Workable Indication

A workable indication is a nominal quote expressed in the municipal bond market showing the price at which a dealer is willing to either buy or sell a particular issue. This indicator differs from a firm quote as revisions to the offer are allowed within a specified period, usually one hour.

In that way, a nominal quote expressed in the form of workable indication might be seen as an estimate or initial offer, or perhaps a starting point from which they can come to a mutually agreeable deal. In contrast, a firm quote binds the dealer, who must follow through with the deal at a price quoted if the offer is accepted. Municipal bond dealers can also give out 'firm-with-recall' quotes that can be good for roughly the next hour, and then recalled.

The workable indication often expressed as a range, gives the seller the flexibility to adjust. The use of this strategy is in a more casual context. Using a range allows both parties flexibility to negotiate until reaching specific figures. Flexible ranges work well when the dealer or broker is in the initial stage of trying to make a deal and perhaps still gauging the interest of the potential buyers. 

The workable indication also give the seller the ability to assess various price levels impact on the investors. It may often be delivered in non-committal terms, using relatively vague language, such as “It’s somewhere in the neighborhood of…” or “I think it would probably be roughly around…”

To fully appreciate how a workable indication tactic might be used in a bond trading scenario, it is helpful to understand the atmosphere in which this activity typically takes place. Trading for municipal bonds is usually within a secondary or interdealer market. In the interdealer marketplace, banks, bond funds, insurance companies, other institutional investors, individual investors and small businesses will purchase the bonds.

Whereas in the stock market things tend to happen at a fast pace, with frantic bursts of activity and the pressure to make quick decisions, the municipal bond market is generally more relaxed. Participants aren’t under the intense pressure to make swift decisions. As a result, they can haggle and mull over the offer while trying to negotiate the best possible deal. However, there is always the possibility that another potential buyer will swoop in and express interest. Then the scenario may get more competitive, and buyers may need to increase their offer and make a quick decision.