Market Update
US tsys opening NY trading weaker, curve steeper with the 10Y note 2.44 (+3.4bps) . Nothing on the calendar today, mkt awaits Yellen semi-annual testimony tomorrow, PPI & CPI as well. JGBs lower, Japan Q4 GDP rose for the fourth straight quarter @ 1.0% ann., less than forecast (1.1%). UK gilts, bunds weaker, peripheral spreads doing better. GOCs weaker, unch vs tsys for the most part . UK gilts, German bunds weaker, peripheral spreads doing better, also EGB supply from Austria & Italy weighing. Bloomberg highlighted Japan selling of treasuries in an article on Sunday, saying holdings declined by the most in four years in Dec. The latest CFTC COT report showed large specs covering shorts in 5s& 10s in the week ended last Tuesday , which covered Jan payrolls which showed the smallest increase in AHE since last August.
News headlines
Global Stocks Keep Climbing as Treasuries Decline: Markets Wrap (Bloomberg) Rumors of the reflation trade’s demise seem to have been at least a little exaggerated, as investors shifted to equities from bonds. Global stocks continued a rally before data this week provides detail on the strength of U.S. consumer prices, and ahead of speeches from a range of Federal Reserve officials. Treasuries fell after data showed America’s biggest creditors ditching holdings. Iron ore surged and copper climbed, buoying commodity producers.
Oil falls on rise in U.S. drilling, selling ahead of OPEC report (Reuters) Oil prices fell nearly one percent on Monday in response to growing evidence that U.S. production is rising and as some investors unwound positions ahead of OPEC’s first report on compliance with its deal to cut production. Global benchmark Brent crude futures were down 45 cents at $56.25 a barrel at 0947 GMT and touched a session low of $56.04 a barrel. West Texas Intermediate (WTI) crude futures were down 41 cents at $53.45 a barrel and traded as low as $53.86 earlier in the day.
Saudi Arabia Tells OPEC It Cut Oil Output by Most in 8 Years (Bloomberg) Saudi Arabia told OPEC that it cut oil production by the most in more than eight years, going beyond its obligations under a deal to balance world markets. The kingdom reported that it reduced output by 717,600 barrels a day last month to 9.748 million a day, according to a monthly report from the Organization of Petroleum Exporting Countries. The group’s own analysts, who compile data from external sources, estimated that Saudi Arabia made a smaller 496,000 barrel-a-day cut — in line with last year’s supply agreement.
Dollar hits two-week high after U.S.-Japan meeting (Reuters) The dollar hit a two-week high against the yen on Monday as investors focused again on the U.S. reflation trade which dominated the aftermath of Donald Trump’s election in November but has stalled this year. All eyes are fixed on testimony by Federal Reserve chief Janet Yellen this week after signs that other policymakers at the U.S. central bank are leaning towards more hikes in interest rates this year than the two currently priced in by markets.
Trudeau visits U.S. with two aims: Push trade, avoid Trump’s ire (Reuters) When Canadian Prime Minister Justin Trudeau visits U.S. President Donald Trump on Monday, he will look to nurture economic ties while avoiding tensions over issues such as immigration on which the two are sharply at odds. Trudeau has taken a low-key approach toward Trump, a Republican who campaigned on a pledge to toughen U.S. immigration policies and renegotiate the North American Free Trade Agreement among Canada, the United States and Mexico.
Japan’s economy slows in Q4 on flat spending (Market Watch) Japan’s economy slowed again in the final quarter of 2016 as feeble spending by consumers took the shine off a pickup in exports and business investment, leaving growth lagging behind the pace targeted by Prime Minister Shinzo Abe’s administration. Japan’s real gross domestic product grew 1.0% on an annualized basis in the three months through December for the fourth consecutive quarter of expansion, the longest stretch of gains since 2013, according to Cabinet Office data released Monday. The expansion was slightly smaller than a forecast for 1.1% growth by economists surveyed by The Wall Street Journal.
Overnight markets
Overview: US 10yr note futures are down -0.2129% at 124-17, S&P 500 futures are up 0.19% at 2317.25, Crude oil futures are down -0.74% at $53.46, Gold futures are down -0.7% at $1227.3, DXY is up 0.05% at 100.85, CAD/USD is up 0.16% at 0.7631.
US Economic Data
There is no major economic data release for today.
Canadian Economic Data
There is no major economic data release for 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, David Leclair-Legault
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230