Risk-on: M&A activity starts paying dividends

CORPORATE BONDS

Merger and acquisition activity is expected to pick up further in 2014, but in-depth analysis will be crucial to pick the winners, says Kames Sterling Corporate Bond manager Iain Buckle.

Since the onset of the financial crisis, investment grade credit is best described as having been dominated by bouts of ‘risk-on’ and ‘risk-off’. In essence, the whole market has moved in unison in either one direction, or the other. So when credit spreads are widening, everything is widening to a greater or lesser extent. The same is true when spreads have been tightening. Some sections of the market have had a higher ‘beta’ than others (financial and peripheral European credit in particular), but the pervading theme has been that the entire market has been moving in the same directi...