High Yield Credit Trading
How are high yield credit trading desks at banks like DB? What is generally the split between trade idea generation versus risk management? Any insights into progression, WLB, and comp for these roles at the junior level? Thanks.
Bump
bump , looking to move into HY
I thought you were a commodities guy
High yield credit trading desks at banks like Deutsche Bank (DB) are known for their focus on trading bonds and other credit instruments issued by companies with lower credit ratings (below investment grade). Here's a breakdown based on the most helpful WSO content:
1. Trade Idea Generation vs. Risk Management
The balance between these two aspects can vary depending on the desk's strategy and the market environment. However, junior traders typically spend more time on execution and risk management early in their careers, gradually moving into idea generation as they gain experience.
2. Progression
3. Work-Life Balance (WLB)
4. Compensation
Insights on DB's High Yield Desk
Deutsche Bank has historically been strong in credit trading, particularly in Europe. The bank's position in primary issuance and its ability to facilitate secondary market trades are key strengths. However, the desk's performance and culture can vary by region and market conditions.
If you're considering a role on a high yield credit trading desk, it's essential to assess the bank's market position, the desk's culture, and your own interest in credit markets and risk management.
Sources: Different Desks on the trading floor, Q&A: Credit hedge fund analyst at MF, former BB trader, State of Credit markets now and in the future?, https://www.wallstreetoasis.com/forum/trading/qa-1st-year-bb-london-rates-trader-taking-your-questions?customgpt=1, Undergraduate Opportunities - Credit Funds
This will all vary from bank to bank I would imagine, but I can give some insight for the place that I'm at.
Idea generation vs risk management: Going to depend on the trader's preference, seniority, and probably the bank as well (culture around risk taking and how much the bank prioritizes the HY team). Senior traders will be allowed to take more risk, but even (2nd year) analysts will have autonomy to take some risk on the names they cover. The junior analysts tend to start off trading some of the higher-quality BBs and are expected to focus more on flow. The senior traders generally had a stance on pretty much all the names they covered, and knew whether they preferred to be long or short a bond. Like I said, however, it is also up to the trader. Some traders focused entirely on flow and made their money off the spread, hedging risk as much as they could. Others were happy to run more risk and trade based on their views. Great traders tended to lean towards the latter, though I imagine the former were less stressed.
Progression: Seems very unstructured. Depends mostly on how good you are and also whether there is room for you to move up. Some people fly through the ranks and others seem to stagnate. But it generally seems that if you are a strong producer, they will find room for you to move up.
WLB: Juniors were generally around 6:30am to 5:30pm, seniors could be more like 7:00am to 4:30pm. Seniors seemed to do what they wanted though, and if they weren't seeing a lot of flow they left. Sometimes senior traders would miss the morning meeting or leave at 3:00pm if it was a slow day. You're judged off P&L not hours worked, and if you make money nobody's going to say anything.
Comp: Pretty standardized at the analyst level, median is probably a slight discount to IB. Once you have a tie to P&L it becomes difficult to talk about comp because it's heavily influenced by performance.
Depends on the bank. DB just went through a total rebuild in staffing. Distressed desk made out like a bandit last year, they take on some real prop positions. HY trading world is pretty small, seems like people have rotated around the banks, not very many new faces fairly recently.
If searching for idea generation start looking into portfolio trading. Future of any IG/HY desk
Idea generation is for the analyst esp. in HY, then quants for strat in approaching this from market making perspective if done electronically. At a place like db you are largely just flow traders.
DPG from DB is very very good. IG/HY and the rest of the entire GFCT business is very steadily progressing. DB is the one of the top Credit shops on the streets. You can question some of their business lines, but credit is their flagship
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