Sales & Trading
Prepalyst has 21 rates interview questions with model answers, covering duration, curve trades, auctions, basis and central bank reaction. Every question is graded on technical accuracy, completeness and interview communication. Practice is free.
Tests the bond vocabulary a junior needs before discussing a Treasury, gilt or corporate bond quote.
A newly issued five-year bond has a 4% annual coupon and trades at par. If market yields immediately rise to 5%, will the bond trade above or below par? Explain the difference between coupon and yield.
Rates and government-bond desks ask this to test whether candidates understand how the benchmark asset is supplied.
Walk me through a US Treasury auction. What do "stop-out yield," bid-to-cover and tail tell a rates trader?
A first-round rates-desk question testing whether a candidate can turn a curve screen into a clear market description.
The two-year Treasury yield is 4.10% and the ten-year Treasury yield is 4.45%. Is the curve inverted or upward sloping? Calculate the 2s10s slope, and explain one reason a trader cares about its change rather than only…
A junior sales-and-trading screen that checks whether a candidate can reconcile a simple Treasury-futures move before discussing a trade.
You buy one Treasury futures contract at 110-16 and sell it at 110-20. The contract's minimum tick is 1/32 of a point and each tick is worth $31.25. What is your P&L, and why is futures-price direction opposite to yield…
A practical rates-interview prompt on how traders read the market's central-bank expectations.
What is an overnight indexed swap (OIS), and why does a rates trader use it to discuss expected central-bank policy?
A first-round rates-desk check that makes sure a candidate can follow a live market conversation.
A trader says, "10-year Treasury yields are up 7bp to 4.32%." What does that mean in percentage terms, and why do rates desks speak in basis points rather than percentages?
Foundational screen for any fixed income or markets role.
Explain intuitively and mathematically why bond prices move inversely to yields. Which bond falls more when rates rise by 1%: a 2-year or a 30-year? Why?
A rates-desk scenario lab testing DV01 arithmetic, limit discipline and trade expression after a macro surprise.
You are covering a Treasury book after a hot CPI print. Size the rate-risk exposure, test it against the desk limit, and recommend how to preserve the trade thesis without relying on a hope-driven position size.
Expect this in every fixed income interview, often with a calculation.
Define Macaulay duration, modified duration and convexity. A bond has a modified duration of 7 and convexity of 90. Estimate the price change if yields rise 150bps.
A desk-style risk question testing whether a candidate sizes a hedge by rate sensitivity instead of by headline notional.
A client buys a Treasury portfolio with a DV01 of +$175,100: it gains $175,100 if yields fall 1bp and loses the same amount if they rise 1bp. A Treasury futures contract has a DV01 of +$85 when you are long. How many…
Macro reasoning question for rates desks and macro funds.
The central bank raises rates by 100bps. Walk me through the transmission channels to the real economy and the likely reaction across asset classes.
The plumbing of every rates desk, and the market that breaks first in a crisis.
Explain a repurchase agreement. Who uses it and why, and what does it mean when a bond goes "special"?
Core product knowledge for any rates or corporate derivatives desk.
Explain an interest rate swap. A corporate has floating rate debt and wants fixed. What do they do, and what is a swap spread?
Essential for rates and macro roles.
Explain the relationship between nominal rates, real rates and inflation expectations. What is a breakeven inflation rate, and how would you trade a view that inflation will be higher than the market expects?
A realistic junior-trader scenario testing whether a candidate can convert a macro print into a risk-defined rates view.
Headline and core CPI both print 0.2 percentage points above consensus. Two-year Treasury yields jump 12bp in seconds, while ten-year yields rise only 4bp. You think the market has overreacted. What would you check, how…
A staple opener in sales & trading and macro interviews.
Explain what the yield curve is and what an inversion means. Why has inversion historically preceded recessions, and what are the limits of that signal?
Rates desks test whether you can express a view without taking directional risk.
Explain a steepener, a flattener and a butterfly. Why would a trader use these rather than an outright long or short?
Macro and FX desk interviews use this to probe understanding of risk premia.
Explain the FX carry trade. Why does it work despite theory suggesting it shouldn't, and what is its risk profile?
A rates-desk market replay testing reaction function, positioning and risk expression.
You are on a US rates desk into CPI. Commit to a trade as the release and market colour arrive. You will see the reaction only after making each decision.
A rates relative-value interview case testing whether a candidate can see financing and delivery optionality, not just a screen spread.
A desk sees a deliverable Treasury trading rich to its futures-implied price and proposes buying the future's cash-and-carry: buy the bond, finance it in repo, and short the futures. The apparent annualised spread is…
Credit trading and research interviews start here.
Define a credit spread. What components does it compensate for, and why do spreads historically exceed what realised default losses would justify?
Write your answer, get it graded on technical accuracy, completeness and communication, and see exactly which mechanic you missed.
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