In the new issuance of bonds, an investment bank has options with respect to how to place the bonds in the market. These options are as follows:
Competitive bids are the process in which the bond issuer solicits bids from the underwriting of various investment banks. This is typically used in dealing with municipal bonds.
2. Negotiated Sales
A negotiated sale is the process whereby a bond issuer negotiates with the investment bank with respect to the pricing of underwriting services.
3. Private Placements
A private placement is the process whereby an investment bank "places" the new bond issue with a small number of buyers, typically large institutions. Private placements are not registered with the SEC for public sale.