How to prepare for a fixed income research analyst interview?

inthe213's picture
Rank: Baboon | 119

I'm interviewing for a new job and I have very little experience with fixed income.

Some of the duties for this new position include:

research/analyze fixed income investments

find new fixed income investing opportunities

monitor portfolio's credit ratings

present credit reports to investment team

Any advice on how to prepare or what type of questions to expect?

Comments (9)

Apr 1, 2018


This isn't entry-level and I have investment experience but none in FI

Apr 1, 2018


Best Response
Apr 2, 2018

shocked no one's responded, guess I'll come out of hiding (again).

know roughly where major rates are (UST, gilt, bund, JGB)

know what all the major terms are (duration, convexity, etc.)

know how to answer situational questions, here's some I'd ask if I was interviewing someone (granted, I oversee PWM assets, but I like to think I know a tiny bit about bonds)

  • duration is X, rates move by Ybps, how does the price change?
  • what's difference between YTW, YTC, YTM and explain why they're important
  • what could cause credit spreads to change
  • why would someone buy a yankee bond, a samurai bond, a eurodollar bond?
  • say I'm a foreign investor invested in UST, what happens if my currency
    appreciates/depreciates relative to USD?
  • what factors impact mortgage bonds?
  • say I worry about interest rates rising rapidly, what types of things could impact my decision making with my bond portfolio?
  • explain a bond ladder
  • how does the federal reserve impact the bond market? (this is intentionally vague)
  • what factors do you need to consider when investing in corporate bonds that are unique from government/GSE bonds?
  • what factors do you need to consider when investing in bonds issued outside your home country?
  • if I hand you a bond that's not rated by an agency, how would you go about rating it?
  • how do bond investors make money? how do bond investors lose money?
I may think of more, but I would be curious to see your replies

edit: just realized you said this isn't entry's some other Q's maybe slightly more advanced

  • where are HY spreads right now? is that cheap or expensive?
  • give me a trade idea and why it works (looking for something like selling JGB, buying UST, what currency dynamic has to take place for this to work. basically I want you to think of a carry trade that has multiple layers, rather than just going long the 10y)
  • explain the impact of the end of muni bond insurance
  • explain the implications of decreased inventory at the banks due to post-GFC regulation
  • why are euro sovereigns yielding less than UST?
  • how do you analyze a company's debt differently than its equity?
  • how would your analysis differ when reviewing a revenue bond versus a GO?
  • is floating rate a good trade right now? why or why not?
    • 6
Apr 3, 2018

If this is a fixed income research position you will need to focus on fundamentals. Because if you know all of what Brofessor posted, but don't know what drives the credit/ what drives the industry/ where it fits into the industry and thus why it trades XXX bps wider than company XYZ then it doesn't really matter.
Questions you should be able to answer:
* How do you value a company?
* What are the key financial metrics?
* What is the difference between equity and FI investors?
* When analyzing a company which financial statement would you use and why?

    • 3
    • 1
Apr 6, 2018

fixed income is very broad and before you go spinning your wheels unnecessarily, do you know what sector/desk/product the position is for?

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Apr 6, 2018


Apr 6, 2018

You should come up with a pecking order for the major issuers in the sector- i.e. the 2nd best should be 25 bps behind the best, 3rd best another 20 bps back etc etc. If this is beyond the scope of your expertise, at least be able to rank them on the relevant high level credit metrics- gross/net debt, interest coverage, ebitda size/growth, cash flow generation. Know any trends in the industry and any specific valuation methods if the industry is esoteric (o&g, financials etc). Know basic bond math, duration/convexity/yield/ g vs. z spread vs oas. Finally make sure you can project cash flows (with all the add backs and adjustments) since cash is king for credit investors. Note this is for investment grade and high yield (performing) corporates. Distressed, sovereigns, ABS or Munis will have more or different wrinkles. Good luck.

Apr 6, 2018