Market Update
US tsys higher, 10Y 2.36 (-1.3bps), rising with gilts after the BOE hiked rates to 0.50%, heavy volume in TY futures (>375k). Focus on Trump announcement of Powell as Fed chair as well as tax cut/reform bill later today. Tsys higher in Asia even as the Nikkei rose 0.5% on solid earnings from Honda & Sony, a WSJ article suggested US tax cuts would be gradual and phased in over 10 yrs. Gilts sharply higher after BOE decision, the accompanying statement left out language that additional hikes would be necessary. GOCs higher in line with tsys, Can/US 2-3bps wider out the curve on profit taking. 2Y auction at noon – $2.6bln in new Feb 1 2020 bonds with the WI roll 3.6/3.4 which seems cheap relative to the 2Y roll (Nov/Aug19) roll @ 2.7 and the Mar20/2Y roll 2.3/1.7. Provis opening firmer to start, Ont 27s 63.5/63, Newf 10Y deal expected and well spoken for.
News headlines
Trump Selects Powell for Fed Chairman, Replacing Yellen (Bloomberg) President Donald Trump plans to nominate Federal Reserve Governor Jerome Powell to the top job at the U.S. central bank, according to four people familiar with the decision. In Powell, he’ll select a former private-equity executive who favors continuing gradual interest-rate increases and sympathizes with White House calls to ease financial regulations. The president will announce his decision Thursday at 3 p.m. Washington time from the Rose Garden, the White House said in a statement. Powell declined to comment when approached by a reporter outside his Washington-area home.
Bank of England Rate Decision Tests Carney’s Credibility (Bloomberg) Since taking over as governor of the Bank of England four years ago, Mark Carney laid the groundwork for an interest-rate increase multiple times. All he delivered was a single cut after last year’s referendum to leave the European Union
What We Know About the GOP Tax Bill Ahead of Today’s Rollout (Bloomberg) House Republican leaders plan to unveil a tax bill Thursday that would cut the corporate tax rate to 20 percent and leave it there — abandoning an earlier plan to phase out the rate cut over time, said a person familiar with discussions on the bill.
Corporate Tax Cut to Be Phased Out After a Decade (Bloomberg) House tax writers are planning on phasing out the proposed corporate rate of 20 percent after a decade, according to a Republican lawmaker familiar with the negotiations. Cutting the corporate tax rate to 20 percent from 35 percent is a key provision of the tax legislation that Republican congressional leaders plan to unveil on Thursday. But there have been conflicting reports about when the rate cut would take effect — or how long it would last.
Dollar Drops as Powell Set for Fed Nod; Bonds Slip: Markets Wrap (Bloomberg) The dollar declined and Treasury yields steadied as investors digested news that President Donald Trump is poised to name Jerome Powell to lead the Federal Reserve. The euro rose after data showed euro-area manufacturing is expanding at one of the fastest rates this millennium.
Musk Says Production Is Still Hell as Gigafactory Delays Model 3 (Bloomberg) Tesla Inc. still hasn’t figured out how to overcome manufacturing challenges that threaten its viability, with battery factory-line glitches delaying production of its cheapest car. The electric-car maker won’t build 5,000 units per week of its Model 3 sedan until sometime in March, three months later than planned. “I have to tell you I was really depressed about three or four weeks ago,” Chief Executive Officer Elon Musk said on a call with analysts Wednesday after Tesla reported a record quarterly loss and cash burn.
Facebook Tops Sales Projections While Russia Ad Inquiry Unfolds (Bloomberg) Facebook Inc. has been under fire for Russian abuse of its platform leading up to the 2016 U.S. election. Now, the world’s largest social network said it will boost spending next year to confront the problem and fund new business initiatives.
Canada to admit 340,000 immigrants a year by 2020 (CTV) The federal government sought Wednesday to introduce more stability into Canada’s immigration system by introducing a plan that sets out a gradual rise in admissions over the next three years. By 2020, Canada will see an increase of 13 per cent in overall immigration numbers, with the vast majority coming under economic programs designed to address skills shortages and gaps in the labour market as the population ages and the birth rate declines.
Sharp rebound in Toronto home sales signals market may have hit bottom (Financial Post) Toronto home sales tumbled in October from a year earlier and prices were down 15.1 per cent from their April peak, but sales rose sharply from September, suggesting the housing market in Canada’s largest city may be steadying, data showed on Thursday.
Bombardier to deliver fewer C Series aircraft than expected in 2017 (CBC) Bombardier Inc. says it will likely deliver fewer C Series aircraft this year than originally expected due to engine delivery delays. The company says it now expects to deliver 20 to 22 C Series jets for 2017 compared with its earlier guidance for about 30.
Canada infrastructure bank on track to open in 2017: Minister (Reuters) Canada’s new infrastructure bank is on track to be up and running by the end of the year and will look to attract investment from major pension funds, the country’s infrastructure minister said on Wednesday.
Overnight markets
Overview: US 10yr note futures are up 0.075% at 125-00, S&P 500 futures are down -0.05% at 2573.5, Crude oil futures are down -0.07% at $54.26, Gold futures are down -0.09% at $1276.1, DXY is down -0.15% at 94.677, CAD/USD is down -0.14% at 0.7784
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.412% | 2 Year | 1.612% |
| 5 Year | 1.643% | 5 Year | 2.013% |
| 10 Year | 1.959% | 10 Year | 2.363% |
| 30 Year | 2.293% | 30 Year | 2.849% |
US Economic Data
| 7:30 AM | Challenger Job Cuts YoY, Oct -3.0% (-27.0% prior) |
| 8:30 AM | Initial Jobless Claims, Oct 28th 229k est 235k (233k prior) |
| Continuing Claims, Oct 21st 1884k est 1894k (1893k prior) | |
| Nonfarm productivity, 3Q 3.0% est 2.6% (1.5% prior) | |
| Unit Labor Costs, 3Q 0.5% est 0.4% (0.2% prior) | |
| 9:45 AM | Bloomberg Consumer Comfort, Oct 29th (51.0 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