by Luis Miguel Ochoa Comments (31)

Debt Capital Markets (DCM): The Definitive Guide

Debt Capital Markets (DCM): The Definitive Guide

If someone tells you, “I work in Debt Capital Markets (DCM)”, you might immediately think: Bond. Investment-grade bond.

Or, you might not think of anything at all, since there’s much less information about the debt markets than there is about the equity markets.

Everyone can recall famous IPOs of technology companies, but hardly anyone outside the finance industry can name a “famous” debt offering.

Debt is lower-profile than equity, but it also offers many advantages – both to the companies issuing it and the bankers advising them in the context of DCM.

Similar to its counterpart, Equity Capital Markets, Debt Capital Markets is a cross between sales & trading and investment banking.

But that’s where the similarities end:

Debt Capital Markets Explained: What You Do in the DCM Group

Definition: A Debt Capital Market (DCM) is a market in which companies and governments raise funds through the trade of debt securities, including corporate bonds, government bonds, Credit Default Swaps etc.

Therefore, in the DCM Team, you advise companies, sovereigns, agencies, and supra-nationals that want to raise debt.

“Raising debt” means that an entity borrows funds and then pays interest on those funds – as opposed to equity, where the entity sells a percentage ownership in itself and pays no interest.

It’s similar to borrowing money for a student loan or mortgage, but organizations do it on a much greater scale than individuals.

As a junior-level banker in this group, you’re responsible for three main tasks:

  • Pitching clients and potential clients on debt issuances and answering their questions.
  • Executing debt issuances for clients.
  • Responding to requests from other groups, updating market slides, and creating case studies of recent deals.

As a specific example of task #1, a company might come to you and say:

“We have $500 million of debt maturing in 5 years. Interest rates have fallen, so we think we could ‘refinance’ by raising new debt at a lower interest rate and using the proceeds to repay the existing issuance.

However, we’d also have to pay a prepayment penalty fee if we do that. Does this plan make sense? What terms could we get on the new debt? What interest rate is necessary for us to come out ahead?”

Or, a company might ask you something like:

“We want to raise debt to fund our everyday operations – what type do you recommend, and what should we expect regarding the interest rate, maturity, and prepayment penalty?”

You’ll answer these types of questions and advise organizations on their best options.

On the execution side – task #2 – much of your work will consist of drafting memos for internal committees and sales teams.

These memos help get your bank comfortable with deals and provide the sales force with the numbers and analysis they need to ‘sell’ the offerings to institutional investors.

Finally, you will also spend a fair amount of time answering requests from industry and product groups, updating market slides, and creating case studies of recent debt deals.

There is some quantitative and financial modeling work, but it is usually not as in-depth as you might think.

DCM tends to be a higher-volume, lower-margin business than ECM.

The global credit markets are far bigger than the global equity markets, there are more deals, and the deals happen more quickly – days rather than weeks or months.

As a result, investment banks charge lower fees than they do for, say, IPOs, and they have to make up for it with higher deal flow.

Debt Capital Markets vs. Leveraged Finance vs. Corporate Banking

Several other groups at investment banks also advise on debt issuances; the two most similar ones are Leveraged Finance and Corporate Banking.

The differences between these three departments vary from bank to bank.

DCM is different from Leveraged Finance because it focuses on investment-grade issuances that are used for everyday business purposes.

By contrast, Leveraged Finance focuses on higher-risk, higher-yielding issuances (“high-yield bonds”) that are often used to fund acquisitions, leveraged buyouts, and other transactions.

Corporate Banking groups focus on “bank debt” (Revolvers and Term Loans) that is kept on the bank’s Balance Sheet and not syndicated to outside institutional investors.

By contrast, DCM focuses on investment-grade bonds that are syndicated and sold to outside investors.

These are general guidelines, but in practice, there can be significant overlap between these groups, and there may be exceptions to these guidelines.

For example, Leveraged Finance is sometimes called “Leveraged Debt Capital Markets,” and a DCM team might focus exclusively on syndicated debt assignments of all types.

