Module III· DCM — Investment Grade & Senior DebtIntermediate
Question

What is new issue premium (NIP), and how is it determined?

Answer

New issue premium is the extra spread a new bond offers versus the issuer's existing curve to attract investors. It compensates for execution risk, supply, market volatility, and concession needed to clear the book. NIP is determined from secondary spreads, peer curves, investor feedback, order book strength, and market tone.