Your investment banking internship and graduate job questions answered by an experienced credit trader

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Q: Hi, I’m interning in trading this summer.  What are the most common traits you see in successful summer interns, and what have you seen them do that takes them above and beyond the others interns?

All interns are intelligent. However, what distinguishes interns with actionable intelligence over those with logical intelligence is: initiative.

To really succeed in your internship you need initiative and motivation, but initiative is the deal breaker.

What does this mean in practice?

If you’re in M&A and you see a VP asking your friend to update comps on the Oil sector, you should suggest to your associate "I've finished x, do you think it's worth me updating the comps on pharmas?”

Similarly, if you’re interning in trading and the guy who trades bank credits is busy in the morning, suggest to him that you get the upcoming timetable of bank earnings calls.

The key to success as an intern is: don’t wait to be told.

Work out what people need.

Almost all interns wait to be told what to do. If you don’t, you will stand out immediately.

Q: How do you suggest networking towards the end of the internship to get fast track interviews at other banks? Thanks.

Frankly, this is going to be hard. For it to work, you will need to know someone else at another bank very well.

No bank likes to be bullied. They don’t want to be told that they need to fast track you through the interview process.

Your best bet is to try getting an offer from the bank you’re interning at. They will usually give you an ‘exploding offer’ which you need to accept within 2 weeks of the issue date. You could try shopping yourself around at this stage, but you might put the banks you’re shopping yourself to off.

Instead, your best bet is to accept the offer you receive on the back of your internship and then to apply as normal for a graduate position as other banks. If you get offers from these other banks months later, you can always cancel the earlier acceptance.  It's very poor form as an MD or Director but as a grad it doesn't matter.

Q: Hi there. I’ve just graduated from a Red-Brick uni with a First in History and have experience in Equity Reseach and currently work for a VC firm, how do I go about securing a role in FICC?

A: I assume you have an internship in equity research and that you have 1-2y experience in the VC firm?  FICC is a wide field of currencies, debt and commodities.  The longer you stay in your current role the harder things get to move but you certainly have chances to move.

The best strategy is to focus on credit research (overlaps with the VC modelling and [equity] research) or to focus on cashflow modelling such as in project finance (mostly sovereign funds now) or ABS modelling.  If you want sales or trading there's no real overlap to previous experience.  If these roles are your goal getting into FICC by the routes I mention then proving yourself is the best chance. I know an IT developer who worked closely with a trading desk and was made an EM trader at 34 - he's doing really well now.  Never lose hope.

Q: Hi,

 I am about to start a summer internship on a fixed income trading desk and would like to know your thoughts on how useful it is to have strong Excel modelling and VBA programming skills.

 This is an area that I have very little experience in but have been told it can make the difference of getting a full time offer if an intern can take on a project that requires such skills.

Is this true?

A: Yes. Excel modelling and VBA programming is an EXTREMELY useful skill.  However, like all things you need to know how to use if properly.  The first thing I will say is never fall of into the trap of programming what you don't need to.  Excel has a rich tapestry of in-built formulae - use those first.  In fact, a well-built spreadhseet impresses people more than VBA - always think about the workflow of how people will use it before you charge ahead and build it.  Simply ask the traders around you what would help them on a day to day basis and start working on it.  Perhaps do this from week 3 so you have a modicum of knowledge about what it is they need.

However, a word of caution: It's very important you don't get labelled as the IT geek and find yourself being given an IT offer at the end!  Make sure you are supporting/helping/proving an interest in trading and the VBA comes second.  Whatever you do, never leave the pub before anyone else when they take you out!  Excel allosw you to manipulate the information you have to hand efficiently.  Synthesizing all that information into a core of what's important is the key to a good trader.

Q: Hi,

I will be interning on a credit trading flow desk this summer, and was wondering what products are generally traded on this type of desk? Is a knowledge of Credit derivatives like CDS expected or does this not come under flow?

 Also, what would you suggest a trading intern do in order to stand out above the rest?

 Many thanks.

A: Hi. In response to your first question, credit flow desks trade both bonds and Credit Derivatives Swaps (CDS).  Over the last 10 years flows desks have been split in two (bonds & CDS), amalgamated, and split in two again.  Sometimes a trader will trade a sector, e.g. Utilities (both bonds and CDS) or will focus on multiple sectors but one product.

Read up on credit bonds.  It would be useful to read a bond prospectus too as the terms are almost the same in all prospectuses. Click here for an example.  The prospectus lays out the ‘rules’ of the bond, what the interest payment is, how it is calculated and pain, how senior the bond investor ranks amongst other claims on the company if it defaults etc.  The best book to read is Fixed Income Securities: Tools for Today's Markets by Bruce Tuckman (ISBN: 978-0471063223).  This goes through everything from calculating duration and convexity to bond conventions.

Similarly read up on CDS (try the JP Morgan credit derivatives handbook).  Although traditionally flow desk CDS traded single names, i.e. on Vodfaone or Deutsche Bank, increasingly the index CDS traders are being put in with the flow desks so you may want to look at MarkIt’s website which will explain the main European credit indicies (Main, HiVol and XOver) – how they are calculated and what the constituents are.

In response to your second question, learn Excel VBA so you can program spreadsheets to save traders’ time and know about the legal side of credit trading (pari passu, capital structure etc.).  Be keen, and learn from those around you.  Suggest spending some time (a couple of days) with research and risk management.  These (aside from sales – which won’t matter as an intern as you can’t really interface with them) will be you two most important desks.

Q: Hi,

I will be interning on a trading desk at a European IB and have a few questions.

 With regards to trading, how have interns can stood out in the past? Having interned in sales before, sending regular trade ideas to the desk was a good way of showing eagerness to learn and a willingess to ‘go the extra mile.’ Would you suggest something similar in trading, or due to the nature of the role, a different approach to trying to stand out?

 Prior to the internship, what are the most important concepts an intern in credit should have a good knowledge of?

 Finally, in this environment – what are the key things an intern has to do to get hired!

Hello again.  You should be expected to be forming trade ideas if you are to be sat on the trading desk.  Don’t send e-mails to the trading team but suggest them to the trade you are working with.  Your trader will be busy so don’t overload them – mention only up to two a day – and really think/play devil’s advocate before you say something.  If you have questions write them down and ask them when the market is dying down (after 3:30PM in London, 4:30PM in Europe).

You question is very much like others – how to stand out.  It comes down to being and appearing intelligent – you have to demonstrate this (i.e. insightful questions and more importantly useful help).  By preparing fully (reading up about bonds, credit derivatives) and having useful spreadsheet skills you will be a useful reseouce for a trader who wants information.  Get to know your trader’s research contact and risk contact.  He will be busy trading and if he needs to know what the historical and forecast EBIT/debt ratios for the future are, you getting it will genuinely help him.  Similarly if there is a risk issue, save him time and look into it for him – was there a system problem or is it a real problem?

Whatever you do don't nag or annoy anyone there's nothing worse than that when you are concentrating.  Remember you trader will have 2 phones, brokers shouting down the line, constant news from Europe on the political situation and economic news, sales people wanting prices, 10-15 Bloomberg messages/minute and e-mails every 5 minutes or so. THEN they have you asking questions sat next to them.  Also get the coffees and food at lunch - that's something traders will instantly miss - people getting their things for them!

Don’t be shy and work hard, you should do well if you have read up on the products your desk will be trading.

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