DCM Interview
Hi all,
I have an informal chat/interview coming up for DCM for a Summer Analyst position in London at an American BB.
I was just wondering what kind of technicals that I should expect? I was told by HR that they would test some baseline knowledge. I didn't do my previous internship within this field, but rather in Structured Finance. Do bond price setting happen in a similar vain as to an ABS? E.g., SONIA + some margin.
Would really appreciate the advice!
Ignore the India tag, I don't know why it added itself.
As you are probably aware DCM interviews are not technical in the traditional banking sense (DCF models, valuation etc). However, you should have good general market knowledge with surprise a focus on rates. For SA they’ll probably ask you things like what happened at the last FED meeting, what is the purpose of QE etc
On the pricing side, everything is benchmarked against a floating rate (SONIA, SOFR, Bund etc) to get a yield. Then the price of the bond is discounted and a fixed coupon determined to achieve this yield.
Different issuer types and investors view bond returns differently. Most buyers of corporate bonds are looking for outright yield (just a clean number). However, buyers of public sector bonds (sovereign, development banks) are looking for a pick up relative to the floating rate as they’ll almost always enter into a swap (pay in fixed and receive the floating rate).
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