Market update
US tsys opening higher US 10Y 2.20 (-3bps), with only slight pullback after better than expected readings on Nov Retail Sales & PPI. Weakness in crude as prices hit 2008 low, emerging mkt stocks down or 8th day. Core Euro bonds higher led by 10Y UK gilts – comments from ECB Coeure said biggest tisk to inflation is off the table due to QE. GOCs are higher underperforming tsys out the curve by ~1.5bps. Provis not seeing any relief from recent widening despite little supply & lower GOC yields – Ont 46 108.5/107.5 (+0.5bps), Alberta/Ont 46 4/3, QC/Ont 45 5.5/5.0.
News headlines
- Dow Chemical and DuPont Set Merger and Plans to Split (NYTimes) DuPont and Dow Chemical, with more than three centuries of history between them, said on Friday they had agreed to merge, in one of the biggest deals of the year. The combined company, which would be known as DowDuPont, would result from an all-stock merger of equals. Once the two are combined, they plan to split into three separate companies, consisting of agricultural chemicals, specialty products, and materials, like plastics.
- Senate Extends Deadline Again To Prevent Government Shutdown (HuffPost) he Senate decided by a unanimous voice vote Thursday to keep the government open for five more days, preventing a shutdown — for now at least. The Senate will have until the middle of next week to reach an agreement on a year-end omnibus spending and tax extenders package. The House is expected to follow suit on Friday, passing its own continuing resolution to extend the funding deadline — originally set for Dec. 11 — into next week.
- Oil hits new seven-year low on glut warning (BBC) The oil price has fallen to a new seven-year low after the International Energy Agency (IEA) forecast a slowdown in growth in demand for oil. The price of Brent crude oil fell below $39 a barrel at one point, its lowest since December 2008. The IEA said demand in the current quarter was growing by 1.3 million barrels a day, down from 2.2 million barrels in the previous quarter. The IEA predicts that will slip back to 1.2 million barrels a day next year.
- Third Avenue shuts doors on $800m high-yield bond fund (FT) US retail investors are pulling money out of high-yield bond funds at the fastest pace in more than a year, and one mutual fund has barred further redemptions, in the latest intimations of distress in corners of the credit markets.
- As Fed Sets Pace on Rate Increases, Watch Inflation (WSJ) The U.S. Federal Reserve says historically low inflation is transitory. The market begs to differ. Inflation has fallen short of the Fed’s 2% target for more than three years. And while the central bank is all but set to raise interest rates next week, the inflation conundrum should give the Fed pause as it weighs the pace of rate increases in 2016 and perhaps beyond.
- Russian central bank leaves key interest rate on hold (Reuters) Russia’s central bank left its main interest rate on hold at 11 percent on Friday, saying it recognised growing inflation risks and that risks of economic cooling remained. Economists had expected the central bank to leave its one-week minimum auction repo rate unchanged, extending a pause in the monetary easing cycle.
- China’s Credit Rebounds as Stimulus Helps Boost Loan Demand (Bloomberg) China’s broadest measure of new credit rebounded in November, signalling that the economy continues to stabilize as fresh rounds of government easing help to boost demand for loans. Aggregate financing rose to 1.02 trillion yuan ($158 billion) in November, according to a report from the People’s Bank of China on Friday. That compared to the median forecast of 970 billion yuan in a Bloomberg survey.
Overnight markets
- Overview: IG24 5Y 86.089/86.954 (+2.029), US 10yr note futures are up +0.21% at 126-19, S&P 500 futures are down -0.70% at 2026.25, Crude oil futures are down -0.95% at 36.41$, Gold futures are down -0.68% at $1064.7, DXY is down -0.08% at 97.863.
US Economic Data
- Retail sales increased 0.2% MoM in November, below expectations (0.3%), after increasing 0.1% the previous month.
- Retail sales excluding automobiles increased 0.4% in November, compared to consensus of a 0.3% increase, and a revised 0.1% increase in October.
- PPI came in at 0.3% MoM (-1.1% YoY) in November versus October -0.4% MoM (-1.6% YoY).
- PPI core increased 0.3% MoM (+0.5% YoY) in November compared to previous month -0.3% MoM (0.1% YoY).
- Business inventories are forecast to increase 0.1% MoM in October, lower than previous month increase (0.3%).
- University of Michigan confidence (P) is expected at 92.0 in December 0.7 point higher than previous month.
Canadian Economic Data
- There is no major economic data 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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230