Module 3 · Fixed Income

Fixed-Income Issuance and Trading

EN: Primary and secondary markets — auctions, underwriting, dealer markets.
VN: Thị trường sơ cấp và thứ cấp, đấu giá, dealer market.

1. Primary Market Concept

Auction Government bonds — single-price (Dutch) or multi-price (discriminatory).
Underwritten Investment bank guarantees full subscription, takes principal risk.
Best-efforts Bank tries to sell, no guarantee.
Private placement Sale to a small number of qualified investors (less disclosure).

2. Secondary Market Concept

OTC Most bonds trade OTC via dealer networks; less price transparency than equities.
Liquidity Concentrated in benchmark government bonds and recent issues.
Settlement T+1 / T+2 typical; treasuries T+1.

Practice problem Practice

Practice problem

In a single-price (Dutch) auction, bids accepted: $99 (yield 5.0%), $98.5 (5.1%), $98 (5.2%). All bidders pay which price/yield if all 3 are accepted?

Show solution

Single-price/Dutch: all winners pay the lowest accepted price (highest accepted yield).

Lowest accepted price = $98.

All accepted bidders pay $98 (yield 5.2%).