Pricing by Competitive Bid
Once the above documents have been prepared, once a request has been sent for a bond rating from the credit rating agencies, and once the rules for the auction have been devised, the issuer will post a Notice of Sale in The Bond Buyer and elsewhere, which announces the proposed sale and the process for submitting underwriting bids. After the announcement has been published, the issuer will mail the preliminary official statement to both potential bidders and potential investors to elicit their interest in the offering. Information meetings will be held both to encourage interest in the issue and to assess the market.
Prior to making a bid, potential underwriters will collect as much information as possible on the issuer, the bond issue itself, and the strength of the market for the bond. Municipal underwriters are allowed to take presale orders from clients, and they do so assuming various interest rates. This helps gauge the demand for the issue.
To get the broadest possible view of the market and reach the maximum number of prospective bidders, underwriters will form a syndicate prior to securing the bid. Each member of the syndicate is assigned a certain number of shares that it will be responsible for selling. The underwriter that manages the underwriting is called the lead unde