Sales & Trading
33 fixed income questions of the kind asked in sales & trading interviews. Each carries a model answer, the concepts a complete response must hit, and graded feedback on your own attempt.
Asked to ensure candidates do not quote yield without thinking about price and recovery.
A distressed bond trades at 60 and yields 18%. Why might the yield be misleading?
Asked on macro desks because inflation trades often start with breakevens.
What is breakeven inflation and how would you trade a view that inflation expectations are too low?
A desk-level vocabulary question that connects yield curves to realised portfolio returns.
What are carry and roll-down in a bond portfolio? Why can a manager earn money even if yields do not move?
A first-round fixed-income operations check before a manager lets you discuss performance or trade execution.
A bond is quoted at a clean price of 98.40. It has accrued interest of 0.65 points per $100 of par. What cash price does the buyer pay, and why are bonds normally quoted clean?
A basic trading-desk question used to check whether a candidate understands what cash changes hands on a bond trade.
A 6.0% annual-coupon bond pays semi-annually on 30 June and 31 December. It trades on 31 March at a clean price of 92.00. Assume 90 days have elapsed in a 180-day coupon period and par is 100. What is the dirty price,…
A first-round check that you can describe a bond's return without mixing its terms.
A $1,000 par bond pays a 5% coupon and trades at $950 with five years left. Distinguish coupon, current yield and yield to maturity.
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.
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 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 core DCM screening calculation used when a banker discusses preliminary pricing with an investment-grade issuer.
A BBB-rated industrial company plans to issue a new five-year USD senior unsecured bond. The on-the-run five-year Treasury yields 3.80%, and comparable bonds indicate the new issue should price at +145 bps to Treasuries.…
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 basic calculation used to test whether a candidate can translate a rate view into portfolio risk.
Your bond portfolio has a modified duration of 6. If yields rise by 25bp, what happens to its value, and what does the estimate leave out?
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?
A basic but important question for anyone pitching bonds or CDS.
A corporate bond trades 400bp over Treasuries. What does that spread compensate investors for?
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?
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?
Tests whether a candidate can avoid overstating carry and upside in a high-yield bond pitch.
A bond purchased at 102 can be called at 100 in one year or mature at 100 in five years. Its coupon is 8%. Why should you assess yield to worst rather than simply quote its yield to maturity, and what does the call…
A rates expression question for macro seats.
Explain the difference between a bull steepener and a bear steepener. What macro environments produce each?
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.
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?
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"?
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 portfolio-review question testing whether you can explain a corporate-bond return without merely repeating its total return.
An investment-grade corporate bond has a Treasury duration of 5.0 and a spread duration of 4.5. During the month, its Treasury yield falls 20bp while its credit spread widens 30bp. Ignore carry and convexity. Estimate…
Tests whether you can distinguish realised inflation protection from an inflation forecast.
When would you buy an inflation-linked government bond instead of a nominal government bond of the same maturity?
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?
A DCM superday case tests whether you can turn a maturity schedule into an actionable financing recommendation rather than merely reciting current spreads.
A BBB- issuer has $1.2bn of notes maturing in 18 months and $900m maturing 30 months from now. It has $400m of cash, a $750m undrawn revolver, and forecast annual free cash flow of $250m before debt maturities. The CFO…
A fixed-income portfolio-manager case during a busy primary market calendar.
A BBB issuer offers a new bond at a 20bp concession to its secondary curve. The syndicate says demand is strong. How would you decide whether to participate?
The primary active decision in a fixed income mandate.
You run a bond fund benchmarked to an index with a duration of 6.5. You think rates will fall. How do you position, and how much risk is that?
A fixed-income portfolio-management replay after a government funding update changes the curve and sector valuations.
You help manage an intermediate-duration bond portfolio when a government borrowing update triggers a sharp curve move. Make the portfolio decisions as information arrives, then prepare a note for the portfolio manager.
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?
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.
Firm names indicate where a question type is commonly reported in interviews. They are not sourced from, endorsed by, or affiliated with the firms named.