Debt Capital Markets Interview Questions and Answers

As with any other IB group, some students intern in DCM and accept full-time offers there, while others are placed into the group via a sell-day or off-cycle recruiting.

Sometimes lateral hires with credit analysis experience at rating agencies or corporate banking join, and you’ll find former industry coverage bankers here as well.

The recruiting process is similar to the one for any other investment banking role: Start early or be left behind!

The main difference is that the interview questions are often closer to the ones you might receive in sales & trading interviews.

Since DCM is a hybrid group and often sits on the trading floor, interviewers from fixed-income trading desks could easily ask you questions about how to hedge interest rate or FX risk (for example).

You could even get macroeconomic questions about the activities of central banks or the impact of trade policy on FX rates.

At the minimum, you should have a solid understanding of bond analysis: Yields, prices, call and put options, the yield to maturity (YTM) and yield to worst (YTW), make-whole analysis, and how companies think about refinancing decisions.

You should also know something about how credit ratings are assigned, why companies raise debt vs. equity, and how to advise a company on the most appropriate type of debt.

We cover these points in the IB Interview Guide in the Equity vs. Debt section and in more depth in the Excel & Fundamentals financial modeling course.

You should also be prepared to discuss debt market trends; you can find that information on sites such as and sometimes directly from banks (ex:  Société Générale’s year-end reports).

To prepare for deal discussions, you can look at GlobalCapital’s list of recent bond issuances and research the names you find there.

Finally, if you’re still in the networking phase, check out the Fixed Income Analysts Society, Inc. (FIASI) and the CFA Society.

The DCM Team Structure: Variance 101

The structure of Debt Capital Markets teams varies a lot because of the hybrid nature – some banks might even combine DCM with Leveraged Finance.

Some teams are divided into corporate vs. government issuers, and then they are further divided into industry verticals.

Just as in ECM, there’s also a syndicate team that’s responsible for allocating orders between different investors and building the books for bond offerings.

Junior Analysts typically work across a few verticals and then specialize as they move up the ladder.

Debt Capital Markets Jobs: Workstreams, Projects, and Sample Assignments

As in ECM, your main task in DCM is to tell stories about companies, governments, and other organization so they can raise capital more easily – but the plot points and characters in those stories differ.

For example, equity investors like to hear about the growth potential and upside of a company’s business, but debt investors care most about avoiding losses since their upside is capped.

As a result, they’ll focus on the stability of a company’s cash flows, its recurring revenue, the interest coverage, and the business risk.

They want to hear a story that ends with: “You’ll earn an annual yield of XX%, and even in the worst-case scenario, the company will still repay your principal.”

If you’re working in Debt Origination, you can expect these types of tasks:

  • Market Update Slides: You might work with an industry coverage team to present your thoughts on financing alternatives in the current market. These pages can include details on the volume of capital raised, the number of offerings completed, the market’s total leverage, and the terms of recent offerings. Here are a few examples:
  • Debt Comparables (Comps): The idea is similar to comparable public companies (public comps) or Comparable Company Analysis, but since these are for debt issuances, they present very different data. You might show the issuer’s name, the offering date and amount, the coupon rate, the security type (e.g., senior secured notes vs. subordinated notes), the current price, the issuer’s credit rating, the Yield to Maturity (YTM) and Yield to Worst (YTW), and credit stats and ratios such as Debt / EBITDA, EBITDA / Interest, and Free Cash Flow / Interest. You can see a few examples below:

Debt Capital Markets (DCM): The Definitive Guide

Debt Capital Markets (DCM): The Definitive Guide

  • Case Studies: You will also create slides on similar, recent offerings to motivate and inform prospective clients. To do this well, you’ll need to research an individual offering’s details, read through the term sheet, and assess the company’s performance following the offering. Here are a few examples:
  • Internal Memorandum: You’ll draft this document to set the narrative about the proposed debt offering and to inform your bank’s internal committee of the risks involved. Typical sections include:
    • Situation Overview
    • Credit Considerations
    • Risk Factors
    • Transaction Analytics and Financial Overview
      • Sources & Uses
      • Capitalization Table
      • Operating Summary and Credit Statistics
    • Company Information
    • Industry Overview
    • Business Unit Overviews
    • Comparables Analysis

It’s incredibly difficult to find public examples of this type of memo, so our team of ninjas did the next-best thing: They found leaked examples from everyone’s favorite failed bank:

Yes, they’re old, but these memos do not change much over time, and it’s almost impossible to post anything recent and not get sued.

