What does a prior commitment in bond purchasing mean?

A prior commitment in bond purchasing refers to an agreement made to purchase bonds without the need for public advertising. This typically occurs in situations where an entity, such as a municipality, has predetermined specific terms with an underwriter or a group of investors, allowing for a streamlined and often expedited process in acquiring funds through bond issuance.

This approach is often utilized when the issuing body wants to secure financing quickly or when existing market conditions indicate a favorable interest rate for borrowing. It allows entities to negotiate terms directly without the complexities of an open bidding process, which might require more time and potentially lead to inconsistencies in pricing due to market fluctuations.

In the context of the other options, open bidding generally suggests a competitive marketplace where multiple bids are solicited, while commitment under state law may refer to legal obligations rather than purchasing mechanics. Bond market stabilization is focused on efforts to maintain stability in bond prices and interest rates rather than the mechanics of purchasing.