Capital Markets Interview Questions for New Grads: ECM, DCM and Trading
Updated 2026-10-27
Capital markets interviews test three things: whether you understand how companies raise money (equity versus debt, how deals are priced and sold), whether you follow markets (rates, spreads, recent deals), and whether you can explain why you want this group rather than M&A or trading.
Technical depth is usually lighter than in M&A modeling interviews, but market awareness is tested harder. Prepare a short view on rates and credit, and two or three recent deals you can discuss.
What each group focuses on
| Group | What it does | What interviews emphasize |
|---|---|---|
| ECM | IPOs, follow-on offerings, block trades, convertible bonds | IPO process and pricing, why companies go public, follow-on discounts, equity market conditions |
| DCM | Investment-grade bond issuance for companies, financial institutions and governments | Rates and credit spreads, bond pricing, why issue debt now, new issue concessions |
| Leveraged finance | High-yield bonds and leveraged loans, often for buyouts | Leverage and coverage ratios, covenants, LBO basics, credit risk |
| Sales and trading | Making markets and serving investor clients in equities, rates, credit, FX or commodities | Market views, trade ideas, product knowledge, quick math |
Equity capital markets questions
- Walk me through the IPO process. Outline: choose banks, due diligence and drafting the registration statement, regulatory review, roadshow and bookbuilding, pricing, allocation, trading, stabilization.
- How is an IPO priced? Outline: valuation against comparable companies sets a range; bookbuilding shows demand at each price; the final price balances proceeds for the issuer against leaving a first-day gain for investors.
- What is a greenshoe? Outline: an over-allotment option letting underwriters sell extra shares and buy them back or exercise the option, used to support the price after the offering.
- Why do follow-on offerings usually price at a discount? Outline: new supply, compensation for investors taking a large block quickly, and the signal that insiders or the company are selling.
- Why would a company issue a convertible bond instead of straight equity or debt? Outline: lower coupon than straight debt, less immediate dilution than equity, at the cost of possible future dilution.
Debt capital markets and leveraged finance questions
- Why would a company issue debt instead of equity? Outline: debt is cheaper (interest is tax deductible, lenders take less risk), does not dilute shareholders, but adds fixed obligations and default risk.
- If the Fed cuts rates, what happens to bond issuance? Outline: lower benchmark yields reduce funding costs, often prompting issuers to come to market or refinance; the effect depends on credit spreads and market expectations too.
- What drives a company's credit spread? Outline: credit rating and default risk, leverage and coverage, industry, maturity, liquidity, and overall market risk appetite.
- What is a new issue concession? Outline: the extra yield a new bond offers over the issuer's existing bonds to attract investors.
- What covenants would you expect in a high-yield bond versus a leveraged loan? Outline: bonds usually carry incurrence covenants tested when the company takes an action; loans may carry maintenance covenants tested regularly, though many recent loans are covenant-lite.
Market and trading questions
- Where is the 10-year Treasury yield and why has it moved recently? Know the current level before the interview.
- Pitch me a stock or a trade. Outline: the idea, why the market is mispricing it, the catalyst, the risk, and where you would exit.
- What happens to bond prices when rates rise? Outline: prices fall; longer duration bonds fall more.
- Tell me about a recent deal you followed. Outline: issuer, size and terms, why now, how it was received, what it says about the market.
Fit questions you should not skip
- Why capital markets rather than M&A or sales and trading? Have a specific answer: you like the mix of markets and client work, the shorter deal cycles, or a particular product.
- Why ECM (or DCM) specifically? Tie it to something you have actually done or followed.
- Walk me through your resume. Keep it to about two minutes and end with why this role is the logical next step.
FAQ
- How technical are capital markets interviews?
- Usually less technical than M&A modeling interviews but heavier on markets. Expect accounting and valuation basics plus questions on rates, spreads and recent deals.
- How do I keep up with markets before interviews?
- Read a daily markets newsletter or the markets section of a major financial paper, track the 10-year Treasury yield, major equity indexes and credit spreads, and note two or three recent deals in the group you are applying to.
- Do capital markets groups sponsor visas?
- It varies by bank and by year. Check the job description and the Department of Labor's public LCA records, and see the guide on answering sponsorship questions.
Free tools
The FindAlly interface is in Chinese; mock interviews are conducted in English.