Noticed there is an ongoing NCD subscription on BondScanner. I have only bought bonds from the secondary market so far. What is different about applying in a primary issuance? Is one better than the other?
In a primary NCD issuance, you are buying directly from the company at a fixed price set by the issuer. You submit an application during the subscription window, pay the face value, and bonds are allotted to you after the issue closes, typically within a week or two. The yield is fixed and known upfront. In the secondary market you are buying from another investor at the current market price. The yield may be higher or lower than the original coupon depending on where prices have moved.
so primary is like an IPO for bonds. you apply and hope you get allotted
Good analogy. Though NCD allotments are generally not as competitive as equity IPOs. Most retail NCD issues get fully allotted if you apply early enough. Always read the rating rationale and the prospectus before applying.
One practical difference: in primary applications you pay the exact face value with no accrued interest because you are buying from issuance day. In the secondary market you always pay accrued interest on top of the market price. Both result in the same actual return if you hold to maturity, but the upfront cash outflow is cleaner in primary.
Secondary market also gives you flexibility in choosing maturity date precisely. A primary issue comes with fixed tenure. In secondary you can find bonds at various stages of their life and pick one that matures close to when you actually want the money back. For someone building a bond ladder, secondary market is often more useful than waiting for primary issues to match your timeline.