Big pay packages return to junk market

The vibrant new-issue market in the US and Europe has brought in tens of millions of dollars of fees. But many bulge-bracket companies are short of experienced sales and trading staff after cutting back in the lean years of 2001 to 2002.

Michael Karp, chairman of the Options Group, a US-based headhunting firm specialising in credit markets, said: "In the US, we are seeing demand for high-yield traders, mostly in cases where people are looking to upgrade talent, rather than add to their headcount."

Banks such as Goldman Sachs, Morgan Stanley, Bank of America and JP Morgan are looking to add to or upgrade their teams, although headhunters said recruitment is higher in Europe than in the US.

Banks in Europe are willing to pay guarantees to traders and capital markets professionals who bring good client relationships and the prospect of paying for themselves several times over in their first year. There is also a shortage of experienced staff in London.

Last week, Goldman Sachs hired Tim Gaitley, a high-yield trader from JP Morgan. The bank is understood to have attempted to hire other members of the JP Morgan high-yield team. BNP Paribas has recently hired two sales staff.

One London-based headhunter, specialising in bond market sales and trading, said: "There are jobs available, even though the market place is smaller than it used to be."

When the high-yield business collapsed in Europe two years ago, several banks closed their specialist teams, including TD Securities, Bank of America and ABN Amro. Larger players, including Goldman Sachs, Merrill Lynch and Morgan Stanley, slimmed their high-yield businesses in Europe and the US.

In the US, new-issue volumes are 55% higher in the first half of this year against 2002, according to Dealogic, the investment banking data firm. In Europe, volumes more than doubled to $12.5bn. Fee income globally rose 66% to $1.7bn year-on-year.

Much of the new-issue volume has been driven by so-called "fallen angels". Companies that lost their investment-grade status during the market downturn are returning to the bond markets to refinance their loans.