Market Update Tsys slightly higher before payrolls, 10Y 2.78% (-1.2bps), futures near highs on heavy volume. European equities down 1.0%, S&P futures -16, gold weaker, crude unch. Deutsche Bank -5.0% on Q4 earnings & revenues miss. Core EGBs lower despite equities and weaker ECO data, 10Y gilt +3bp @ 1.56%. GOCs slightly higher in line with tsys, 10Y 2.36%. Yesterday yields spiked higher, 10Y largest selloff since Sept to 2.38% the highest since May ’14, and underperforming the decline in tsys as the 30Y tsys rose above 3.0% for the first time since May. Provis fairly contained despite the move higher in GOC yields, rapid flattening in 10s30s.
News headlines
Bond-Market Pain Reaches 30-Year Treasuries as Yield Breaches 3% (Bloomberg) The benchmark 10-year U.S. yield hurtled toward 2.8 percent, setting fresh highs since 2014, and the 30-year yield broke through 3 percent for the first time in eight months. Treasuries found little support throughout the trading session — no more month-end buyers like pensions and index funds to step in, and little sign of demand from Asian buyers. Most traders were content to let the bear-market narrative run its course after the worst January for the world’s biggest bond market since 2009.
Deutsche Bank Investors See No Silver Lining After Results Slump (Bloomberg) Deutsche Bank AG investors searching for good news after the bank’s third straight annual loss found little to give them optimism. The Frankfurt-based lender, which had already guided for a slump, surprised with revenue that fell to the lowest in seven years and declines at businesses from transaction banking to equity derivatives. Even cost control — a key feature of Chief Executive Officer John Cryan’s tenure — was worse than expected.
Dollar Gains Before Jobs Data; Stocks Extend Drop: Markets Wrap (Bloomberg) Stocks in Europe declined as a bond selloff deepened across the continent. The dollar rebounded from three days of losses and Treasuries steadied before U.S. jobs data that may give further clues on the Federal Reserve’s rate path. The Stoxx Europe 600 Index dropped for a fifth straight day, the longest streak since November, as heavyweights Deutsche Bank AG and BT Group Plc slumped after disappointing results. Germany’s DAX gave up the year’s gains, capping the worst weekly decline since 2016. Futures on the S&P 500 also slipped. Bund yields reached a two-year high as core European bonds fell along with gilts, while the euro and pound weakened. Japanese debt gained and the yen declined after the Bank of Japan intervened to stem the rise in rates.
Oil Near $70 as U.S. Shale Surge Looms Over Bullish Banks (Bloomberg) Brent crude traded near $70 a barrel as the specter of expanding U.S. supply was weighed against Wall Street banks’ growing faith in a price rally. The benchmark grade is on course to end the week lower, after being whipsawed by concern about rising American production and optimism over rosy outlooks painted by forecasters including Goldman Sachs Group Inc.
Scotiabank expects up to $6.5 billion excess capital by 2020 (Reuters) Bank of Nova Scotia expects to generate C$7 billion to C$8 billion ($6.5 billion) of excess capital by 2020, giving it the opportunity to return capital to shareholders or make acquisitions, its chief financial officer said.
Canada manufacturing growth strongest in nine months in January (Reuters) The pace of growth in the Canadian manufacturing sector picked up at the start of the year to its highest level in nine months as measures of new orders and employment rose in January, data showed on Thursday.
Stock futures edge lower as gold falls (Reuters) Stock futures pointed to a slightly lower opening for Canada’s main stock index on Friday as spot gold prices edged lower, led by a rise in the U.S. dollar.
Overnight markets
Overview: US 10yr note futures are down -0.026% at 121-06, S&P 500 futures are down -0.62% at 2805, Crude oil futures are down -0.12% at $65.72, Gold futures are up 0.07% at $1348.9, DXY is up 0.2% at 88.846, CAD/USD is up 0.39% at 0.812.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.862% | 2 Year | 2.149% |
| 5 Year | 2.14% | 5 Year | 2.558% |
| 10 Year | 2.357% | 10 Year | 2.784% |
| 30 Year | 2.416% | 30 Year | 3.028% |
US Economic Data
| 8:30 AM | Change in Nonfarm Payrolls, Jan est 180k (148k prior) |
| Change in Private Payrolls, Jan est 181k (146k prior) | |
| Change in Manufact Payrolls, Jan est 20k (25k prior) | |
| Unemployment Rate, Jan est 4.1% (4.1% prior) | |
| Average Hourly Earnings MoM, Jan est 0.2% (0.3% prior) | |
| Average Hourly Earnings YoY, Jan est 2.6% (2.5% prior) | |
| 10:00 AM | U. of Michigan Sentiment, Jan est 95.0 (94.4 prior) |
| Factory Orders, Dec est 1.5% (1.3% prior) | |
| Durable Goods Orders, Dec (2.9% prior) | |
| Durable Ex Transportation, Dec (0.6% prior) | |
| Cap Goods Orders Nondef Ex Air, Dec (-0.3% prior) | |
| Cap Goods Ship Nondef Ex Air, Dec (0.6% prior) |
Canadian Economic Data
There is no Canadian economic data for today.
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