Debt Capital Markets interview preparation

Questions

100

Traced to a firm

45

Firms

26

Updated

September 2026

Asked at

All firmsTSTruist Securities5PIMCO4TD Securities4Apollo Global Management3Nomura3Scotiabank3Bain Capital2Houlihan Lokey2Mizuho2Neuberger Berman2Oaktree Capital Management2RCRBC Capital Markets2Carlyle Group1Deutsche Bank1Golub Capital1HPS Investment Partners1Invesco1KKR1Lazard1Moelis & Company1Moody's1Northern Trust1NUNuveen1Rothschild & Co1S&P Global1Wells Fargo Securities1

Topic

All topicsBond mechanics11Duration and convexity6Yield curve and rates5Credit spreads5Credit analysis and ratings13Credit modelling9Primary issuance9Syndication and loans10Structured credit7Covenants and documentation5Liability management5Indian debt markets7Fit8

Level

AnyCoreIntermediateHard

Type

AnyTechnicalBrainteaserMarket viewCaseFit

1. 003What is yield to maturity, and how is it different from current yield?Bond mechanicsCoretechnicalPIMCOFixed Income · Sydney · 2025

   Say this

   Yield to maturity is the single discount rate that sets the present value of all remaining cash flows equal to the current price. Current yield is just the annual coupon divided by the price, so it ignores the capital gain or loss you get by holding to par.

   Then walk it

   1. Current yield on a 6 percent coupon bond trading at 90 is 6.67 percent. That is the cash income only.
   2. Yield to maturity on the same bond is higher, maybe 8 percent, because you also collect the 10 points of pull to par over the remaining life. For a discount bond, YTM is above current yield; for a premium bond, below.
   3. YTM is an internal rate of return, so it embeds an assumption people forget: that every coupon is reinvested at the YTM itself. If reinvestment rates are lower, your realised return is lower than the quoted yield.
   4. It also assumes you hold to maturity and the issuer does not default or call. Yield to call on a callable bond is the same calculation run to the first call date, and you quote yield to worst, the lower of the two.
   5. Current yield is still used because it answers a real question for an income investor: what does this pay me per year. It is just not a return measure.
   6. The clean summary: current yield is income, YTM is total return under a strong reinvestment assumption, and yield to worst is what a desk actually quotes.

   Where candidates lose it

   Defining YTM correctly and never naming the reinvestment assumption. That assumption is the entire weakness of the measure, and stating it unprompted is what separates someone who has used the number from someone who has read about it.

   Expect next

   • So when is YTM a misleading measure of return?
   • What is yield to worst?
   • How would you compute realised return instead?

   Reported by candidates at PIMCO (Fixed Income, Sydney, 2025). Source: Wall Street Oasis.

2. 012What is duration, explained the way you would explain it to a client?Duration and convexityCorephone / first roundPIMCODebt Capital Markets · San Diego · 2026

   Say this

   Duration is how much your bond's price moves for a one percent change in yields. A duration of 7 means roughly a 7 percent price fall if yields rise 100 basis points. Underneath, it is the weighted average time until you get your money back.

   Then walk it

   1. Two readings of the same number. Macaulay duration is a time: the present-value-weighted average years to the cash flows, quoted in years. Modified duration is a sensitivity: the percentage price change per 100 basis points.
   2. Modified equals Macaulay divided by one plus the periodic yield, so for normal yields they are close, and people use the words loosely. Say which one you mean.
   3. What makes duration long: long maturity, low coupon, low yield. All three push more of the present value further into the future.
   4. The client version: duration is your interest rate risk budget. A fund with duration 2 loses about 2 percent if rates rise 100 basis points. A fund with duration 15 loses about 15. Same credit, totally different instrument.
   5. It is a first-order approximation, valid for small moves. For a 200 basis point move you need convexity, which corrects the fact that the price-yield curve bends.
   6. And the framing that matters on a debt desk: duration is what a rates trader hedges and what a credit investor tries to neutralise so that what is left is the credit view.

   Where candidates lose it

   Conflating Macaulay and modified duration, or reciting 'weighted average time to cash flows' without ever saying what it is used for. A client and an interviewer both want the sensitivity first, then the definition.

   Expect next

   • So how does duration affect what happens when rates move?
   • What is DV01 and how is it different?
   • How would you reduce the duration of a portfolio?

