Momentum has been slowly building up in the US high Yield market, particularly last week whereby the uptick in the price of oil resulted in energy names to be better bid, from 2-8 points overall, with the lower-quality less liquid names registering an increase in demand. Market technicals supported the US market of late; with over $8B in inflows between mutual funds and ETFs over the last two weeks, a very limited calendar in terms of primary market issuance, and the search for yield ever present, offers seem to have dried up. One can argue that certain US bond prices, most notably BBs appear expensive, but the argument for a further uptick in bond prices is plausible, especially in a scenario where the price of oil continues on its (gradual) upward trajectory.

US data news flow continues to be mixed but still portrays a somewhat positive outlook. The jobs market slowed down in January but the momentum remains intact. On the other hand, retail sales are expected to have stalled mainly due to the decline in the fuel consumption, lower oil price as well as contraction in car sales, whilst the University of Michigan consumer sentiment should be supported by the robust labour market and an increase in consumer purchasing power.

Across the pond, signs that the Eurozone economic recovery is gradually gaining momentum are finally beginning to emerge, following the recent improvement in leading indicators. Supported by lower oil prices, the decline in the euro and the easing in monetary conditions, we do not exclude year-end (2015) GDP coming in above expectations. Furthermore, the sentiment indicator for the single currency region could trickle upwards in February on the back of the ECB’s QE package. For the time being, investors are not likely to see Greece’s political woes as a serious (imminent) threat to the Eurozone recovery. Having said this, we do not exclude this intensifying.

As from today, the ECB will no longer accept Greek sovereign debt as collateral, with the newly elect Greek PM schedule to meet other European leaders tomorrow in Brussels, a mere two weeks before the 28 February deadline for Greece to accept the terms of the current Troika Programme. This move by the ECB has clearly step upped the pressure on the Syriza-led coalition government, whose recent chatter about debt and fiscal relief have not gone down well with their European counterparts. On the flipside, Syriza faces a dilemma domestically of not fulfilling the electorate’s wishes (as stated in its electoral manifest) and hence losing its domestic political credibility if it gives in to the Troika's demands. It is still early days to indicate how things will develop, but it is sure to keep markets on edge.

Within the EM space, the retreat in the price of oil helped aid sentiment with the larger event last week being the resignation of Petrobras CEO Foster, followed by the (political) appointment of incoming CEO Aldemir Bendine, former CEO of state-run bank Banco do Brasil, following the major corruption scandal being hit by the company. The role of CEO is touted to be a political one, whereby the President of Brazil appoints board members who in turn approve the CEO post. However, the market expected President Rousseff’s appointment of CEO to come from the private sector, news which was not well received by the markets, as the share price of Petrobras lost ground, with the bonds largely unchanged following this announcement.