Bond issuing in Amsterdam
In the eighteenth century Amsterdam was the leading international capital market. Apart from financing international traders, Dutch merchants and bankers issued the bonds of sovereign states using market mechanisms familiar to present day practitioners. The financial instruments at the heart of the market were fixed rate bearer bonds denominated in guilders. Interest rates, payable half yearly, ranged from four to five per cent and the tenor of a typical bond was between 10 and 15 years.
Bonds were frequently issued at par but could have discounts of up to ten per cent. Issuing houses engaged brokers to find buyers for a portion of an issue ahead of a public offering. For this undertaking, in effect underwriting, buyers received a commission ranging from one to two per cent. The issuing house’s commission was between four and ten per cent. By 1800 London was overtaking Amsterdam as the leading international market and adopted the practices used in Amsterdam. The Louisiana bonds operation was perhaps the first major issue that London absorbed.