  • Sales Team Memorandum: This one is similar to the equity sales force memorandum, but it’s slightly more technical. It helps sales professionals pitch the bond offering to potential investors, and it includes details such as:
    • Offering Summary (the purpose of the offering)
    • Key Dates and Road Show Schedule (an abbreviated timetable outlining the sequences of marketing to investors to offering pricing)
    • Summary Financials
    • Company Overview
    • Investment Highlights (why the investors should participate)
    • Summary Valuation
    • Products/Services Overview
    • Growth Strategy
    • Sources & Uses
    • Capitalization
    • Comparables Analysis and Operations Benchmarking
    • Risk Factors
  • Speaking with Clients and Investors: You’ll do more of this as an Associate, but frequently investors will call the group to find out more about a company’s issuance – sometimes via the sales force. If everyone else is busy or gone, you’ll take these calls. The DCM group will also send out indicative pricing to clients each week so they can get an idea of the terms of new potential offerings.
  • Financial Modeling: In credit analysis, you focus on building 3-statement models with different scenarios (e.g., Base, Downside, and Extreme Downside) and assessing how a company’s credit stats and ratios (Debt / EBITDA, EBITDA / Interest, etc.) change… at least in theory. In practice, you do little financial modeling in many DCM groups because investment-grade issuances are so straightforward to analyze. Bond pricing and terms are often based on a client’s credit rating and basic financial stats.

DCM Products: Originate, Structure, and Market

DCM deals differ based on the type of issuer (corporation vs. sovereign vs. agency vs. supranational vs. municipal) and the terms of the issuance.

For example, issuing senior secured notes for a mature industrial company will be quite different than issuing a 10-year bond for the government of Brazil.

Many people put debt into different categories, such as Senior Secured Notes vs. Junior Subordinated Notes vs. Subordinated Notes vs. Senior Notes vs. a laundry list of others.

That’s a useful start point, but it can get confusing because there’s overlap between the categories, and sometimes the dividing lines are not clear-cut.

It’s more helpful to think about the key terms of any bond issuance:

  • Principal Amount: How much money the organization raised or is planning to raise.
  • Coupon Rate: This is usually a fixed rate for corporate bonds, such as 5.0% or 7.0%. On the other hand, government bonds are often priced at spreads to prevailing rates such as the 10-year U.S. Treasury rate.
  • Maturity Date: When does the organization need to repay the bond in full? Five years? Ten years? Thirty years (for government bonds)?
  • Frequency: Many corporate bonds have semiannual (twice per year) interest payments, but some bond payments are annual, quarterly, or even monthly.
  • Seniority: Where does this bond rank in the company’s capital structure? This point is critical in the case of a bankruptcy or liquidation scenario.
  • Redemption / Redemption Prices: Can the organization repay the bond early? If so, how much extra will it pay to do so? Normally, corporate bonds cannot be repaid for the first few years after issuance, but they can be repaid as the maturity date approaches, according to a downward sliding scale of prepayment premiums (e.g., 103%, 102%, and 101% in the three years before maturity). A company might want to repay debt early to reduce its interest expense (if rates have fallen).
  • Covenants: What does this issuance prohibit the company from doing? Maintenance covenants limit the company’s credit stats and ratios (e.g., it must stay below 5x Debt / EBITDA at all times), while incurrence covenants limit its actions (e.g., it cannot divest a division or issue dividends above a certain level).
  • Original Issue Discount (OID): Was this bond issued at a discount to par value? If so, why? How is the amortization of this discount reflected on the financial statements?

To further complicate things, there are also different types of mandates besides bonds: Loans (more senior, with floating interest rates), asset-backed securities, and commercial paper, for example.

Other teams, such as corporate banking or structured finance, may take the lead on these assignments, with DCM involved but not necessarily leading the deal.

