The price at which the trader will sell a bond. Bid-offer spread The price difference between what the trader will buy a bond at, and the price at which the trader will sell a bond. The difference on highly liquid and tradeable government bonds is usually only a few cents. A basis point is a hundredth of a percentage point. A corporate bond with a similar coupon and maturity date could easily be 100 basis points higher in yield than a federal government bond.
Traders often bid and offer on a spread basis.
For instance, in the case of this corporate bond, the trader could have a bid price of 105 basis points over governments, and an offer price of 95 basis points over governments. Therefore, it is important for investors to inquire about any special features before making a commitment. Bond auctions Federal governments in North America has move to a system of auctions to sell their bonds to investors. Most bond dealers are allowed to bid at the auctions, and then re-distribute the bonds to investors. Most other governments and corporations use a different system of distributing new issues, namely offering them to investors through bond dealers.