A Canadian startup applies machine-learning to corporate bond issuance

May 10, 2018

WITH the exception of a few governments big enough to run their own auctions, anyone wishing to issue bonds must seek bankers’ help. A hefty fee will buy assistance in calibrating the size, structure and timing of a bond issue, as well as connections to lots of buyers. And once a bank has agreed to underwrite an issue, it bears the risk of failing to get a good price for the bonds. But the process is old-fashioned and inefficient (the head of bond origination at one American bank jokes that “not a lot has changed since 1933”), and the accuracy of the advice is hard to gauge. Overbond, a financial-technology startup in Toronto, wants to change all that.

Investment bankers responsible for bond issuance still operate largely by feel, calling up asset managers to get a sense of demand, rather than by crunching numbers. Rules against insider trading mean they cannot talk directly with their trader colleagues. Data on existing bonds are more abundant. In America, for instance, information on the price,...Continue reading

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