What is Debt Capital Markets?
The Debt Capital Markets (DCM) product group of an investment bank advises corporations and government entities, such as sovereigns and supranationals, on raising capital via investment-grade debt securities.
Debt Capital Markets (DCM): Product Group Primer
The debt capital markets (DCM) is a product group within the investment banking division that offers capital raising services in the form of corporate bonds and government bonds on behalf of their clients.
The clients served by the debt capital markets group are typically corporations and governmental entities.
The term “product group” in investment banking refers to deal teams that specialize in a particular type of transaction.
On that note, the debt capital markets product group specializes in assisting their clients with raising capital in the form of investment-grade debt securities, such as bonds and loans.
While there are exceptions, most DCM groups are usually industry agnostic. Thus, their capital raising services can be offered to a wide range of clients, irrespective of the sector.
The issuance of debt is one method for corporate and government entities to raise capital to fund their ongoing operations and strategies to achieve growth and expansion.
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Debt Capital Markets (DCM): Investment Banking Services
The transactions the debt capital markets (DCM) group advises on are predominantly related to the origination, structuring, and marketing of investment-grade debt issuances.
The debt capital markets (DCM) group also works on debt refinancing transactions, where the issuer is advised on the replacement of an existing debt obligation with a new issuance.
The structure of a debt instrument—i.e. the terms attached to the security—are specific to the type of financial product being offered and the credit profile of the issuer, among other factors.
The most common types of debt issuances include the following:
- Investment Grade Corporate Bonds
- Commercial Paper
- Government Bonds (Treasury Bonds)
- Municipal Bonds
- Emerging Markets Bonds