What are retail bonds?
Retail bonds are another form of ‘new issue’ where companies look to raise extra capital by borrowing from the investor at a fixed rate for a set period. Like equity IPOs these new issues are typically introduced by companies looking to raise capital to expand their business, pay down debt, or finance other corporate activities.
Many new issues attract sizeable interest from private investors who may be looking to take advantage of demand on the primary market, before the security is bought on the secondary market, with the hope that the value of the investment will rise. However, investors must be aware that investing in new issues is not without risk and the value of your investment may fall significantly after the security is quoted on the open market.