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Deal Demand Still Strong Despite Higher Rates, Say Strategists

Risk has not dampened demand for deals, says Steven Costabile, managing director at AIG Global Investment Group. He and Tim Backshall, chief credit derivatives strategist at Credit Derivatives Research, told "Power Lunch" viewers to expect more mergers and acquisitions in the foreseeable future.

Interest rates have creeped up, but in context are still quite reasonable, Costabile told CNBC's Sue Herera. He compared the current environment to the 1990s, when deals were rife.

"The risk premium over Treasurys is still very tight," he declared. "There is no lack of funding and no lack of opportunity to get deals done right now."

Backshall agreed "completely" -- and said that riskier M&A is still almost as much in favor as high-quality deals.

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He pointed to "aggressive action" like the announced $24.8 billion acquisition of Alltel by TPG Capital and Goldman Sachs' buyout arm, GS Capital Partners. Targets of takeover offers like First Data and Sallie Mae "haven't widened out dramatically," he noted.

Backshall conceded that volatility in "the last few days" has been surprising, particularly the swift rise of Treasury rates -- but he believes that "the changes are not enough to change the relative value of deals."

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