cti2015header-morning comments web

Market update

US tsys opening slightly lower, curve 1bp flatter after initial claims came in higher than exp, 10Y 2.215. Core Euro bonds higher on lower stocks, except Glencore which rose 10% on debt reduction plans.  Nikkei down for a 3rd day as exports hurt by surge in Yen to one month highs.  BOE left rates unch pointing to low inflation, while huge gain in Aussie employment weighed on front end of Aussie curve. Tsys traded in narrow range o/n before this aft $13bln 30Y auction – which should benefit from latest steepening in US 10/30 curve & renewed weakness in oil prices. In Canada GOCs are higher led by 10s, with notably steeper 10/30 –trading ~4bps wider @ 75.5 with 5/10 1.5bps flatter this week. Two year auction yest was big success after Poloz mention of negative rates – two yr roll is now -0.2bps from 1.5 last week a huge move in the context of 2s/5s only ~3bps flatter. Provis unch , Ont 46s 108/107, QC 48s 113.5/113, QC/Ont 25 4.3 unch. Supply still expected this week before xmas break. CHT 5Y expected tp be announced today.

News headlines

  • Bank of England keeps interest rates unchanged (The Guardian) The Bank of England has kept interest rates on hold this month amid expectations that inflation will remain low after another sharp fall in the oil price and a levelling off in wage growth. Minutes from the Bank’s policy-setting meeting showed the MPC thought little had changed in terms of domestic demand or international activity since its last decision was published in November along with economic forecasts
  • Swiss National Bank Keeps Record-Low Rate, Says Franc Overvalued (Bloomberg) The Swiss National Bank left interest rates at a record low and maintained its pledge to intervene if needed to push back against pressure on the “significantly overvalued” franc. Announcing its decision on Thursday, the SNB said its measures continue to help weaken the currency, which has been a weight on the economy, holding back growth and pushing down consumer prices. It maintained the rate on sight deposits at minus 0.75 percent, as forecast by 15 of 19 economists in a Bloomberg survey, and kept its target range for three-month Libor unchanged.
  • Bank of Korea holds rates in December, as expected (The Globe and Mail) South Korea’s central bank held its policy interest rate steady at a record low for a sixth straight month on Thursday, as expected, just a few days before the U.S. Federal Reserve decides whether to implement a much-anticipated policy tightening.
  • Strong jobs data boost Australian dollar (FT) A second successive strong jobs report gave the Australian dollar a boost on Thursday and pushed back the prospect of a rate cut, allaying fears about the economy but exerting pressure on the country’s main stock index. The currency rose by as much as 1.5 per cent to $0.7333 after the data. Against the New Zealand dollar, the Aussie rose 0.6 per cent to NZ$1.0820.
  • Rand falls after Jacob Zuma sacks South Africa finance minister (FT) South Africa’s President Jacob Zuma dismissed his finance minister late on Wednesday, in a move that is expected to exacerbate the country’s economic woes and which sent the rand plummeting to new lows. In a brief statement that shed little light on the decision, Mr Zuma, whose six years in office have been characterised by scandals and controversies, said Nhlanhla Nene had been removed from his post “ahead of his deployment to another strategic position”.
  • Glencore shares jump on faster debt cutting plans (BBC) Mining giant Glencore’s shares jumped nearly 10% on news it has increased its debt reduction target and cut spending plans in the face of a highly uncertain outlook for commodity prices. Its debt reduction target is now $13bn from the previous target of $10.2bn. As a result, Glencore aims to cut its total debts to $18bn-$19bn (£11.8bn-£12.5bn) by the end of 2016, down from a target of “low $20s billion”.
  • Yahoo’s Course Is Less Certain (WSJ) Yahoo Inc. on Wednesday signaled that its Internet business is up for sale, dealing a blow to Chief Executive Marissa Mayer and setting the stage for what may be the final act of a Web pioneer that failed to reinvent itself in the smartphone age. The company said it would shelve its yearlong plan to spin off its stake in Alibaba Group Holding Ltd. into a holding company because investors feared tax regulators could challenge the spinoff and hit the company with a multibillion-dollar bill.

Overnight markets

  • Overview: IG24 5Y 82.529/83.278 (+0.459), US 10yr note futures are flat at 126-21+, S&P 500 futures are up +0.22% at 2038.25, Crude oil futures are down -1.02% at 36.78$, Gold futures are down -0.37% at $1072.5, DXY is up +0.40% at 97.736.

US Economic Data

  • Initial jobless claims came in at 282K  for the week ending December 5th, higher than expectations (270K) and higher than prior week (269K).
  • Continuing claims increased to 2243K from 2161K and was higher than expected (2155K).
  • Import price index came in at -0.4% MoM (-9.4% YoY) in November versus October -0.3% MoM (-10.7% YoY).
  • Monthly budget statement is forecast at -$66.0B in November versus -$136.52B in October.

Canadian Economic Data

  • Capacity utilization came in at 82.0% in 3Q 2015, higher than previous quarter (81.4%) and equal to expectations.
  • New housing price index increased 0.3% MoM (+1.5% YoY) in October compared to September 0.1% MoM (1.3% YoY).


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
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