And Debt Capital Markets itself has grown to include products for hedging interest-rate and FX risk – which is yet another reason why it’s a hybrid group.

At PwC, there is even a team that covers debt capital advisory.

In a financing assignment, your team might act in any of the following roles:

  • Bookrunning Manager
  • Lead / Co- / Sole Manager
  • Initial Purchaser
  • Sole / Joint Placement Agent

Similar to equity deals, the bookrunners have the most responsibility and earn the highest fees.

When you work with an industry group at the bank, the industry group will provide the market analysis and valuation, and DCM will handle the credit analysis and answer questions about the pricing and terms of an offering.

The process of executing a debt deal isn’t that much different from the process of executing an equity deal.

The main differences are that borrowers issue debt more frequently and deals happen more quickly, so you don’t need to do as much work educating investors.

Finally, there are also block trades (bought deals) and agency transactions in some regions, such as Canada.

In bought deals, the bank acts as a principal and buys the client’s debt before reselling it to investors, and in agency deals, the bank acts as an agent and allocates the debt to institutional investors on a “best-efforts” basis.

Debt Capital Markets Hours

Since DCM sits between sales & trading and investment banking, the culture is also somewhere between those two.

In the best-case scenario, you might work close to “market hours,” i.e., roughly 12 hours per day on weekdays.

In practice, however, many DCM bankers work more than that, and the hours can approach the traditional IB grind.

That’s partially because it’s a higher-volume business, so you’re more likely to get staffed on deals consistently.

An average day might start with you at the desk at 7 AM, followed by team meetings with the sales force and traders.

Those two groups leave, and syndication stays behind to discuss possible and pending deals.

You finish up with meetings at 8 AM and then spend the next hour catching up on the news, overnight events, and monitoring traders in other offices.

Deals start launching when the market opens at 9:30 AM in NY (the market open time varies based on your region), so you’ll be quite busy if your bank is leading deals.

After that, the day varies based on your team’s deal flow. If you’re launching deals, you’ll have to monitor their performance and be around to answer questions.

If there are no live deals, a “quiet day” might consist of updating market slides, responding to requests from industry groups, and creating case studies based on recent bond offerings.

Debt Capital Markets Salary and Bonus Levels

At the Analyst level, compensation in DCM is similar to compensation in any other group.

However, the pay ceiling for Managing Directors and senior bankers is lower because fees and margins are lower, and the fees are split more ways.

A decent-performing MD in a financial center can still earn $1 million+ USD per year, but he/she is unlikely to go far beyond that.

Some argue that DCM offers better long-term career prospects than ECM because it’s “more stable” and bankers are less likely to be cut in downturns.

There is some truth to that because equity markets tend to shut down more quickly and decisively than debt markets; also, the skill set in DCM transfers to a wider variety of other fields.

But this claim is also a bit exaggerated because in a true recession, a lot of bankers across all groups will be cut.

Debt Capital Markets Exit Opportunities: Credit-Related Anything?

The good news is that you do have access to a wider set of exit opportunities in DCM than you do in ECM.

Not only could you move to different groups at your bank, but you could also apply to Treasury roles in corporate finance at normal companies, credit rating agencies, corporate banking, and credit research.

The bad news is that DCM is still not an ideal group for getting into private equity or getting into hedge funds.

“But wait,” you say, “you work with debt in DCM. Private equity firms use debt to do deals! And many hedge funds are credit-focused! They should want DCM bankers.”

Yes, but the problem is that PE firms use debt to fund transactions – whereas most debt issuances in DCM are not M&A/LBO-related.

As a result, you don’t get much practice with modeling acquisitions or leveraged buyouts or understanding the dynamics of those deals.

Also, while there are quite a few credit-focused hedge funds, most invest in high-yield bonds, mezzanine, or other securities with higher risk/potential returns instead of investment-grade issuances.

So, if you’re interested in private equity careers or hedge fund exits, you’re better off joining a strong industry group or M&A team.

But if you want to make a long-term career out of banking, DCM is a good option since you’ll have a better lifestyle and you’ll still earn a lot.

