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How many analysts do you need?

Merrill Lynch has merged its high-grade and high-yield research teams. So has JP Morgan. They say it provides quality coverage, especially for fallen angels. But is it really just cost cutting in a bear market?

John Fusek

The large number of fallen angels - formerly investment-grade credits that have fallen to non-investment grade - has led many firms to consider merging their once separate investment-grade research teams with their high-yield colleagues. In Europe the two markets have been almost entirely distinct, with different buyers and few of what are called cross-over investors operating in the middle ground populated by rising BBs and falling BBBs. As a result, some valuable investing opportunities have gone begging.

Chris Francis, head of international credit research at Merrill Lynch, says: "Certain investment-grade bonds have offered far wider spreads than those on lower-rated bonds in the same sector held in high-yield investors' portfolios."

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