Credit Trading interview questions

A desk analyst must estimate risk quickly before reaching for a pricing system.

You are long $10 million face value of a corporate bond priced at par with spread duration of 4.5. Its credit spread tightens by 20bp, while Treasury rates are unchanged. Estimate the price and dollar P&L impact.

A sales-and-trading screen tests whether a candidate understands the cash amount a bond buyer actually pays at settlement.

A corporate bond is quoted at a clean price of 98.40. It has accrued interest of 1.10 points per 100 of par. What price does the buyer pay, and why do traders quote the clean rather than dirty price?

Credit desk interviews often start by asking candidates to translate a compact market quote into plain English.

A dealer quotes a corporate bond at 98.50 / 99.00, with a spread of 225bp over the Treasury curve. Explain each number and which side you would hit if you wanted to buy $5 million face value.

A foundational credit-trading question checks that a candidate can explain a spread as more than a default forecast.

Two five-year corporate bonds have the same Treasury benchmark, but Company A trades at Treasury + 120bp and Company B at Treasury + 260bp. What does the 140bp difference mean, and what would you investigate before…

A first-round credit trading screen checks that candidates can interpret a bond quote before discussing a credit view.

A bond has a fixed 5% coupon. Its market price falls from 100 to 95. Does its yield rise or fall, and why?

This is a foundational recovery question in credit sales, trading and research interviews.

A company has a first-lien loan, unsecured bonds, and common equity. Rank them in a restructuring and explain why the ranking matters even when the company is current on interest.

New-issue pricing is a practical test of how a credit trader distinguishes valuation from primary-market technicals.

An issuer's outstanding five-year bonds trade at Treasury + 180bp. It launches a new five-year bond at Treasury + 205bp. Is the 25bp difference attractive, and what would you check before buying?

A credit trading interview uses this scenario to test trade expression, financing and basis risk rather than a generic CDS definition.

You expect a leveraged retailer's credit to weaken before earnings. Its five-year cash bond trades at 94 with a 7.0% coupon, while five-year CDS trades at 520bp. Should you short the bond or buy CDS protection? Explain…

This tests practical market judgement: preserving information and execution quality matter as much as the directional view.

A portfolio manager needs to sell $40 million face value of a corporate bond that normally trades only $5 million clips. How would you execute without unnecessarily moving the market?

The two halves of the leveraged credit market behave differently, and desks trade both.

Compare leveraged loans and high yield bonds as investments. Which would you rather own if you expect rates to fall?

Credit traders are expected to translate company news into debt-service and spread implications quickly.

A high-yield issuer reports EBITDA 15% below expectations after losing a major customer. The stock falls 25%, but its bonds are down only 2 points. How do you decide whether to sell, hold, or buy the bonds?

Credit-desk interviews test whether an analyst can distinguish useful flow intelligence from a reason to chase a price move.

At 10:00am, three real-money accounts ask for offers in the same issuer's 2029 unsecured bond. The bond has widened 12bp while the issuer's CDS and peer bonds are unchanged. The trader asks whether to mark the bond wider…

The structural fact that shapes every credit trading desk.

A single company might have twenty bonds outstanding while it has one common share. What does that do to liquidity, and how has the market adapted?

Essential for credit trading and credit hedge fund interviews.

Explain a credit default swap. If a 5-year CDS trades at 300bp and you think the company will default, what do you do. And what determines your payoff?

Relative-value credit interviews test whether candidates can combine documents, recovery analysis and market pricing into a trade.

A company's first-lien term loan trades at 92 and its unsecured bond trades at 78. Both mature in three years. Under a downside case, you estimate enterprise value of 85 for every 100 of first-lien debt outstanding, with…

A credit desk interview uses this to test hedge selection, basis risk and sizing rather than a memorised CDS definition.

You are long $20 million of a five-year high-yield cash bond. You expect a broad risk-off move over the next month but want to keep the issuer-specific position. Explain how you could hedge, what you would short, and the…

CLOs buy roughly two thirds of the leveraged loan market. Desks need to understand their behaviour.

Explain a CLO. Where does the equity return come from, and what happens when the portfolio deteriorates?

A recurring relative value trade on credit desks, and a lesson in what arbitrage really requires.

A company's 5-year bond trades at a 300bp spread while its 5-year CDS trades at 250bp. Is there a trade?

A credit-trading desk replay after an issuer misses earnings and the market reprices its bonds.

You cover credit trading for a consumer-products issuer reporting before the open. Make a decision at each stage, then leave a concise trading note for the desk head.

One of the most reliable technical dislocations in credit.

An investment grade issuer is about to be downgraded to high yield. What happens to its bonds, and how would you position?

A credit-trading desk simulation testing trade expression, liquidity discipline and client communication after a fast market move.

You are a credit-trading analyst supporting a desk that holds a large cash-bond inventory after a disappointing earnings release. Use the market updates to prepare a risk note for the desk head and sales force.