cti2015header-morning comments web

Market Update

US tsys trading lower, yields 1.6 – 2.3 higher across the curve, US 10Y 2.388 (+2.4bps), curve 0.5bps steeper after US small business optimism, as measured by the NFIB index, rose to a 12-year high in Dec to 105.8. Tsys pressured in Europe after unch Asia session despite China factory prices rising to a five year high in Dec. France IP surged 2.2% vs 0.6% exp , the UK FTSE  for 9th straight day to record high. The CITI Eurozone eco surprise index has surged to a three year high, and coupled with renewed inflation concerns (the EUR 5Y5Y infl swap pushing above 1.75%) and EGB supply (Netherlands & Austria longs) raises odds of a retracement in 10Y bund yields back above 0.40% from ~0.28% currently.  GOCs lower, CGBs moving lower in lockstep with tsys in recent trade. Provis opening unch with supply expected to materialize as generic spreads are at one year tights,  new Ont 10Y 2027 rumoured. Algonquin Power (BBB/BBBL) in road show – no deal imminent , next maturity is 2018 thou the company has been in acquisition mode. Honda Finance (A1/AH) in the mkt with a 3.25Y FRN & $400 mln 5.5Y fixed (July 2022) @ ~ 105bps, which looks 2-3bps cheap based on Dec 21s at 95 OTC.

News headlines 

Stocks and dollar fall; sterling reels from Brexit pain (Reuters) Risky assets hit the skids on Tuesday, with stocks and sterling tumbling over political uncertainty over Britain’s future ties with the European Union and the policies of the incoming U.S. president, Donald Trump. European stock markets opened broadly lower , with the exception of Britain’s blue-chip FTSE stock index .FTSE, which hit a fresh record high on the back of sterling’s fall to multi-week lows — seen as beneficial to exporters.

Oil prices steady after recent falls on weaker dollar (Reuters) Oil prices stabilized on Tuesday after a sharp sell-off as a fall in the dollar triggered a bout of short-covering, but analysts said the market remained vulnerable to further falls. Rising oil prices through December encouraged investors to buy large volumes of crude oil futures contracts and many of these « long » positions are likely to be unwound unless the market stays strong, analysts and brokers say.

China consumer inflation slows down in December (Market Watch) China’s consumer inflation slowed in December, losing speed for the first time in four months, but producer inflation quickened at a pace much faster than economists expected, official data showed Tuesday. China’s consumer price index increased 2.1% in December from a year earlier, rising at slower pace than a 2.3% year-over-year gain in November, the National Bureau of Statistics said, adding that a higher base for comparison from the year-earlier period was the main factor weighing on the headline figure.

Carney Faces Lawmakers as Brexit Battles Sweep Into New Year (Bloomberg) Mark Carney is starting 2017 exactly where he left off: in front of his fiercest critics. In parliament’s first week back from recess, lawmakers have the chance to haul the Bank of England governor over the coals again. He faces the Treasury Committee on Wednesday after multiple fiery exchanges last year in which he was grilled on the Brexit vote, record-low interest rates, central bank independence and even his own tenure.

Valeant to sell assets for $2.12 billion to ease debt load (Reuters) Valeant Pharmaceuticals International (VRX.TO) is selling its Dendreon cancer business and three skincare brands for about $2.12 billion as the troubled Canadian drugmaker looks to pay down its more than $30 billion debt. Valeant’s U.S.-listed shares rose 15 percent to $17.65 in premarket trading on Tuesday.

Refiners shun new Canadian crude blend offer from Enbridge line (Reuters) Enbridge Inc has approved a new stream of heavy Canadian crude for export on one of its major oil pipelines to the United States, according to four trading sources. The only problem? No one wants it. Canada produces more heavy than light crude because of its vast oil sands projects in northern Alberta. Space on the Enbridge system for heavy barrels is in short supply, with congestion set to worsen as oil sands production grows.

Overnight markets 

Overview: US 10yr note futures are down -0.0501% at 124-23, S&P 500 futures are down -0.03% at 2264.25, Crude oil futures are down -0.08% at $51.92, Gold futures are down -0.18% at $1182.8, DXY is up 0.1% at 102.03, CAD/USD is up 0.04% at 0.7564.

US Economic Data 

6:00 AM NFIB Small Business Optimism, Dec, 105.8, est. 99.5 (prior 98.4)
10:00 AM Wholesale Inventories, m/m, Nov F, est. 0.9% (prior 0.9%)
  Wholesale Trade Sales, m/m, Nov, est. 0.5% (prior 1.4%)
JOLTS Job Openings, Nov, est. 5500 (prior 5534)

Canadian Economic Data

8:15 AM Housing Starts, Dec, 190k (prior 184k)
8:30 AM Building Permits, m/m, Nov, est. -6.0% (prior 8.7%)


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, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230