In which scenario is a negotiated sale typically used?

A negotiated sale is typically utilized in situations where the bond issue may not achieve a high credit rating, such as an "A" rating. In these cases, underwriters may be better positioned to evaluate the specific circumstances surrounding the bond issue and tailor the terms accordingly to attract investors.

This approach allows for more flexibility in the pricing and structure of the bond, which can help to facilitate the sale even when market conditions or credit ratings are less than ideal. Underwriters in a negotiated sale work closely with the issuer to understand their unique needs and to develop a strategy that addresses concerns related to lower ratings, thus enabling a successful transaction.

Other scenarios, such as high investor demand or favorable interest rates, are more aligned with competitive sales where the auction-like environment can drive prices up due to increased investor interest. Issuing bonds for immediate liquidity typically demands a more streamlined process that may favor a competitive sale approach as well.