(Bloomberg) -- Wall Street bankers who help companies sell debt are poised to get bigger bonuses for their work in 2024 and may collect even higher rewards for next year if issuance trends continue, according to recruiting and compensation specialists.
Search firm Options Group predicts US debt capital markets professionals will get a 23% increase in total pay compared with 2023. Compensation consultant Johnson Associates Inc. forecasts an even bigger 25% to 35% rise for bond underwriters.
Although some of the boost could come from salary, bonuses are what really drive swings in Wall Street paychecks. Options Group’s range for bond bankers that are managing directors is $825,000 to $1.5 million in total compensation. By contrast, the median US household income totaled $80,610 in 2023, according to the US Census Bureau.
What’s happening with bond bankers parallels volumes in the business. Investment-grade and high-yield corporate bond markets bounced back in 2024 from down years in 2022 and 2023, according to data compiled by Bloomberg. Strength in the economy, combined with an expectation that President-Elect Donald Trump will remove barriers to dealmaking, suggests that issuance is likely to keep moving upward.
“Firms are trying to capitalize, raise debts in a pretty attractive interest rate environment,” said Alan Johnson, founder and managing director of Johnson Associates. “If you were going to raise money, this was a good time to do it.”
In the US, companies have issued more than $1.47 trillion in investment-grade bonds this year, up 25%, according to data compiled by Bloomberg. US high-yield issuance has totaled $269.2 billion, up 54%.
Issuance has also risen in Europe and Asia Pacific, with European investment-grade bonds reaching the records hit around the Covid-19 pandemic, when companies rushed to issue debt as interest rates fell to near-zero again.
Volumes don’t directly align with compensation, but the two tend to have a “decent correlation,” said Jason Goldberg, a senior analyst at Barclays Plc. who tracks bank stocks.
US data from Options Group and Johnson Associates suggest that bond bankers, and their counterparts across investment banking, are among the few who should expect to see significant pay increases. Leveraged finance professionals saw a 17.6% pay increase, according to Options Group, on the heels of a record year of issuance in the US leveraged loan market. Other winners include those in energy markets, financial institutions dealmakers and those working in electronic markets and equity derivatives.
Overall, workers in the financial industry will see pay increase 4.4% in the US and 4% globally, according to Options Group.
For bond bankers, the pay bumps reflect not only weakness the prior year — when their compensation had slid 27% — but that these bankers get paid less than colleagues elsewhere, according to Jennifer Montalvo, head of the North America sell-side practice and co-head of investment banking at Options Group.
For instance, managing directors in US investment-grade bond trading will only see pay rise by roughly 6%, but they will make make $1.7 million to $3 million in total compensation, according to Options Group’s estimate. Even the low end is more than double what the firm expects debt bankers to earn.
“People need to manage their expectations so they’re not disappointed,” said Michael Karp, CEO and co-founder of Options Group.
Looking ahead, the soothsayers of Wall Street pay are optimistic that things will get even better.
Underlying economic factors suggest companies will continue to issue more bonds, and many firms are predicting that next year’s issuance will match our outpace totals in both investment-grade and high-yield issuance.
“There is a limit to how much debt clients will issue, how much trading they’ll do,” said Johnson. “But we’re certainly not there yet.”
(Updates with table of links to other credit stories. An earlier version of this story corrected spelling of Options Group’s name in 12th paragraph.)