And if you’re interested in other credit-related roles, or in corporate finance at normal companies, Debt Capital Markets also gives you solid options.

So Why Work in Debt Capital Markets?

Similar to ECM, DCM tends to attract a lot of negative comments online – often from people with zero experience in the finance industry.

It isn’t necessarily “the best group,” but it’s still far better than most entry-level jobs outside of investment banking.

And if you intern or work in the group and find out it’s not for you, just transfer to another team – they’re always looking, especially after bonuses are paid.

M&I - Luis

About the Author

Luis Miguel Ochoa has facilitated a variety of strategic initiatives from corporate acquisitions to new market development. He earned his B.A. in economics from Stanford University where he was a member of the varsity fencing team.

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Read below or Add a comment

  1. Hi Brian,

    Thanks in advance for answering my question.

    I’m a junior at a semi-target school who recently received a DCM Summer Analyst offer from a BB In NYC. I was wondering about your thoughts on how best to

    1. (continued) lateral to an M&A /coverage group. Should I pursue recruiting FT or stay in this role and then lateral after 1-3 years?


      1. It is generally best to focus on winning a full-time return offer in the DCM group, perform well there, and then move to another group after a year or so. It’s not a great idea to try to switch groups at the end of your internship in many cases because everyone else is trying to do the same thing, some banks hold accelerated recruiting, etc., so it is a giant scramble with a lot of competition. But people start dropping out once they’re on the job, so more opportunities pop up then.

        1. Thanks so much for your insight!

          Also, I would greatly appreciate if you could make my name anonymous on my previous post. Thanks!

  2. Hello,

    Thanks for the fantastic post M&I, really useful info.

    I will be interning in DCM at an EB soon in Italy, I was expecting to be placed in a M&A/Restructuring team, and will probably transition at a later date if I get a grad offer (as analyst program has 3 rotations). The DCM team is very small and I am excited to start and learn. I was hoping to get some advice from you.

    The DCM team actually sit with the restructuring/M&A (Chemicals) teams. I was hoping to get exposure in either restructuring/chemicals while I’m working there too. The internship is long (6 months minimum) so I think it’s possible.

    I was wondering how I should best approach this situation to get into the restructuring/chemicals team. I don’t want to say to HR I want to switch immediately as it won’t give a good impression + I am now also interested in DCM after researching. I have already asked HR if I could move to another M&A team (once I found out allocation of groups) earlier and they said I should talk to my manager, but I will be based in DCM. Basically, I want to learn some financial modelling skills in the 6 months too to open up opps. How should I approach restructuring/chemicals desk and when? If you have already written an article about networking with other teams I will try search for it on your site.

    Thanks for all your help and your website is truely awesome.



    1. You can approach the restructuring/chemicals team maybe around the halfway mark of your internship and ask about working there. You should focus on proving yourself with the DCM team first and getting a strong reference so that if you apply for other teams, someone in your group will recommend you.

  3. Hi, i was interested to know if it is possible to move to a capital markets team with a background in Financial control in CIB working for the CFO) in a major Investment bank?

    thanks for yout help

    1. Yes, I think so, especially since capital markets is closer to CIB than other groups in IB.

  4. Thanks a lot for your post, it looks exhaustive and covers a lot the subject and goes in-depth. Thanks a lot as well for the examples, they are trully adding values. I’ll begin an off-cycle in DCM in a G-SIB bank soon, in the meantime I’ll work on the subjects you mentioned.

    1. Thanks! Glad to hear it.

  5. Would be great if you could also provide some content on the corporate derivatives units within the capital markets groups (day-to-day, skillset, lifestyle etc.). Thanks!

    1. We don’t have anything on that at the moment, but I’ll see if we can cover it in a future interview.

    2. Avatar

      Super chill role. Great in terms of work you are doing. If you like arithmetic and are into stuff like caps, floors, SWAPS, and understand basic markets, this is great because it is intellectually challenging enough to not make it monotonous. Hours will fly by quick when executing trades. Either way, you don’t work more than 12-14 (max., only sometimes) on weekdays. Weekends exist for you.

