Market Update

US tsys continuing to selloff this morning, US 10Y 2.582% (+2.9bps), tsy curve another 4bps steeper led by the long end, heavy volume in TY futures (>900k). Tsys dropped sharply in Asia after Bloomberg headline out of China that officials there are wary of treasury buying due to supply, trade tensions..  Block trade steepener in 10Y/ ultras with a DV01 of $565k . US auctions $20bln in reopened 10Y notes at 1:00PM. EGBS lagging the move lower in tsys, ,10Y bund future unch, despite a technically uncovered 10Y benchmark bund auction, results coming out right after the China tsy news however. GOCs lower, spreads 1bp narrower vs tsys. BOC auctions $3.6bln in reopened Feb 2020s at noon. 

News headlines

China May Halt Purchases of U.S. Treasuries (Bloomberg) China added to bond investors’ jitters on Wednesday as traders braced for what they feared could be the end of a three-decade bull market. Officials in Beijing reviewing the nation’s foreign-exchange holdings have recommended slowing or halting purchases of U.S. Treasuries, according to people familiar with the matter. Benchmark bonds reversed earlier gains on the news, with the yield on 10-year Treasuries climbing for a fifth day.

Trump’s Willingness to Deal on Immigration Adds Urgency to Talks (Bloomberg) Congressional Republicans got the green light from President Donald Trump to negotiate an immigration deal with Democrats, potentially clearing a stalemate that’s stalled action on multiple issues, including funding to keep the government from shutting down next week.

EU Risks Global Bank Crisis If It Blocks Brexit Deal, U.K. Warns (Bloomberg) The European Union risks opening the door to another global financial crisis if it refuses to give London’s bankers a good trade deal, two senior U.K. ministers said, as the finance industry emerged as a key battleground for Brexit talks.

Stocks Retreat as Dollar Declines With Treasuries: Markets Wrap (Bloomberg) European stocks dropped on Wednesday and U.S. equities were poised to follow suit as investors digested a surge in bond yields, the flip side to synchronous global growth and potentially rising inflation. The dollar retreated against all G-10 peers.

Canada housing starts fall in December as condos decline: CMHC (Reuters) Canadian housing starts fell in December, as expected, as a sharp decline in multiple unit urban starts outweighed a rise in single-detached starts, data from the Canada Mortgage and Housing Corporation showed on Tuesday.

NAFTA breakup poses biggest risk to Canadian railways, experts say (Financial Post) The potential dismantling of the North American Free Trade Agreement poses the biggest risk to Canada’s railways not benefiting this year from healthy economies and higher demand to move crude oil, say industry observers.

Trump policies loom large for Canadian banks (Financial Post) NAFTA renegotiations and recently passed corporate tax cuts were among the policies of U.S. President Donald Trump that loomed large over a get-together of Canada’s top bank CEOs Tuesday.

Overnight markets

Overview: US 10yr note futures are down -0.19% at 122-26, S&P 500 futures are down -0.33% at 2743.25, Crude oil futures are up 0.89% at $63.52, Gold futures are up 0.78% at $1323.9, DXY is down -0.49% at 92.078, CAD/USD is down -0.1% at 0.803.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.783% 2 Year 1.964%
5 Year 2.018% 5 Year 2.343%
10 Year 2.217% 10 Year 2.583%
30 Year 2.438% 30 Year 2.934%

US Economic Data

7:00 AM MBA Mortgage Applications, Jan 5th 8.3% (-1.6% prior)
8:30 AM Import Price Index MoM, Dec 0.1% est 0.4% (0.7% prior)
  Import Price Index ex Petroleum MoM, Dec -0.2% est 0.1% (0.1% prior)
  Import Price Index YoY, Dec 3.0% est 3.1% (3.1% prior)
  Export Price Index MoM, Dec -0.1% est 0.3% (0.5% prior)
  Export Price Index YoY, Dec 2.6% (3.1%% prior)
10:00 AM Wholesale Inventories MoM, Nov est 0.7% (0.7% prior)
  Wholesale Trade Sales MoM, Nov est 0.6% (0.7% prior)

Canadian Economic Data

8:30 AM Building Permits MoM, Nov -7.7% est -1.0% (3.5% 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