M&A is good news for bonds

Fatima Luis, co-manager of the F&C Strategic Bond Fund, believes that increasing levels of M&A activity will be generally positive for investors in credit markets, particularly for corporate bonds and high yield bonds.

Luis commented: "Put simply, two are stronger than one, which normally means that default risk reduces. The announcement of the merger of US property groups Prologis and AMB Property is a good example, with the Prologis bonds reacting positively. The European subsidiary, which we hold, should trade more in line with the US issues. In our view, it can often be the case that better value can be found in bonds issued in Europe by US companies and indeed vice versa."

Luis and Seabrook also hold bonds in a number of private companies that are starting the process of obtaining a full listing. Shipping group Hapag Lloyd is one such example, alongside others in the oil services sector.

"While such activity is particularly beneficial in the high yield arena, it is very much on a case by case basis rather than across the market, so stockpicking remains ever important," Luis cautioned.