Investment bankers generally have a good understanding of where and how to market newly issued bonds. They may decide, for example, that they can successfully market a certain bond through advertisements in the financial press, including The Wall Street Journal and Barron's.
They usually have well-developed investment banking networks and may identify the brokers and sales forces most able to market a particular bond offering. Investment bankers sometimes have established networks with investors who may be interested in the offering; they may encourage the investors to contact brokerage houses, specifying what they want in a bond.
Investment bankers also may sell newly issued bonds through private placements to large, institutional investors like insurance companies or government unit retirement funds. If the bonds are purchased for investment and not for resale, they do not need to be registered with the Securities and Exchange Commission. A bond that is not registered and that may not be sold in the public marketplace is called a letter bond, or letter security, since the purchaser signs a letter stating that the bonds are for investment purposes and not for resale.
Role of Investment Banker >>