Business & Finance Stocks-Mutual-Funds

Underwriters and Underwriting

Definition:

Selling bonds is a complex endeavor. There are millions and millions of dollars at stake even in the smallest of offerings in the fixed-income market.

Central to the process are the investment banks of Wall Street. Acting either alone or as part of a "syndicate," investment banks bid for the right to "underwrite" a bond offering -- agreeing to take on all responsibilities to sell the bonds.

Underwriters agree to buy all the bonds in an issue and then re-sell them for a profit. The difference between the price an underwriter pays for a bond and what it sells the bond for is called the "underwriting spread."

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