The so-called ‘Santa rally’ over November and December has put some pep into many investors’ portfolios. Rather than any spirit of seasonal goodwill, the principal driver of this has been the dramatic fall in government bond yields. UK 10-year gilts were trading on a yield of 4.7% on 19 October but by 27 December the yield was 3.4%. The picture for US Treasury yields is similar.

There is a strong sense that the next move in interest rates will be down. For those sectors that have been hit hard by rising rates, the recovery is only just beginning.

Normally, you might expect that the pace of corporate activity – which was exceptionally high in 2023 – might slow down as Christmas approached. However, some last-minute announcements are worthy of closer attention.

The first of these is the proposed merger of LXi Reit (LXI ) and LondonMetric Property (LMP). I have long been a fan of LXI and last wrote about it in May 2022. Very shortly afterwards, LXI announced a tie-up with Secure Income Reit. That deal allowed it to make material cost savings that helped drive growing earnings. However, rising valuation yields put downward pressure on its net asset value (NAV).

LMP has been on its own mission to bulk up, acquiring CT Property Trust in May 2023 and Savills IM UK Income and Growth fund in December 2021. However, this latest deal is on a different scale. If successful, the LXI/LMP merger will create a £4bn Reit with total assets of £6.4bn. LXI’s portfolio of long-leased properties in sectors such as healthcare, hotels and theme parks will dilute LMP’s bias to logistics. It seems like a sensible idea to me but both boards and then both sets of shareholders will get to decide whether it progresses.

International Public Partnerships (INPP ) announced that it had rejigged its exposure to the offshore transmission owner (OFTO) sector. These are the links that connect offshore power generation to the onshore electricity grid. INPP freed up about £200m from its existing portfolio of OFTOs at a modest premium to their valuation in the portfolio. It then agreed to redeploy £85m into the Moray East OFTO which provides 23 years of predictable, inflation-linked income. The balance of the cash will be used to pay off INPP’s debt facility and help fund a £30m share buyback programme.

INPP’s discount has narrowed from about 25% in October to about 12% today. Hopefully, given the additional transactional evidence for the validity of its valuations and the buyback programme, that will narrow further.

Bluefield Solar Income Fund (BSIF ) unveiled a new partnership between it and a consortium of UK pension funds investing in infrastructure through GLIL Infrastructure. GLIL has £3.9bn of committed capital. I think this is a really interesting deal.

GLIL and Bluefield are committing £200m and £20m respectively towards the purchase of a 247MW portfolio of 58 operational solar assets. GLIL will then buy a 50% stake in a 100MW portfolio of solar assets owned by Bluefield. Finally, GLIL will help fund the investment company’s development pipeline.

Again, this will provide transactional evidence of the accuracy of Bluefield’s NAV and free up capital for the fund. Last September I highlighted the valuation opportunity in the shares whose discount has narrowed a little since then but is still about 13%. The 7.4% dividend yield looks very attractive and I can easily envisage the stock trading back at asset value later this year.

The last of 2023’s big announcements came from Octopus Renewables Infrastructure (ORIT ), which said that it was interested in merging with Aquila European Renewables (AERI ). I am not particularly enthused by the idea. ORIT trades on a slightly narrower discount than AERI but there is no obvious reason for this. Both are a decent size and have portfolios of renewables projects in Europe. However, there is not much of a track record yet to draw any conclusions as to how well they are doing relative to each other.

The Aquila fund’s yield is a bit higher, and the investment trust has forecast dividend cover of 1.5 times for the next five years. It has far more fixed rate debt while ORIT has been more exposed to rising interest rates. Both have sizeable pipelines of potential new investments, but until their discounts are eliminated are unable to expand through share issuance.

Aquila’s board is keen to tackle the fund’s discount. Having passed one continuation vote last summer, it has brought forward the fund’s next one to September 2024. To my mind, it makes sense to wait until then to gauge whether the board needs to do anything radical. In the short term, a merger with ORIT would not achieve much beyond incurring some sizeable fees for the two sets of advisers.

James Carthew is head of research at QuotedData.

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