US tsys opening lower, US 10Y 2.17 (+3.7bps), curve 1bp steeper after stronger ADP & Q3 Productivity. Fed chair Yellen to testify before congress later this morn. Odds of a rate hike have risen to 72% for next week’s FOMC meeting from ~65% prior to last month’s payrolls. Intervening data has been mixed with the CITI economic surprise index at a two month low. Overnite tsys were lower as China stocks rose 2.3% but found support as bunds/gilts rallied on weak UK construction PMI. GOCs are lower ahead of BOC, curve ~1.5bps steeper. After yest BMO/BNS NVCC deals, RY is possible candidate to issue today after results were announced this morn. Westcoast (Al/BBB) is in the mkt with a 10 & 30Y reopening @ ~223/260. Union Gas last issued 10Y bonds @172 on Sep 17th.
- Euro zone inflation sticks at 0.1%, all eyes on ECB (CNBC) Euro zone inflation is expected to hold steady in November, unchanged from the previous month. But with little to no growth, pressure remains on the European Central Bank to increase its massive bond-buying program to boost prices at its monthly meeting on Thursday.
- Global company debt sales eclipse $2tn (FT) Sales of global corporate bonds have eclipsed $2tn for the fourth consecutive year, with a further easing of European Central Bank policy seen encouraging companies to take advantage of lower interest rates.
- Watch for U.S. recession, zero interest rates in China next year, Citi says (Reuters) The outlook for the global economy next year is darkening, with a U.S. recession and China becoming the first major emerging market to slash interest rates to zero both potential scenarios, according to Citi.
- Treasury Curve Flattest in 10 Months Shows Trust in Fed’s Yellen (Bloomberg) The Treasury market is taking Janet Yellen at her word on the path for monetary policy. The yield premium offered by 10-year notes over two-year securities narrowed to the least in 10 months as the Federal Reserve chair has stressed the potential for liftoff this month, while reiterating that tightening will proceed at a measured pace.
- The return of inflation could define capital markets in 2016 (FT) Betting on a cautious but notable inflation upswing could be the winning trade of 2016, according to a slew of investment bank analysts who have polished off their flagship predictions for the coming year.
- Overview: IG24 5Y 77.609/78.379 (+1.021), US 10yr note futures are down -0.18% at 126-23, S&P 500 futures are down -0.06% at 2098.75, Crude oil futures are down -1.72% at 41.13$, Gold futures are down -0.35% at $1059.8, DXY is up +0.40% at 100.190.
US Economic Data
- MBA mortgage applications came in this morning at -0.2% for the week ending November 27th, versus prior week -3.2% decrease.
- ADP employment change came in at 217K in November compared to 196K in October (Expected 190K).
- Nonfarm productivity (F) came in at 2.2% in 3Q 2015 versus 3.5% for previous quarter.
- Unit labor costs (F) increase 1.8% in 3Q 2015 compared to the 2.0% in 2Q 2015.
- ISM New York (November) will be release at 9:45 (last report: 65.8).
- Fed will release beige book at 14:00.
Canadian Economic Data
- Bank of Canada overnight lending rate decision will be release at 10:00 and is expected to remain at 0.50%.
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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240