March 8, 1990
TO: MEMBERS - ONE PER COMPLEX NO. 11-90
RE: PRICING OF HIGH YIELD BONDS
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It is our understanding that Drexel Burnham Lambert has
continued to provide prices on certain issues of high yield bonds
in an effort to allow pricing services time to develop
alternative sources for prices on these issues. We have been
informed that as of March 16, 1990, Drexel will no longer provide
price quotations to pricing services for these approximately 300-
400 issues.
As a result of discussions that the Institute has had with
several pricing services, it appears that these firms may not be
able to develop alternative pricing sources for a number of these
issues. Therefore, it is recommended that you discuss with your
pricing service(s) the names of those issues for which they will
no longer be able to provide price quotations. With respect to
these issues, members may wish to consider implementing
procedures for establishing "fair value." Under Section 2(a)(41)
of the Investment Company Act and Rule 2a-4 thereunder,
securities for which market quotations are not readily available
should be priced at fair value "as determined in good faith by
the board of directors."
Donald E. O'Connor
Vice President - Operations