Debt Capital Markets

Really interested in this line of business. Can anyone who has experience in DCM explain to me the day-to-day? Also, does anyone know any non-traditional routes into DCM? Is commercial banking --> corporate banking --> DCM possible? 

Ideally perspectives for Canada would be best, but other places are good too. Thanks!


 
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I have zero insight on the Canada bit. I had an internship doing A/R for local providers and did FT recruiting. Several people on my team moved from different functions of the bank (corp, back office etc). So, not too hard if the firm you are at promotes internal mobility. It is market hours based (in before 7am), so roughly 65-70 hrs/wk with weekends off. Typically, I start my day by looking at my emails, fielding any requests from corp/IB/other teams and catching up any overnight news. There are daily calls before markets open with the traders and syndicate. Mornings are usually busier, but no 'typical' day really follows. I update pitch books, send out market updates, listen in on calls with clients about a pitch/upcoming transaction or internal calls to discuss pitch materials, work on deal prep and any misc. requests/projects. Hope this helps.

 

Not very difficult to switch from coverage (IB or corp) to DCM. Just communicate your interest with your staffer/development officer/whoever. At least at my firm, they will promote openings in other groups and if you have been having conversations, our team will be pretty supportive to help you switch. I'm only a 2nd year, so not completely sure how a transitioning associate would work. We typically spend more time as an analyst (3-4 years) before being promoted to associate. But, openings do come up, so I'm sure if you have strong story/background, show that you're eager to learn more, bring the differentiating factor, etc you can secure the job. 

 

Commercial banking to corp banking is very feasible. At some banks such as HSBC Canada, the line between commercial banking and corp banking is really blurred. I think their FT commercial banking rotational program allows you to rotate in a few teams, including mid market corp banking and commercial banking.

Corp banking to IB/DCM is also feasible but it's tougher. If you are not able to move to IB in the first few years of your career, chances are you will never be able to make the transfer.

 

Canadian domestic DCM is tiny - deals rotate pretty much amongst the sovereigns/quasi-sovereigns and select big corporates. Most, if not all, are repeat issuers. The set of investors (on the other side of the trades) are also quite stable. Complete flow business, and not as exciting or sexy compared to, for example, event-driven or special sits type of trades folks in Leveraged Finance do.

That said, if you find DCM your fit, there's a clear path for career progression, and you could do very well down the road.

In terms of day to day, pitch, termsheet (mostly one pager with basic pricing and secondaries comps), quals, market updates, then repeat. IG bond terms are pretty much standard (limited if not no covenants to brain damage yourself), and chances are you are just recycling docs from the last deal. You'd develop of good sense of the general rates market and where a new bond for an issue X would price at. If you get lucky to work on something slightly more sophisticated, you could get to asked to run some simple calculation to figure out if an exchange or buy back would work for liability management (I highly suspect LM is a separate business line parallel to DCM in most banks). Other than these, stay close to your clients treasury team so that you know when their next bond matures or is callable, and you can pitch preemptively.

If you work purely on IG DCM, you don't really develop any hard skills like modeling or even credit analysis. But you should be well versed enough to be able to transition to corporate banking (don't even thing about commercial bank as the type of clients are just too small). One route I do like though, is debt syndicate.

Let me know if you want me to explain what debt syndicate does and where/how they add value, probably in a separate post.

 

Not impossible if you are well versed in DCM and generically, bond offering + post offering mgt process. I've seen treasury folks at some repeat issuer clients work exclusively on bond trades, and because of the continued and deep exposure, became expert in DCM (in particular from a technical perspective), even more so than DCM bankers (might be a surprise, but many bankers don't know how to calculate make-whole premium, let alone how restricted payments actually work).

As experienced hire, what people need to see from you is your genuine interest in the market and career in DCM, not just how knowledgeable you already are.

Otherwise, go through an MBA - typically the safest and surest route.

 

In the prestige scale, internally within most large banks, IBD/LF >>> DCM/ECM >> Corp Banking > Risk >> Commercial banking.

Trading down in prestige is easy. Trading up isn't quite as easy. You might be able to do it once every 3 years. 

Of course, the intensity of the above inequalities will vary between banks. At a bank that isn't as balance sheet-heavy, DCM/ECM might be less prestigious. Conversely, at a bank where relationship management is done through lending, Corp Banking might be more relatively prestigious. But this is more about the amount of inequality signs, not the pecking order itself.

DCM isn't a bad place to spend a few years, if what you want is to make a decent amount of money and still enjoy your weekends. It's not a great place for skills, though.

The truth is you're the weak. And I'm the tyranny of evil men. But I'm tryin', Ringo. I'm tryin' real hard to be the shepherd.
 

Hope it's ok that I interfere a bit! I have an offer (full time internship) with DCM at a big bank in the country I live. I wonder if that is better than doing full-time internship at M&A department (at a big 4). My long term goal is to go into PE and the feedback I've gotten for PE internships is that I have to get more technical skills. 

 

DCM isn't going to give you any technical skills you can take to PE. Big 4 M&A might be less prestigious, but the skills are more transferable.

The truth is you're the weak. And I'm the tyranny of evil men. But I'm tryin', Ringo. I'm tryin' real hard to be the shepherd.
 

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