Market Update

Tsys trading mixed on decent volume w/Japan back from extended weekend (TYH>340k), long end underperforming/curves steepening. Equities inch higher (emini +2.0, 2748.5), gold weaker (XAU -6.28, 1514.19), West Texas crude firmer (WTI +.37, 62.10). The Bank of Japan on Tuesday reduced the amount of its buying in Japanese government bonds with 10 to 25 years left to maturity and those with 25 to 40 years to maturity by 10 billion yen from its previous operations. The BOJ offered to buy 190 billion yen of 10-25 year JGBs, compared to 200 billion yen previously, and 80 billion yen of 25-40 year JGBs, compared to 90 billion yen in the past. The announcement has placed pressure on JGBs, helping to lift yields and the yen as a consequence. John Williams, president of the Federal Reserve Bank of San Francisco, thinks the central bank needs new tools to fight chronically low inflation. Chronically low inflation points to a labor market that is still operating well below its full potential despite a 17-year low unemployment rate of 4.1%. 

News headlines

China Changes the Way It Manages Yuan After Currency’s Jump (Bloomberg) China’s central bank has made a change to the regime used to manage the yuan, effectively removing a component used by banks to calculate their submissions to the currency’s daily reference rate, according to people familiar with the matter.

 OPEC Doesn’t Want Brent Over $60 a Barrel, Says Iran’s Oil Minister (Bloomberg) A key OPEC minister has warned that the group risks overheating the oil market as crude prices head toward $70 a barrel. “Members of the Organization of Petroleum Exporting Countries are not keen on increased Brent crude prices above $60 a barrel because of shale oil,” Iran Oil Minister Bijan Namdar Zanganeh said, according to the ministry’s news service Shana. Prices have climbed in recent days because of production cuts and increased demand for petroleum products due to cold weather, he said.

Euro-Area Jobless Rate Drops to Lowest Level in Almost 9 Years (Bloomberg) Joblessness in the euro area declined to the lowest level since early 2009 last month as the labor market continued to benefit from a resurgent economy growing the fastest in a decade.

Europe Stocks Extend Rally; Dollar, Yen Strengthen: Markets Wrap (Bloomberg) The upward march in global stock markets continued, with European equities extending a rally as economic data underpinned growth. The yen was the only G10 currency to rise against the dollar after the Bank of Japan pared bond purchases.

TD acquires Toronto-based AI startup Layer 6 (Globe and Mail) Toronto-Dominion Bank is acquiring artificial intelligence startup Layer 6 AI for an undisclosed amount as financial services companies increasingly look to tap the technology’s potential.

Minimum wage hike has rocky start in Canada’s Ontario province (Reuters) A steep minimum wage increase that went into effect on Jan. 1 in Ontario, Canada’s most populous province, has had a rocky start as some employers cut workers’ hours and benefits to reduce its impact on the bottom line.

Bank of Canada sees capacity pressure, setting up another rate hike (Reuters) Canadian companies remain optimistic about future sales despite some moderation from highs, and signs of capacity pressures and labor shortages have picked up, the Bank of Canada said on Monday, reinforcing expectations for an interest rate hike.

Overnight markets

Overview: US 10yr note futures are down -0.013% at 123-15, S&P 500 futures are up 0.07% at 2748.75, Crude oil futures are up 0.55% at $62.07, Gold futures are down -0.36% at $1315.7, DXY is up 0.16% at 92.503, CAD/USD is up 0.04% at 0.8048.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.785% 2 Year 1.948%
5 Year 1.978% 5 Year 2.284%
10 Year 2.163% 10 Year 2.487%
30 Year 2.361% 30 Year 2.829%

US Economic Data

6:00 AM NFIB Small Business Optimism, Dec 104.9 est 107.8 (107.5 prior)
10:00 AM JOLTS Job Opening, Nov est 6025 (5996 prior)

Canadian Economic Data

8:15 AM Housing Starts, Dec 217.0k est 211.0k (252.2k prior)


Disclosure and Disclaimer

The following sources of information have been, or may have been, used partially or in their entirety to compile the herein provided CTI Capital Securities Inc. (“CTI Capital”) ‘Morning Comments.’ CTI Capital believes these sources to be generally reliable, however, as said sources are varied and from third parties, CTI Capital cannot guarantee the accuracy or completeness of said information: Canadian Press (CP); Bloomberg News (BN); Wall Street Journal (WSJ); Stone & McCarthy Research Associates (SMRA); New York Times (NYT); Financial Times (FT); Market News International (MNI); Globe and Mail; Associated Press (AP); CNW Group (CNW); Reuters; Business News Network (BNN); Market Watch; and others.

Ivan Greenstein, Stephan Buu, Hugues Savard

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230