DCM is mainly Investment Grade Bond Origination (I say Inv Grade because most banks have separate groups for High Yield bonds). Main types of breakdowns are Corporate, FIG and Sovereign. Junior people do presentations, help with pricing, attend calls in August when no one else is at work. And no they do not do any roadshows/syndication.

 

daemonavn, thanks for the input. i really appreciate it.

do you know what kind of skills/education/experiences the DCM department would like to see in their analysts? in other words, what specific things would senior members want from their junior people. i have an interview coming up with a DCM department and any input would be much appreciated.

thanks in advance.

 

I'm an analyst in DCM and feel like the skill set desired of new hires (and there haven't been very many in the year or so I've been here) is similar to that of any prospective IB employee: sharp analytically, attentive to detail, good work ethic, etc.

As far as responsibilities go, outside of basic financial functions (PV of cash flows, etc.) there is much less emphasis on modeling in Excel and more of your time will be spent using different debt sizing, refunding, assumptive applications (more of some than other based on if you are in Derivatives Banking, Public Finance/Munis, High Yield/Corporate, etc.). Most of my time is consumed by doing the majority of the analytics for my deal team (everyone will contribute to the pitch books) so I'd be happy to answer any specific questions associated with what that entails on a day-to-day basis if you want to PM me.

As far as the interview goes, having an even basic knowledge of how the debt markets work and an understanding of important related aspects (yield curves in particular) will go a long way as a lot of applicants are more familiar with the sexy equity counterpart of CM.

 
Best Response

I'm critical of these gigs because I don't think you develop a decent skillset - you can read my prior posts if you like. I rotated through one of these groups.

The job is comps, comps, comps because you want to see what kinds of terms are palatable in the market. HY issuance is slightly more interesting than IG because there's more company-specific issues. On the IG side, you look at the credit rating on the bond and the spread in the market, and try to give the issuance the same terms; rating is all that matters. No modeling, no market making - you look at term sheets and trading prices.

To be blunt, you end up doing the shit that IBD is too busy to do and sales/trading don't want to bother with. I would avoid this gig if other opportunities emerge for you.

 

yesman and BankonBanking (as usual) are right on. There is little emphasis on the type of modeling that will help you develop a skill set transferable to PE/HF but with that exception I have found it to be a pretty good fit. My biggest worry is exit opps outside of grad school which is a path many analysts/associates end up taking likely because few other opportunities in high finance present themselves.

 

Okay, there is no modeling in Capital Markets unless you're thrown into either Lev Fin (and that's dry right now) or Securitisation. Its mainly comps, so basically you look at the market and see similar companies with similar ratings, you look at the previous issue, market conditions and you decide on the pricing. There's a lot of client exposure, you learn about capital structure and all that, its good for later, some HF/PE funds who invest in mezz/subordinate debt will find you useful. One notable thing is that client exposure is much more at Analyst level in DCM than in IBD.

Yeah you're right DCM is taking off, I think you might be meaning High Yield. Investment Grade DCM levels had dipped but they are back up, Inv Grade companies dont find it too hard to issue bonds really. Also, if they ask you to choose a group, best is to choose FIG DCM over others.

Skill set would just be attention to detail, hard work, presentations etc. Not a lot required really..

 

alrite dcm is more complicated than what these guys are giving it credit for. yes, when you look at aaa companies, secondary trading comps is mostly what you look at. However, right now, things are getting really interesting. A lot of these banks have callable structures embedded in their sub debt that need to be re-worked.. They don't want to screw their investors by not calling as the bonds are usually priced to the call date but don't want to screw themselves by calling.. Also, the HY space is wide open right now as cash and cds spreads are back to pre-crisis levels.. bb/b companies are issuing at lower yields than ever. there's also a lot of debt restructuring going on, covenant waivers, exchange offers, upsizing, etc..

you also get a lot more responsibility at the junior level. a lot of the DCM groups have shrunk so you will get the opportunity to work closely with syndicate on pricing and possibly going on roadshows - deal or non deal.

DCM deals are also quick and spontaneous. Only takes 7-9 weeks to complete on the long end and some of the MTN issuances take a lot shorter.

If you have the opportunity, also look into derivatives solutions.. might not be part of dcm depending on the bank but definitely a great place to be. they basically help companies hedge, whether its fx, rates, commodities, by buying risk off their hand at a discount and sell it off using greeks.. risk free easy money essentially.. it is quantitative but at the IBD side, its more about understanding the companies capital structure and the economics behind the basic concepts.. forwards, call spreads, etc..

 

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