| Most people associate the term 'investments' with | | | | tax approvals. This is done to ensure that proper legal |
| stocks and mutual funds, but Federal bond issues also | | | | procedures are being followed. The marketing phase |
| constitute a major chunk of the overall investments | | | | of Federal Bond issues usually lasts a week, during |
| market. The annual turnover of US Federal Bond | | | | which potential underwriters review and evaluate the |
| issues is many times more than that generated by the | | | | terms and conditions of the bond issue. This helps |
| collective stock markets. Although considered the | | | | them in quoting an appropriate bid amount. This |
| safest investment options in the US, Federal Bonds are | | | | process is eliminated, when the government appoints a |
| not free from obscurity. The following information will | | | | single underwriter, based on past relationships with the |
| help you understand the basics of these bonds. | | | | person. If multiple underwriters are to be appointed, the |
| How and why they are issued? | | | | government allows all interested parties to submit their |
| The main organization that coordinates Federal bond | | | | purchase bids, which includes general terms and |
| issues is the Central Bank, which first conducts a | | | | conditions, the term of the bond issue, the actual |
| market survey to assess the current investment | | | | amount of the bonds, interest rates, amortization |
| needs of investors. This survey involves consultations | | | | schedule, and details about prepayment provisions. |
| with various entities like investment dealers, banks, and | | | | Completing documentation requirements |
| other financial organizations that are experienced in | | | | In the final phase of the process of issuing Federal |
| handling Federal bond issues. Before introducing the | | | | bonds, the appointed underwriter wires the purchase |
| bonds in the market, the Federal government needs to | | | | price to the paying agent, who in turn transfers back |
| determine their exact purpose, which may be for | | | | the cost of issuance according to the terms and |
| constructing a new road or bridge, refunding | | | | conditions. The paying agent is also entrusted with the |
| government debt or for funding some other project | | | | task of allocating funds to the appropriate parties or |
| that is designed to serve national taxpayers or some | | | | projects, depending on the original purpose determined |
| other federal constituents. In addition, the Federal | | | | in the initial phases of the Federal bond issue. The |
| government has also to determine the legal | | | | counsel firm then prepares the closing documents, a |
| parameters required by the federal legislation | | | | copy of which is sent to all the participants of the |
| beforehand. | | | | issue. |
| Marketing the bonds | | | | The closing documents are highly technical in nature |
| For marketing the bonds, the government can select | | | | and you will have to be a law professional to |
| either a single underwriter or a group of them, based | | | | understand the kind of information given in them. |
| on the size of the bond issue. The government is | | | | These documents are used as a proof that the terms |
| required to supply copies of a disclosure document | | | | and conditions of the purchase proposal have been |
| that provides bond related information to potential | | | | fully approved. |
| underwriters, to enable them to bid for the issue. For | | | | The basic information provided above will help you to |
| this purpose, the government hires the services of a | | | | familiarize yourself with the practical details of Federal |
| professional bond counsel firm that looks into the legal | | | | Bond issues. By investing a part of your savings in |
| aspects of the issue, in consultations with the official | | | | Federal Bond issues, you can hedge against risks that |
| government solicitor. Both the counsel firm and the | | | | are quite common in other types of investments, such |
| solicitor work together to check the applicability of the | | | | as stocks and derivatives. |
| bond issues, in relation with federal and state law, and | | | | |