Question on the pricing of a bond
If a bond is priced/sold at a discount, does that mean that you're losing money? Or doesn't it matter, you're just pricing it and making sure it clears the market, and it's the issuer's problem? Same question for selling at a premium... I don't really understand the nuance of the discount/premium thing, would really appreciate some low-level insight
Who is "you"? Pricing at a discount just means less proceeds to the issuer. This is a lever that issuers pull often, especially when they have a specific coupon in mind. If you price at par your coupon is just the final yield. It doesn't affect fees paid to the bank group since these are calculated on the face value of the trade.
Since you mention issuer I assume you're talking primary market. But in secondary trading, premium/discount becomes a problem for the bondholders (investors). Issuers obviously care about how their name trades, and it would have an impact on any new issuance they want to do, but really the only other time secondary trading at a premium or discount is relevant is if a company is looking to do LM (tenders, etc.)
True, though when they market the bond, why would they price at a discount vs. announcing as benchmark and taking out less(not upsizing as much?) in that way? When transaction announced as benchmark and syndicates discussing with issuer on decision between lower coupon / increased size, why would you then price at a discount vs. not upsizing by as much
The proceeds are a big factor here. A worsening macro environment, rising rates, struggling business may weaken demand for the bonds. And if the investment bank guaranteed financing then they'll discount the bonds and eat a chunk of the losses. Upsizing can be negligable to a company's total debt, it can also increase the amount of near term maturities being refi'd. Just because a deal is oversubscribed doesn't mean you'll see price talk on a BB rated bond drop like 200-300 bps. An investor will just say fuck that, I'll just buy on the secondary market. So instead a company will boost the issuance.
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