Market Update
US tsys trading higher,yields 2-5 bps lower with the long end outperforming in a reversal of post-election steepening. US 10Y 2.21% (-5bps) , 3bps off the lows of 2.18% set in European trading. European fixed income also higher, bund/gilt curves flatter, yet most of the early rally unwound after mixed UK CPI/PPI data. CPI came in weaker than exp for Oct yet PPI input prices were much stronger suggesting pipeline pressures. GOCs higher, lagging the rally in tsys by 1-2 bps out the curve, after spreads finished yest 3-5bps tighter yest with the belly of the GOC curve closing at the most expensive levels vs tsys since mid March, 70bps thru in 5s. Provis closed 2-2.5bps weaker yest despite higher GOC yields with the Ont 46/26 curve 1bp steeper.
News headlines
Bond Selloff Abates as Dollar Halts Trump Rally; Iron Ore Slides (Bloomberg) The fallout from Donald Trump’s election to the U.S. presidency eased off in financial markets with benchmark Treasuries and emerging-market assets rebounding as a dollar rally ended. Iron ore plunged with industrial metals. Treasury 10-year note yields fell from this year’s high and Italy’s bonds led gains in the euro area, outperforming German bunds, which investors tend to favor in times of turmoil.
Oil prices jump 3 percent on hopes of OPEC output cut (Reuters) Oil prices jumped more than 3 percent on Tuesday, bouncing back from multi-month lows on expectations that OPEC will agree later this month to cut production to reduce a supply glut. North Sea Brent crude oil LCOc1 was up $1.50 a barrel at $45.93 by 1200 GMT after hitting a three-month low of $43.57 on Monday. U.S. light crude CLc1 was up $1.50 a barrel at $44.82. It reached a three-month low of $42.20 on Monday.
German economy slows in third quarter (DW) The German economy has picked up only moderately in the third quarter, the statistics office has reported. Private consumption was the main driver of GDP expansion, while exports suffered from a global trade slump. The National Statistic Office, Destatis, reported Tuesday the German economy rose by 0.2 percent in the third quarter compared to the previous three months which economists said was “neither good nor bad.”
U.K. Inflation Unexpectedly Slows as Carney Prepares to Testify (Bloomberg) U.K. inflation unexpectedly slowed in October, driven down by the price of clothing and university tuition fees, but cost pressures built as the falling pound spurred the biggest jump in import prices in five years. Consumer-price growth was 0.9 percent compared with 1 percent in September, the Office for National Statistics said on Tuesday. The rate was forecast by economists to accelerate to 1.1 percent. Prices rose 0.1 percent on the month, the same as a year earlier.
$21 trillion on the table as Trudeau sits down today to woo the world’s most powerful investors (Financial Post) Justin Trudeau and nine members of his cabinet are in Toronto today to meet with some of the world’s most powerful institutional investors with trillions of dollars at their disposal. The prime minister is hoping to persuade some two dozen representatives of large international pools of capital that Canada offers a stable economic and political environment in which to safely invest.
Dodd-Frank easing may herald more lending for banks (Reuters) Deregulation may not mean the death knell of Dodd-Frank, yet it may help lenders do more of what their name implies: lend. That is the message from investors on the first day of the Reuters Global Investment Outlook Summit, despite U.S. President-elect Donald Trump’s pledge to reduce regulations that he believes inhibit banks from profiting.
Overnight markets
Overview: US 10yr note futures are up 0.0123% at 126-22, S&P 500 futures are up 0.24% at 2165.75, Crude oil futures are up 3% at $44.62, Gold futures are up 0.24% at $1224.6, DXY is down -0.16% at 99.95, CAD/USD is down -0.27% at 0.7394.
US Economic Data
| 8:30 AM | Import Price Index, m/m, Oct, est. 0.4% (prior 0.1%) |
| 8:30 AM | Import Price Index, y/y, Oct, est. -0.3% (prior -1.1%) |
| 8:30 AM | Retail Sales Advance, m/m, Oct, est. 0.6 % (prior 0.6%) |
| 8:30 AM | Retail Sales Ex Auto, m/m, Oct, est. 0.3% (prior 0.3%) |
| 8:30 AM | Empire Manufacturing, Nov, est. -2.5 (prior -6.8) |
| 10:00 AM | Business Inventories, Sep, est. 0.2% (prior 0.2%) |
Canadian Economic Data
| 8:30 AM | Teranet/National Bank HPI, m/m, Oct, (prior 11.7%) |
| 9:00 AM | Existing Home Sales, m/m, Oct, (prior 0.8%) |
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