  6. Avatar
    Shah Azaad


    1. Thanks for reading!

  7. Hi, this is a fantastic article. I need a little advice. I was wondering, do you think it’s possible to break into DCM after having some sort of credit analysis experience with? Assuming I network as best as humanly possible? I am 23 with a B.S. in Finance from Louisiana state public school, and working towards a Master of Finance at Colorado state public school. So no ivy league schools for me. I currently work as a market research analyst at a hotel wit one internship at a city government. I am also willing to move anywhere!

    Just looking for real advice on how to leverage my little experience. Thank you!!!

    1. Thanks. Yes, it’s possible to get into DCM if you gain credit analysis experience in some other field first. The lack of brand-name schools will count against you, but if you can use your experience to do something directly focused on credit, it’s possible to make a move. I’m not sure that “market research analyst” will look relevant on your resume, though.

  8. Thanks for another great post! Will be starting SA gig at BB DCM, any advice on how to prepare myself before the internship starts? Thanks again

    1. Learn about the topics mentioned above: bond math basics, how various fixed-income instruments work, get good at Excel and PowerPoint (PPT is especially important in most DCM roles and is consistently overlooked by people), and do a bit of networking with people in the group.

      1. Thanks a lot Brian!

  9. Avatar

    Thanks so much for your introduction. In fact, I am interested in DCM in IBD. Currently, I am very likely to win an internship offer (in the summer of my second year) as a credit analyst at a BB bank. And I will deal with the liquidity risk for the DCM group on the issuance of bonds of the bank. Therefore, I was wondering if this experience will benefit a lot for me to get an IB internship in the summer of my third year?

    1. Yes, credit analysis will help with IB/DCM internships.

      1. Avatar

        So what if the credit analysis work I mentioned is in a back office? e.g. the credit risk group. Would you say this transition is probable: credit risk internship ? DCM analyst ? coverage analyst ? hedge fund?

        1. Avatar

          The question marks above are rightwards arrows.

        2. Assuming you network and prepare effectively, yes.

  10. So moving from dcm to a regular ib coverage group within a BB shouldn’t be too difficult after bonuses are paid? Should I be prepared for standard ib interview questions if trying to make the move, in addition to networking and building a reputation as a good analyst within the dcm group?

    1. Moving around to different groups within IB is fairly common, so yes, it should be possible to do that. Yes, the interview questions for that other group will be standard, but they’ll focus more on your deal experience and how much you have learned about non-debt deals. Industry trend/specific company questions will also come up if you’re moving to an industry group.

  11. Avatar
    DCM Analyst

    As someone who spent a couple years as a DCM analyst, it should be made clear that you pick up zero modeling skills. At a BB firm, you do a fair amount of acquisition financing analysis but all of the financial analysis will be outsourced to industry team and you will be left with mind-numbing market update. I was able to jump to a distressed credit firm through a LOT of self-study and some luck, but there is virtually no buyside exit opp coming out of DCM. I would caution against believing that direct lending is an available option – you will not be competitive against lev fin candidates as an average DCM analyst.

    1. Thanks for adding that. I mostly agree with you, but I hesitate to write “zero modeling skills” because someone will inevitably reply and say that their group was different, or it was combined with LevFin, or something else happened and they learned some modeling as a result. But yes, if it’s a pure-play DCM group at a large bank, your buy-side options are limited.

  12. Great article. You mention corporate banking a few times, would you be able to provide insight into this area? I know you have a corporate banking 101 article, but it’s not quite as extensive as this and I think corporate banking is even less covered than DCM in all the forums out there.

    1. Thanks. Yes, the current corporate banking article is not as detailed. We don’t have much on the topic at the moment, but we are planning to publish an updated article on corporate banking with links to outside resources (and more) later this year. I would summarize corporate banking as “DCM lite” – the analysis can be even simpler because you’re mostly working with Term Loans and Revolvers, but the hours/lifestyle are better (but lower bonuses to compensate). It’s a good starting point if you want to move elsewhere at a bank, especially other credit-related groups. It’s probably not as appealing as a long-term career since the pay differential vs. IB is large, even though it’s not really that much different than DCM.

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