Fixed Income Credit Research Analyst - Interview help

Hey all,
So i have an interview on monday for a Credit Research Analyst in a Fixed Income department that works with Corporate bonds and some lev. finance portfolios.

The role involves some fundamental credit and relative value analysis on the debt securities. it also makes some reccomendations based on credit risk and yield in order to earn high retruns.

I do not have any experience in the Fixed Income securities nor do I have too much knowledge. I want to ace this interview been in the job market for a while.

What information should I know and what should I learn before this interview. How can I ace this fucking thing. Particulary interested in the opinions of those who work with these securities as well.

Thank you for your help in advance.

 

Def understand the impact of the fed. Also take a look at the league tables. The guys with the big balance sheets own this space. Fixed income is all about interest rates and the credit metrics of a given company (aka leverage relative to EBITDA and coverage aka ability to repay debt).

Read an S&P report on a given company or two. Fixed income prices off of their credit ratings. Understand why prices move (effectively change in yield).

 
Best Response

I actually had an interview for a credit research desk (albeit for an internship) two years ago. I did get asked a lot about bond pricing in addition to accounting. From my limited understanding, credit research requires the understanding of financial statements and accounting that you would associate with equity research, as well as the the bond maths for a fixed income desk (which is why credit is actually my dream asset class to be placed in because it combines the best of both worlds for me)

Most likely, you'll get asked general bond questions about z-spread(for relative value analysis), how you price a bond, the yield curve, the different risks etc. You'll also probably be asked the types of questions they ask in an ER interview, like how are the diff financial statements connected, etc. I also think it's important to have a clear idea of the equity vs debt-holder conflicts of interest.

They asked me what kind of things I would look for from financial statements in credit research vs ER- My answer was that Credit Research focuses more on cashflows and not as much on potential growth, since as a bond-holder you are essentially only concerned with getting back your principle + the coupon payments, and do not benefit beyond that no matter how much the firm grows (you know that payoff diagram for the value of debt and equity against assets where equity has unlimited potential whereas debt levels off after a while?) In fact, some investments that equity holder see as positive will be viewed in a negative light from the perspective of bond holders, since it will run down the firm's immediate cash and its ability to meet debt repayments.

They were happy with this answer, but I'm not 100% sure so someone correct me if I'm wrong.

I hope that helped somewhat!

 

Firstly, what is the strategy of the fund you're interviewing with? Prepping for a HY interview will be a lot different than IG.

I would definitely suggest preparing a pitch on a particular debt instrument. In the case of a HY/distressed debt pitch, you would want to look at valuing the company and water falling that value through the cap structure. Understand the potential recovery for the piece of debt as well the risks the would drive it downward.

IG is a bit different and I'm not as certain as how to pitch it, but you would prob want to look at relative yields between different IG companies within the same industry. Also be aware of the company's credit rating.

That's all I got, but you can definitely impress your interviewer if you know what you are talking about. I would suggest you talk to some people (alumni?) within comparable asset managers to learn about different investment styles.

 

If your variable costs are greater than your revenues, your profit maximizing option is to go out of business.

If operating your ships costs 30k and you're only making 5k, you're making a loss of 5k variable + 20k of fixed costs. Therefore, get out of business.

However, if your total costs are 30k and you are making 15k, then you should keep operating even though you're still losing 10k.

Essentially, to keep operating, your revenues must be greater than your variable costs in the short term. In the long run, both fixed and variable costs need to be lower than revenues.

 

You should know where various spread levels are trading, for example, where does the BBB space trade, 200bps, etc. Also have a view on whether or not we are in a bond bubble and if you think spreads are too tight. In so far as technicals I would imagine they would ask you about how you look at credit risk; business risk vs. financial risk and maybe ask you a few questions about reading through bond docs, looking at covenants and understanding cap structures and contractual/structural subordination. I've been asked to pitch a bond or credit idea but those were for distressed debt funds so I doubt you will be asked about that. I was also asked questions about cash flow modelling, for example how you get from EBITDA to FFO and to CFO and then to FCF.

All the best!

 

Brush up your fixed income knowledge. What is modified duration? What is z-spread? What's a covenant? Etc.

Also, as above poster said, know what the current spreads are for different ratings (although you said it was only investment grade so probably just look up where the current treasury rates are at). This might sound obvious, but also make sure you know what is the lowest rating an investment grade bond can get...

