Top 5 Reasons to pursue a career in FIXED INCOME by uploaddoc

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									      Investment Association
      Ross School of Business
       University of Michigan




  Top 5 Reasons
      to pursue a career in

  FIXED INCOME
And how to get prepared.




         Marcelo Miranda
           October 2005
         # 1 – Size of the Market
• Size of the market can be an indicator of the number of job
  opportunities.


         • Equity Market Cap (DJ Wilshire 5000): $10.8 trillion
         • US Bond Market: $ 21.1 trillion

                                      US Bond markets: outstanding by issuer
         Derivatives:                            type (trillions)

         • Equity: $1.8 trillion                    1.6       1.9         Municipal
                                              2.5
         • Fixed Income: $77 trillion!!!                            3.4
                                                                          Treasury
                                                                          Agencies
                                                                          Mortgage
          Figures are from 2004              4.3                    2.5   Corporate
                                                                          Money Market
                                                          5               Asset Backed
          # 2 – Follow the Money
• In the past few years trading revenues from F.I. have been
  significantly higher than revenues from Equities. (Sell Side but could
   tell something about the Buy Side)
     1. Size
     2. Market Structure (most of the trades are OTC, lower impact from
        electronic trading, decimalization, etc.)
     3. Momentum (low interest rates, more issuance)


                     Trading Revenues: Top Securities Firms -
                                EUR bn (1H2005)


                       9.2

                                                            Debt
                                                            Equity

                                                21.7
     # 3 – Spectrum of Products
• Not just Corporate and Treasury bonds.
• A (simplistic) view of the Fixed Income umbrella:

      Money Markets                   Interest Rate Swaps and
                                      Options
      Debt Capital Markets
                                      Credit Derivatives
      Governments/Agencies
                                      Asset Securitization
      High Grade Credit
                                      Emerging Markets
      High Yield
                                      Convertible Bonds



• Each desk requires a different skills set.
• Quantitative skills are highly valued.
          # 4 – Industry Trends
• Hedge funds are becoming an increasing part of the
  business. (more money flowing into these funds +
  extremely active)
• Most sell side firms are merging their Equity with their
  Fixed Income divisions in order to better service these
  hedge funds.
• Firms are training new hires to enable them to look at the
  whole CAPITAL STRUCTURE and not just one side.
• Several summer internships are rotational (D + E) and a
  number of firms hire full time associates as generalists.
          # 5 – Nothing is Fixed
• Plenty of volatility to make it exciting.
• Argentina, General Motors etc.
           How to get prepared
Courses:
• FIN 609: Fixed Income Securities (Fall B, Winter B)
• FIN 580: Options, Futures - FIN 618: Derivatives (Winter B)
• FIN 621: Corporate Finance Policy
• FIN 612 and FIN 614: International Finance
• ACC…

Books: Handbook of Fixed Income (Fabozzi), Fiasco, Liar’s Poker

Websites:
• Bond Market Association: http://www.bondmarkets.com
• FOMC: http://www.federalreserve.gov/fomc/
• Default Risk: http://www.defaultrisk.com/
• Ross School of Business Investment Association (Daniel Oh pres.)!!!
           How to get prepared
Interview FAQs:
• Basic concepts: Duration, Convexity, Negative Convexity.
• Changes in the yield curve (e.g. over the last year).
• Fed (FOMC) decisions, meetings.

Publications:
• Usual suspects: WSJ, Barron's, Markets Magazine (Bloomberg) etc.

								
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