New issue bonds are fixed income securities that can be purchased directly from the issuer. Once a bond is priced and issued, it enters into the secondary market that is predominantly an Over-The-Counter (OTC) market. You need not pay a concession or mark up for the purchase with this type of transaction. Rather, the issuer offers a concession to the brokers who distribute the bonds on behalf of the issuer. However, in the secondary market, a buyer has to pay a concession and the seller has to pay a sales commission to the brokers.
Finding and Buying New Issue Bonds
You have to keep track of bond issuing agencies such as corporations, municipalities and governments. You can buy new issue bonds of corporations through bond dealers. Private and public corporations offer bonds both domestically and internationally. Usually the corporate bond market is huge, with substantial active trading.
For instance, you can buy treasury bonds directly from the US Treasury. However, the Treasury stops the sale of bonds for a few years when it feels that more public debt is not needed. In this case, you can find Treasury bonds in the secondary market.
To find new issue bonds, you can browse the websites of reputed brokers. They normally distribute new issue bonds on behalf of issuers. If you miss the issue date, you can opt for the secondary market. Although one needs to pay a commission or concession for buying bonds in the secondary market, at times you will find bonds in the secondary market cheaper than new issue bonds.
New Issue Bonds and Secondary Market Bonds – Pricing
Either the prices of bonds are fixed or the bonds are traded on fair value when they are first issued. New issue bonds are usually traded by bond dealers on behalf of the issuer. Bond prices in the secondary market vary depending on demand and supply.
Most reputed financial publications, such as The Wall Street Journal, publish the prices of bonds traded on exchanges everyday. However, only a few bonds are traded on a daily basis. It is better to opt for a good broker for the bond you want to buy, if you are not getting new issue bonds. Moreover, a broker can help you meet your investment goals.