Job Description of a Bond Trader
Global bond markets play an important role in modern economies because governments and business entities generally raise operating cash by selling bonds, convertible bonds or commercial papers on those markets. A bond, or fixed income, trader seeks to make profits by buying or selling debt products at favorable prices. A bond trader typically holds at least a bachelor's degree in finance.
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Responsibilities
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A bond trader generally works for a financial institution such as a bank, an insurance company, a private equity firm or a hedge fund. A fixed income trader who uses corporate funds to buy, hold or sell bonds is referred to as a proprietary trader. A firm records in its investment profit and loss (P&L) account the gains made and losses incurred in proprietary bond transactions. For example, say a hedge fund allocates a $25 million trading budget to a bond trader. At the end of the year, the portfolio's value increases to $32 million. The firm records $7 million in investment income and the trader receives a bonus.
Education and Training
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A fixed income trader generally has a bachelor's degree in finance or investment analysis. No formal education is needed to trade on financial markets, but most institutions require, at a minimum, a four-year college degree. Someone with a bachelor's degree in a liberal arts course of study also could enter the profession and receive practical financial training before trading. A bond trader who manages a substantial portfolio on behalf of clients or a firm, or has significant administrative duties, generally holds a master's degree in finance.
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Salary
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A fixed income trader's total compensation depends on her performance, economic trends and developments in global bond markets. Other factors, such as academic training or professional credentials, also may affect her remuneration. The U.S. Bureau of Labor Statistics reports that median wages of bond traders were $68,680 in 2008, excluding cash and stock bonuses. The same research shows that the middle half of the occupation earned from $40,480 to $122,270.
Career Development
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A bond trader's career growth opportunities depend on his performance and economic fluctuations. Top performers typically get promoted faster. A fixed income trader also may improve her career chances of promotion by seeking a master's degree in finance or investment analysis. A competent and skilled bond trader generally moves to a senior role within three to five years, or trades for his own account or on behalf of clients.
Working Conditions
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A bond trader's schedule usually depends on securities exchanges' hours of operations. For instance, a New York-based fixed income trader who focuses on European financial markets may work early in the morning. A typical 8 a.m. to 5 p.m. shift may be the norm for experienced traders with managerial responsibilities.
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References
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