Definition§
A Workable Indication is a pricing technique employed specifically in the municipal bond market that presents a range of prices for buying or selling bonds. It serves as a nominal quote that reflects an estimate or initial bid. Importantly, a workable indication is not binding for the dealer, allowing flexibility and discussions in negotiations.
| Workable Indication | Firm Quote |
|---|---|
| Non-binding estimate range | Binding quote provided |
| Serves as a starting point for negotiations | Commits the dealer to the price if accepted |
| Commonly used in slower, more relaxed markets | Seen in quicker, more fast-paced markets |
| Used when specific bonds or values are uncertain | Secured with confidence and clarity |
Examples§
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Example of Workable Indication: A dealer might say, “I can give you a workable indication for that bond around 98-100,” indicating a pricing range without the obligation to honor an accepted price.
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Example of Firm Quote: Conversely, a firm quote would be expressed as, “I’ll sell you that bond for 99,” which the dealer is obliged to honor upon acceptance.
Related Terms§
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Nominal Quote: A preliminary, non-binding quote to gauge market interest or start negotiations.
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Firm Quote: A definitive price quote that guarantees a transaction if accepted by the buyer.
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Municipal Bonds: Bonds issued by local governments or their agencies, which are typically used to fund public projects.
Financial Formula in Action§
To illustrate how a workable indication functions, consider the simple diagram below demonstrating the communication flow between buyers and dealers:
Humorous Insights & Quotes§
“A workable indication is to market pricing what a warm-up is to a marathon—just the dealer’s way of saying they might be able to run the distance, but only if you’re willing to play along!” 😄
Fun Facts§
- The term “workable indication” emphasizes the chill vibes of the municipal bond market, often akin to a lazy Sunday brunch compared to the hustle of stock market trading.
Historical Fact§
- Workable indications became particularly relevant as the municipal bond market evolved, offering an innovative system accommodating transmitter-to-dealer communications in a slower-paced environment.
Frequently Asked Questions§
Q1: How is a workable indication different from a market order?
A1: A workable indication presents a price range without binding commitments, while a market order is an actual request to buy or sell at the prevailing market price.
Q2: Are workable indications common?
A2: Yes, especially in the municipal bond market, where finding specific bonds might require negotiation and flexibility.
Q3: What happens if a workable indication gains interest?
A3: Dealers may use the indication to gauge demand and either firm up a quote or adjust their pricing based on investor feedback.
Suggested Online Resources§
Further Reading§
- “Municipal Bonds for Dummies” by Brad King
- “The Handbook of Municipal Bonds” by Robert E. Doty