 

I would look at complicated companies that are in distress, have a ton of debt and look at the various levels/prices along the capital structure. You'll find a lot of relative value plays. Really look at upside/downside scenarios for each level of capital structure. Find a company that has a binary outcome which will be the catalyst.

Fear is the greatest motivator. Motivation is what it takes to find profit.
 

I would say know the various solvency, liquidity, and interest coverage ratios. Know the financial statements well (this goes for any finance job), and be able to discuss debt financing concepts and EVERYTHING about bonds. If you want to go deeper, you can research some credit risk modeling concepts. If it's for a fixed income fund as you describe, I don't think they will ask you about stocks, though any finance job can ask you about stocks to get a feel for your general interest in the markets. In addition to the corporate finance topics, I would focus on understanding all the major debt products since it is a fund after all (investment grade, high yield, municipal, Treasury, emerging market, event-linked, asset-backed, etc.). It's also good to know some benchmarks/indexes for the different debt securities.

 

Logisticjoe, way too quiet in here. What about these resources:

  • Digital interview for CIB- High Grade credit Research Analyst So I received an email to do a digital interview for the position stated in the title. Anyone know ... the questions? or how much weight these videos have? I have only done a video interview once and I did ...
  • Fixed Income Credit Research Analyst- Interview help Hey all, So i have an interview on monday for a Credit Research Analyst in a Fixed Income ... as well. Thank you for your help in advance. fixed income Interview help credit research ... based on credit risk and yield in order to earn high retruns. I do not have any experience in the Fixed ...
  • A One Stop Shop For All Things Diversity Recruiting- The Most Exhaustive List On WSO (Markets and Research) Credit Suisse- Americas CEO Awards Scholarship- Description: Summer analyst program, ... with interviews for sophomore summer analyst program in NYC- Divisions: Sales and Trading, Investment ... Leaders Program- Description: 2 day program with interview for 10-week sophomore summer analyst program in ...
  • Global Credit Rating Agency---> Backdoor to High Finance equity research for boutique investment bank in NYC and moved to a "Big 3" credit rating agency ... Thesis: For those unable to break directly into high finance, starting at a one of the "Big ... a bright future. Overview: *Entry-level analysts may only make about $70k (1st year all-in), but work about ...
  • Equity Research- Interview Questions a research analyst after gaining experience. Before any of this though, you must get the interview and show ... Equity Research Interview Questions Positions in equity research are available for seasoned ... Equity Research Analysts are mainly 'bookish', but i'd argue that teamwork still plays an ...
  • credit risk summer analyst- morgan stanley interview credit risk summer analyst. I am kind of confused about the job repsonbilitis for this job. Though ... I understand the job responsibilities of a credit analyst in a commercial bank include looking at an ... chance know the potential exit opportunities for this position? How hard is it for a credit analyst to ...
  • 2018 Full Time IM/ER Recruiting *DECISIONS* Timeline Megathread information. Fidelity (Boston/NH): Equity Research: First rounds beginning week of 8/21 High Grade High Income ... October Business Associate: OCR early september Guggenheim (Santa Monica, NYC): Corporate Credit Analyst ... Research Analyst Portfolio Management Analyst investment management to Monday, December 11, 2017- 10:55am ...
  • More suggestions...

Or maybe the following WSO members have something to say: bryanturner Ram234 Grizzled Guru

I hope those threads give you a bit more insight.

I'm an AI bot trained on the most helpful WSO content across 17+ years.
 

Quia cum deleniti ut recusandae ut et. Ipsum placeat doloribus nihil facilis. Ipsam eos ea repellat repudiandae numquam fugiat nihil. Ut ut culpa voluptas molestias illo quia repudiandae.

Reprehenderit laboriosam quis sunt distinctio ut et vero. Velit non voluptas nemo velit. Ea eligendi autem quas esse. Dignissimos molestiae laboriosam facilis labore laborum. Non animi iusto maiores ad et et magnam. Modi sed vitae fugiat nesciunt. Mollitia id aut saepe.

I'm an AI bot trained on the most helpful WSO content across 17+ years.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
dosk17's picture
dosk17
98.9
6
DrApeman's picture
DrApeman
98.9
7
kanon's picture
kanon
98.9
8
CompBanker's picture
CompBanker
98.9
9
GameTheory's picture
GameTheory
98.9
10
Jamoldo's picture
Jamoldo
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”