Market Update

Risk on rally after passage of US tax bill early Saturday, tsys lower yields ~3bps higher, on heavy volume in TY futures (530k), US 10Y 2.392 (+3bps). Equities higher – S&P fut  +15, Euro stoxx +1.2%. The USD is higher vs the euro, lower vs GBP, unch vs CAD. GBP higher, gilts lower and wider vs bunds/tsys  on speculation an agreement on Brexit talks has been achieved,  EU chief negotiator Michel Barnier  saying a ‘breakthrough is likely today’. GOCs lower in line with tsys, curve maintaining flatter bias from Friday’s blowout employment figures, 20% chance of rate hike this Wed. Provis trading up to start, Ont 27s @ 61, Ont 48s @71 – expectations of supply in both provis & corps given month end cpn flows.

News headlines 

Senate Passes Major Business, Individual Cuts: Tax Debate Update (Bloomberg) Senate Republicans narrowly approved the most sweeping rewrite of the U.S. tax code in three decades, slashing the corporate tax rate and providing temporary tax-rate cuts for most Americans. The 51-49 vote — achieved only after closed-door deal-making with dissident senators — brings the GOP close to delivering a much-needed policy win for their party and President Donald Trump. Trump has promised to sign tax-cut legislation before the end of 2017.

Congress Talks Tax Deal as Trump Signals Corporate Rate Retreat (Bloomberg) House and Senate lawmakers say they’ll begin working Monday on compromise tax-overhaul legislation — just a couple days after President Donald Trump introduced uncertainty over a provision that could mean a difference of about $200 billion over 10 years.

U.K. Fears Brexit Breakdown as May Takes Best Offer to Lunch (Bloomberg) Brexit talks risk being torpedoed by the taboo issue of the European Court of Justice, a senior British official said, as the U.K. downplayed expectations of a breakthrough when Prime Minister Theresa May meets European officials in Brussels on Monday.

CVS to Buy Aetna for $67.5 Billion, Remaking Health Care Sector (Bloomberg) CVS will pay $207 a share for Aetna, with $145 a share in cash and the rest in stock, the companies said in a statement Sunday. That’s a 29 percent premium to Aetna’s share price on Oct. 25, the day before the companies were reported to be in talks.

Dollar Rises With Yields on Tax Plan; Stocks Jump: Markets Wrap (Bloomberg) The dollar made a strong start to the week, rising with Treasury yields and U.S. stock futures on the back of progress for the Republican tax-overhaul plan. European equities rebounded after Friday’s slump, though it was a mixed picture across Asian gauges.

Citi’s Bullish on Commodities While Warning of Risk in China (Bloomberg) Demand gains will be sustained through next year and in 2019, lifted by emerging markets as well as advanced economies, the bank said in a report. While there may be a slowdown in China, the top consumer of metals and energy and grains, stricter environmental standards and pressure to support bank balance sheets by eliminating overcapacity and curbing a glut could lead to tightness in some commodities, according to Citigroup.

Free trade talks with China will not yet begin (CBC) Canada will not begin formal free trade talks with China, at least not yet.  Prime Minister Trudeau met Monday with Chinese Premier Li Keqiang at the Great Hall of the People in Beijing. A joint statement indicating talks would begin had been widely expected.

BlackBerry loses payment dispute with Nokia, to pay $137 million (Reuters) An arbitration court ordered smartphone pioneer BlackBerry Ltd to pay $137 million to Nokia to settle a payment dispute and the Canadian company said it would pursue a separate patent infringement case against the Finnish firm.

Flynn pleads guilty, is cooperating in Trump-Russia probe (Associated Press)  Michael Flynn, the retired general who vigorously campaigned at Donald Trump’s side and then served as his first national security adviser, pleaded guilty Friday to lying to the FBI about reaching out to the Russians on Trump’s behalf and said members of the president’s inner circle were intimately involved with — and at times directing — his contacts.

Overnight markets

Overview: US 10yr note futures are down -0.201% at 124-06, S&P 500 futures are up 0.52% at 2657.75, Crude oil futures are down -0.93% at $57.82, Gold futures are down -0.4% at $1277.2, DXY is up 0.23% at 93.101, CAD/USD is down -0.15% at 0.7895.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.541% 2 Year 1.794%
5 Year 1.717% 5 Year 2.143%
10 Year 1.942% 10 Year 2.39%
30 Year 2.235% 30 Year 2.789%

 US Economic Data

10:00 AM Factory Orders, Oct est -0.4% (-1.4% prior)
  Factory Orders Ex Trans, Oct (0.7% prior)
  Durable Goods Orders, Oct est -1.0% (-1.2% prior)
  Durables Ex Transportation, Oct (0.4% prior)
  Cap Goods Orders Nondef Ex Air, Oct (-0.5% prior)
  Cap Goods Ship Nondef Ex Air, Oct (0.4% prior)

Canadian Economic Data

10:00 AM Bloomberg Nanos Confidence, Dec 1st (58.7 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