In a new municipal bond offering, who assumes the risk of selling the bonds?

In a new municipal bond offering, the underwriting syndicate is the entity that assumes the risk of selling the bonds. This group consists of various financial institutions that collaborate to facilitate the issuance of the bonds. They commit to purchasing the entire bond issue from the issuer and then resell the bonds to individual and institutional investors. By doing so, the underwriting syndicate absorbs the initial risk because they must sell all the bonds at an agreed-upon price, regardless of the demand in the market.

If the bonds are not sold, the syndicate bears the financial responsibility. This role is crucial in the municipal bond market because it ensures that issuers can raise the funds they need while providing a level of assurance that the bonds will be marketed effectively. Other choices represent different roles, such as selling groups, which assist in the process but do not assume the same level of risk as the underwriting syndicate, or individual investors, who are primarily the end purchasers of the bonds rather than stakeholders in the initial selling process.