Off the desk | Arbitrage | May 2026
The Spread Between Signal and Noise: Monitoring for Opportunities
READ TIME: 1.5 MIN | Volatility and geopolitical instability made March a test of judgment across every arbitrage sleeve. Here's what our team is observing.
Markets in March showed broad market volatility and geopolitical instability underneath. For advisors building resilient, low-correlation portfolios, the current environment is a reminder that arbitrage exposure is only as strong as the thinking behind it.
M&A volumes were light, yet activity accelerated toward the end of March with two notable pharmaceutical deals totalling approximately US$5bn.
Merger arbitrage spreads have widened in the software sector, not because of regulatory friction or financing constraints, but because of AI disruption. As artificial intelligence reshapes competitive dynamics across enterprise technology, acquirers and targets alike are being repriced in real time. After a period of robust deal activity that included numerous large-scale acquisitions, M&A volumes have since moderated. That shift is creating a complex opportunity set.
March brought a sharp deceleration in IPOs, which was a welcome cooldown. In SPAC activity: 11 SPACs issued and 7 de-SPACs announced, compared to 27 issuances and only 3 de-SPACs in February. What looks like a quiet month, could be better understood as normalization.
Taken together, March saw IPO activity decelerate while de-SPAC announcements accelerated, bringing new issuances and merger completions closer into balance. After an active February, the month's figures reflect a market in the early stages of equilibrium rather than one in retreat.
The most telling story of March unfolded in convertible bond arbitrage, where positioning in high-delta bonds and new issues provided resilience as credit spreads faced broader pressure. This was not circumstantial, it reflected the complexity of an instrument class where duration risk, credit risk, and equity optionality must be evaluated simultaneously. Not all converts are created equal, particularly when private credit and equity markets wobble at the same time.
Taken together, March shows why arbitrage demands active, differentiated thinking. Each sleeve (merger, SPAC, and convertible bond) surfaced dynamics that a rules-based or index-driven approach may have missed. Spread width alone is not alpha, that is where the real opportunity lives.
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READ TIME: 2.5 MIN | Q1 2026 put the 60/40 portfolio through three distinct market regimes in 90 days. See why our team believes a 40/30/30 framework is built for exactly this environment.
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