within a formal safe harbour.
No later than 3 days after issuance.
answers
1,2,3,3,2
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