The overwhelming demand to go long credit was once again in evidence today, with Monday's late sell-off in the US looking like a blip.

We remarked yesterday that the markets were resilient to negative sentiment, but there was little need for stoicism today as news from the US provided support. On the macro front, the Empire State index rose to 12.5 in January from a revised 2.2 in December. This month's reading was the strongest since May 2012.

Corporate earnings added momentum to the rally. Bank of America followed the example of JPMorgan and Wells Fargo yesterday by posting results that beat expectations. The bank's net income of $3.4bn exceeded consensus estimates of $3.3bn, and the earnings per share of 29cents a share surpassed expectations by a cent.

BofA's CDS spreads tightened 2bps to 77bps, while rival Citigroup also rallied by 2bps to trade at 70bps. Improved credit quality, in the form of a $1.2bn reserve release, made a big contribution to the results. But the bank's fixed income trading division also played its part, with underlying revenues up 16%. Fixed income struggled in the first three quarters of last year, and it will be interesting to see if other banks replicate BofA's performance when they report later this week.

The bullish tone to the market led to a decent rally. The Markit iTraxx Europe tightened 2.5bps to 69.5bps, while the Markit CDX.NA.IG was 1.5bps tighter at 63.5bps. It should be noted that this is more less where both indices were trading prior to Christmas, so the markets haven't exactly been surging in recent weeks. There is still an underlying sense of uncertainty surrounding the Fed's exit strategy, but for now the urge to go long is overriding any doubts.

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