This post was co-authored by Ryan Singer, John Crossman and Faye Keegan.
Next Monday, California will sell an estimated $2.5 billion dollars in bonds, part of which will fund hospitals, high-speed rail, education and other important state projects.
For the first time ever, all investors, not just institutional clients, can use Neighborly to indicate interest in buying bonds prior to the order period and receive updates on the book of orders being built, giving them transparency on pricing usually only available to the biggest investors.
Second, during the institutional order period, broker-dealers call their institutional clients and directly solicit orders. They build a book of these orders, and based on this private information, broker-dealers estimate the price of the bonds and place orders. Because demand has been built ahead of time, they have far better pricing information, giving them an advantage over individual investors.
If all investors had access to this information, they could get a better, fairer price on their investment.
At Neighborly we believe the future of the public finance market depends on increasing accessibility and transparency for all investors, providing better returns to buyers of muni bonds, and funding critical public projects more efficiently.
As we receive your bids we will publish regular updates on the book we’re building and the prices that investors like you are requesting.
Why is Open Book good for governments?
Issuers and taxpayers will see the same information Neighborly does as an issuance comes together. This will increase public trust in the process and institutions that help the issuer borrow money. Because pricing will be derived from actual investor interest, issuers and taxpayers will be able to rest assured that the issuer will not have to pay more than necessary in interest or fees.
Since it’s straightforward to buy bonds on the Neighborly platform and orders can be as small as a single bond, municipal issuers can attract a broad range of investors who are excited to support the future of their communities.
What’s the future of the Open Book?
The municipal bond market is among the least transparent public markets in America. We are changing the way that muni bonds are funded, issued, traded, held and paid so that investors and issuers can together realize the incredible potential of this essential market.
The release of the public Open Book is a milestone in this mission to bring radical transparency and better access to the public finance market.