When they get it right, traders working on high yield desks are some of the best rewarded in the market. When they get it wrong, they can lose a lot of money. And in the current market, it's getting easier to get it wrong, which means banks are keen to upgrade the talent on their desks.
"There's a lot of shuffling going on," says one headhunter who works in the high yield space. "High yield trading books have been getting hammered, so it seems there are firings and upgrades taking place."
Barclays hired four New York-based high yield traders from Credit Suisse earlier this month, of whom three were managing directors. We understand that Mizuho has lost a high yield trader in London (Ed Bruni) and traders in the market say various banks are hiring. "UBS is looking, RBC is looking, RBS is looking," claims one London high yield veteran. "There's movement caused by traders jumping ship, traders making losses, and traders getting fired. Some new players also seem to be building-out."
High yield bonds are often illiquid, requiring what it is a comparatively small group of traders in the space to match buyers and sellers themselves. Top traders can be highly profitable - Hamza Lemssouguer made $120m in profits at Credit Suisse in 2019, for example. However, as banks' risk appetite wanes, trading high yield products is becoming a lot harder to do. “In some cases it’s taken us several weeks to exit what should be very liquid positions," David Newman, chief investment officer for global high yield at Allianz Global Investors, told Bloomberg in late June.
Russell Clarke, a partner at fixed income focused Figtree search in London, said demand for high yield traders is strongest for sector specialists in areas like autos and industrials. "Despite liquidity issues, if banks can hold inventory and hire strong traders with a risk view while hedging with CDS and iTraxx, there is always a chance they will make good money," he said.
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