Market Update

Tsys slightly lower on very light flows o/n (211k TY), 10Y 2.355%. Tsys lagging the rally in EGBs, led again by UK gilts with the gilt curve another 2bps flatter, UK 5/30 near the lows since Aug 2016, 10Y @ 1.15 the lowest since Sep 13th. Progress on Brexit negotiations. In Canada, GOCs  0.5bps wider vs tsys, curve another 1bp flatter on top of the 3bps in the wake of Poloz somewhat hawkish comments yest afternoon, specifically that ‘caution isn’t code for being on hold’, thou the curve did resteepen late in the day after Poloz added that he would allow the economy to ‘run hotter’ for a bit. In credit, Smart Reit (BBB) priced a two tranche deal yest to finance its $1.1bln acquisition of OneReit – $250mln 3Y FRN @ CDOR + 66, $250mln 10Y @ 197, both tranches broke tighter. 

News headlines 

Here’s Where the GOP Tax Plan Stands Right Now (Bloomberg) Congressional Republicans are scheduled to reveal final details of their agreed-upon tax-overhaul legislation Friday. It’s the culmination of a six-week legislative sprint designed to deliver a major policy victory for their party and President Donald Trump before year’s end.

The Biggest Voices in Oil Disagree About 2018 (Bloomberg) The two most critical forecasts of global oil markets offer contrasting visions for 2018: one in which OPEC finally succeeds in clearing a supply glut, and another where that goal remains elusive.

Brexit Bulletin: Divide But Not Conquer (Bloomberg) The European Union’s united front on Brexit is set to splinter as negotiations move on to trade. That’s not necessarily a good thing for Britain. The EU’s 27 remaining countries surprised themselves by defying years of talking at cross purposes to hold a common line on the U.K.’s withdrawal. But with leaders in Brussels set to formally agree on Friday that May has offered enough on the divorce settlement for talks to move on, there are already signs the unity has hit its high-water mark. Diplomats, and leaders, have warned the next stage could be messier.

European Stocks Drop as Bonds Gain; Dollar Steady: Markets Wrap (Bloomberg) Stocks in Europe dropped and bonds gained as investors assessed messages from the Federal Reserve and European Central Bank meetings this week, while concerns about the U.S. tax overhaul lingered.

Russia Surprises With Bigger Rate Cut on Oil Deal, Inflation (Bloomberg) Russia’s central bank unexpectedly accelerated its pace of monetary easing after price growth fell to a record and a deal between OPEC and its allies to maintain oil production cuts until the end of 2018.

Some Canada firms could move to U.S. amid NAFTA worries: survey (Reuters) More a quarter of Canadian firms could move part of their operations to the United States amid uncertainty over the future of the NAFTA trade pact, the nation’s export credit agency said on Friday.

TSX futures point to flat opening (Reuters) December futures on the S&P TSX index SXFc1 were down 0.04 percent at 7:15 a.m. ET. Manufacturing sales data is due at 8:30 a.m. ET ECONCA.

Overnight markets

Overview: US 10yr note futures are down -0.1% at 124-14, S&P 500 futures are up 0.35% at 2665.25, Crude oil futures are up 0.23% at $57.17, Gold futures are up 0.43% at $1262.5, DXY is up 0.07% at 93.551, CAD/USD is down -0.28% at 0.7836. 

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.565% 2 Year 1.824%
5 Year 1.701% 5 Year 2.149%
10 Year 1.861% 10 Year 2.357%
30 Year 2.15% 30 Year 2.704%

US Economic Data

8:30 AM Empire Manufacturing, Dec 18.0 est 18.7 (19.4 prior)
9:15 AM Industrial Production MoM, Nov est 0.3% (0.9% prior)
  Capacity Utilization, Nov est 77.2 (77.0 prior)
  Manufacturing (SIC) Production, Nov est 0.3% (1.3% prior)
16:00 PM Total Net TIC Flows, Oct (-51.3b prior)
  Net Long-term TIC Flows, Oct (80.9b prior)

Canadian Economic Data

8:30 AM Manufacturing Sales MoM, Oct -0.4% est 1.0% (0.5% 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