Good Morning,

As we highlighted in one of our end of year commentaries for 2014 (please visit the Trader Talk section at for further reference) we indicated that the volatility which characterised the last 6 weeks of 2014 could well be a taste of what is to come in 2015. So far, markets have had their fair share of large swings, in either direction as the price of oil continued to drop below the $50 level, inflation expectations in the US seem to have stalled somewhat, and inflationary data in the Eurozone persists on its downward trajectory. And the way markets began the year can offer a hint of the likely key themes heading into the first half of the year.

We have had quite a handful of data and market-moving events to contend with, and we are not even past the half way mark of the first month of the new year, as the theme of a continued divergence of the somewhat strong activity indicators in the US coupled with mixed to weak global data resulted in a stronger dollar (EURUSD currency pair traded below the 1.20 level for most of last week), further declines in the price of oil and large swings in European government bond prices. Major themes and major developments happening right now, and the next big moves are going to be the on-going political uncertainty in Greece (and the possible impacts it can have on the euro and the single-currency area) as well as the ongoing debate of when/how/what and how much will be included in the ECB asset purchase programme, which is expected to be announced in the 22 January ECB MPC meeting next week. In the US, December US composite PMI remained consistent with solid economic growth despite being slower than in November.

Going back to the political issues in Europe, 2015 is laden with key elections namely the Spanish, Greek, English and, possibly, also Italian ones. On all fronts, their outcomes are set to go down to the wire and, although it is premature to devise which way they are expected to go due to the increasing popularity of anti-austerity and anti-EU parties, we have no doubt that all forthcoming elections will be hotly contested. We are aware, for example, of the growing popularity of newly formed Podemos party in Spain and the ramifications further popularity of this party might have on Spain’s coalition government, raising uncertainty over the continuation of fiscal integrity and structural reform. Likewise, increasing popularity of euro-sceptics in the UK such as the UK Independence Party (UKIP) adds a great deal of uncertainty to the outcome of the May elections.

On the corporate credit front within the Eurozone, January is characteristically one of the strongest months in terms of corporate bond issuance on the primary market (refer to our HY and IG credit outlook which should be published on our website over the coming days, please click on for further details), whereby we expect a strong showing for Investment Grade corporate bond issuance in the first half of 2015, in anticipation of an increased demand brought about by QE. Activity was relatively slow for this time of the year in the early trading sessions, with activity picking up somewhat last week, most notably in the senior financial space, with €20billion worth of new issues launched. Mid-way through last week, Danone approached the market with a dual tranche deal, whilst frequent issuer Volkswagen also tested the waters earliest on in the year with a 3-way tranche, with the other German carmaker BMW following suit last Friday. The first two sessions this week were rather hectic to say the least, with an array of new bond issues, most notably Investment Grade bond issues, being launched, with take-up on the primary market satiating supply accordingly. We expect this trend of new bond issuance to persist for most of the first quarter of 2015, as bond issuers continue to take advantage of the cheap form of financing by means of the corporate bond market, with yields continuing to reach historical lows.

Have a nice day!