   Reported by candidates at PIMCO (Debt Capital Markets, San Diego, 2026). Source: Wall Street Oasis.

3. 026Which is cheaper right now, US bonds or US equities?Credit spreadsHardtechnicalPIMCODebt Capital Markets · San Diego · 2026

   Say this

   Compare them on a like-for-like yield basis: the equity risk premium against the credit risk premium. Take the S&P earnings yield minus the 10-year Treasury yield, and set that against investment grade and high yield spreads. When the equity risk premium compresses toward the credit spread, bonds are the better paid risk.

   Then walk it

   1. The bond side is observable: the 10-year Treasury yield plus the investment grade spread gives you an all-in corporate yield, and it is contractual, senior and dated.
   2. The equity side needs a proxy. Forward earnings yield, which is one over the forward P/E, minus the Treasury yield gives you a rough equity risk premium. At a 20 times forward multiple that earnings yield is 5 percent.
   3. The comparison that has mattered since 2022: when investment grade yields sit near 5 to 6 percent and the equity risk premium is compressed toward 100 basis points or below, you are being paid almost the same to sit at the top of the capital structure as at the bottom. That is historically unusual and it is the honest case for bonds.
   4. Then the qualifications, which is where the marks are. Equity earnings grow and coupons do not, so in an inflationary world equities have the better long-run real claim. And the earnings yield is a forward estimate, so it is only as good as consensus.
   5. So the answer should be a framework plus a current read plus a horizon. Something like: on today's numbers bonds look better paid on a risk-adjusted basis over three years, equities over twenty.
   6. And say what would change your mind: an inflation re-acceleration hurts the bond case directly, because you lose the real value of a fixed coupon.

   Where candidates lose it

   Picking a side with no metric. The question is testing whether you can make two asset classes comparable, so the framework matters more than the conclusion. Check the current earnings yield and IG spread level the morning of the interview, and state your figures with the date.

   Expect next

   • What is the equity risk premium right now?
   • Does that comparison hold at a 20-year horizon?
   • What would change your view?

   Reported by candidates at PIMCO (Debt Capital Markets, San Diego, 2026). Source: Wall Street Oasis.

4. 097Which of our products or strategies would you be most interested in working on?FitIntermediatetechnicalPIMCOFixed Income · Sydney · 2025

   Say this

   Name one, give an analytical reason, and show you know what the strategy actually does rather than what the website says. Then name a second as a genuine alternative, so it reads as a considered preference rather than the only thing you looked up.

   Then walk it

   1. Do the homework properly before the interview: the flagship strategies, roughly what they run, their benchmark and mandate constraints, and where the firm's stated edge is. For a large fixed income manager that means knowing the difference between a core aggregate strategy, an unconstrained or absolute return strategy, a credit strategy and a private or opportunistic vehicle.
   2. Then pick one and give an analytical reason. 'Multi-sector credit, because the interesting decisions are relative value across corporates, securitised and sovereign rather than single-name selection, and that cross-sector comparison is the work I find most interesting' is a real answer.
   3. Show you understand the constraint the strategy operates under, because that is what a portfolio manager lives with. A benchmarked core strategy is a tracking-error budget problem; an unconstrained strategy is a conviction problem. Naming the difference shows you have thought about the seat.
   4. Reference something they have published. Large managers put out enormous amounts of commentary, and citing a specific view of theirs — and saying whether you agree — is the strongest possible signal of preparation.
   5. Then give the second choice and say honestly why it is second. That reads as a preference rather than a rehearsed line, and it keeps you in play if the opening is on a different desk.
   6. Finish by being open: at analyst level you go where the need is, and the honest version of that is that you would rather learn the firm's process broadly first. Say it without sounding indifferent.

   Where candidates lose it

   Naming a strategy you cannot describe, or naming the most famous one with no reason. The interviewer works there and will ask a follow-up immediately. One strategy you genuinely understand beats a list, and citing their own published view is the fastest way to prove you prepared.

   Expect next

   • What do you think of our current positioning there?
   • What would you find hardest about that strategy?
   • What have you read of ours?

   Reported by candidates at PIMCO (Fixed Income, Sydney, 2025). Source: Wall Street Oasis.

Firm tags come from public, anonymous candidate reports on Wall Street Oasis: strong signal, not sworn testimony. Firms are named as the places a question was reported, not as partners of Fin Maverick. Answers are written for this page to show how to think out loud; they are not scripts to recite.