Which Bonds Are More Expensive? The Cost Differentials by Debt Issue Purpose and the Method of Sale: An Empirical Analysis

Tatyana Guzman, Tima Moldogazíev

Research output: Contribution to journalArticle

13 Scopus citations


In this paper, we survey the cost differentials by debt issue purpose and the method of underwriting. We find that cost differentials are a function of the purpose for which the debt was issued, with bond purposes traditionally considered riskier facing higher borrowing costs. However, this effect is not uniform and varies by credit quality portfolios. Moreover, the method of bond sale is an important factor for true interest costs. Overall, the competitive method of sale consistently performs better than the negotiated method of sale in all regression models, even after correcting for self-selection.

Original languageEnglish (US)
Pages (from-to)79-101
Number of pages23
JournalPublic Budgeting and Finance
Issue number3
StatePublished - Sep 1 2012


All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics
  • Public Administration

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