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.

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.