Workable Indication
Candlefocus EditorA workable indication is a quote, typically stated as a range, that is used to gauge investor interest in buying or selling municipal bonds. This quote does not bind the dealer offering the indication, but it does give an estimate of what a dealer might be willing to pay for the bond. For example, a dealer might make a workable indication of $100,000 - $105,000 for a certain municipal bond. This tells an investor that the dealer is interested in the bond and the estimated price range that they may be willing to pay.
The workable indication technique is most common in the muni bond secondary market. Due to the nature of the market, which is slower and more relaxed compared to stock markets, quotes are often less firm than they would be in other contexts. Thus, dealers commonly offer workable indications as a starting point for negotiations, or when they are unable to locate a particular bond.
Workable indications can also be used by traders to set prices and provide guidance on what a given municipal bond is worth. By viewing the indications offered by multiple dealers, traders can get an idea of what the market believes the bond is worth, allowing them to make more informed trading decisions.
Workable indications are an important tool for investors and traders looking to buy and sell municipal bonds. By using this pricing technique, investors can get an estimate of a bond’s value, as well as a sense of what other dealers may be willing to pay. This allows them to make more informed decisions, helping them to achieve better returns on their investments.