High Yield and Investment Grade bond trading
- What are some trading strategies of these desks?
- Do they rely on fundamentals (does that even apply?)
- How much client interaction/flow do they have? Or is it more like a credit derivatives desk which doesnt have that much client interaction?
- If Yields are currently low, prices are high, how does this effect the desk?
- When are times that these desks would see increased business: when the market is volatile like recently, a bear or bull market?
ill answer for hy and anyone feel free to correct me
we do rely on fundamentals, lot of bankruptcy scenario valuations...how much an investor will be able to recover but fundamentals play into this a lot. my desk has the same client flow any other desk would have. deal with a lot of distressed buy side accounts and value investors yields are low, working on a sell side means convincing your clients that the yields they once received for the corresponding amount of risk have to be adjusted downwards. Very tough to find "solid" 10%+ returns nowadays for companies that haven't defaulted already (although yields are slowly turning the other way recently). That being said, volumes were very low this year and that may very well play a part. Markets will be busy in both swings. For example, 08 and 09 were both solid years for sell side hy desks. Volatility is good. Business especially picks up as names crossover from ig rating to hy/distressed. Certain accounts can only hold ig paper and certain accounts obviously look to invest in distressed paper. hope that helps
Do you think we are going into a period (end of the current business cycle) where sell side HY desks (and im guessing DD desks as well) could do very well like in 08 and 09 again? ....
Also could you mention the background of people who work in your desk? Like were they credit analysts or from corp finance background? I do not actually have much idea about this desk.
Investment Grade Bond Trading- How does it work? (Originally Posted: 08/22/2014)
How do sell side traders analyze and trade these products? Is it a lot of fundamentals? Anybody has a good intro guide
Spent a summer in IG. Fundamentals do play a large part, but traders spend a lot of time looking at relative value, whether it be within a companies credit curve or comps.
Ex. How is the 10 YR G-Spread compared to the 20 YR G-Spread? How does the 10 YR spread compare to comparables' 10 YR spreads? Based on this does it look rich or cheap?
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