How Much Do Bond Traders Make?

November 9, 2023

When the economy slows, as it does now, traders who specialize in Treasuries and other fixed-income instruments are among Wall Street’s hottest jobs. Last year, their trading revenue boosted bank profits and helped to offset a slump in the IPO market. That resurgence is in part due to central banks dusting off their pre-2008 playbooks and increasing stimulus measures, which drives demand for bond trading.

The question cuts to the core of how much a trader understands the economic environment, and their ability to anticipate and respond to it. Hiring managers ask this to ensure a candidate is capable of navigating the broader dynamic of financial markets and making sound trading decisions. For example, when inflation rises, bonds lose value as their coupon payments have less purchasing power. Conversely, when interest rates decrease bond prices rise.

Traders also make money by speculating around interest rate volatility. They can buy bonds that are scheduled to mature at a certain point and sell them before maturity for profit, or they can take positions that make bets on where interest rates will go. When interest rates fall, existing bonds with higher yields become more attractive, driving up prices and vice versa.

Junior traders typically earn a base salary and an equal amount in bonuses, says Barry Franklin, a recruiter at Integrated Management Resources in Arizona who has placed traders with Goldman Sachs and JP Morgan Chase since 1989. Those with more experience can expect to earn up to four times that, and senior traders can receive pay packages of $5 million or more when the market is good. However, this is a specialized role that requires exceptional technical skills.

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