Market update
US tsys opening lower, curve steeper, global stocks higher, crude oil up for a 2nd day. US 10Y ~3 bps higher @ 2.24% after in line Nov CPI (0.2%). Core Euro bonds lower, 10Y German bunds 8bps higher @0.65% retracing ~80% of last week’s rally. GOCs also lower, steeper spds unch vs tsys despite weaker than exp Oct Manufacturing Sales. Provi spreads opening unch after widening 1-2bps yest, supply expected if positive tone in credit, oil mkts holds up.
News headlines
- Bond investor anxiety rises ahead of Fed rates decision (FT) Further weakness for corporate debt highlighted deepening anxiety in bond markets on Monday, just two days before the US Federal Reserve is expected to declare a formal end to the era of cheap money.
- Global stocks rise but oil, Fed keep investors nervous (Reuters) Stocks rose in Europe and Asia on Tuesday, though volatile oil prices kept investors cautious before a widely anticipated increase in U.S. interest rates later in the week.
- Mortgage growth expected to slow as Canadian banks assume more risk (FP) It’s going to get more expensive for Canadian banks to do business in the country’s housing market as the government seeks to limit its exposure to surging home prices and the risk of default.
- Junk bond ETFs hit record trading levels (FT) Trading in the biggest junk bond exchange traded funds soared to record levels during the recent market sell-off, intensifying a debate about whether high-yield ETFs contribute to financial stability or put it at risk.
- Sweden holds rates, notes ‘somewhat stronger’ economy (FT) Sweden’s Riksbank has decided to hold its key rate at a super-low minus 0.35 per cent, as expected. In a statement, the central bank said developments in the Swedish economy had been “somewhat stronger than expected” – a cheerful note that has kicked the krona higher.
- German business confidence shows December boost (CNBC) Business confidence in Germany rose in December to hit a four-month high in spite of the economic challenges of the European migrant crisis and slowdown in emerging economies, latest figures from the country’s ZEW institute show.
- UK inflation rate rises to 0.1% in November (BBC) The UK has escaped deflation. Consumer prices in the UK edged up 0.1% year-over-year in November. The positive reading comes after two months of -0.1% YoY prints and is the first to note rising prices in four months. The British pound is up 0.1% at 1.5155.
Overnight markets
- Overview: IG25 5Y 90.330/91.015 (-2.041), US 10yr note futures are down -0.20% at 126-05+, S&P 500 futures are up +0.81% at 2025.75, Crude oil futures are up +0.06% at 36.33$, Gold futures are up +0.02% at $1063.0, DXY is down -0.01% at 97.594.
US Economic Data
- CPI is flat 0.0% MoM (+0.5% YoY) in November (0.0% MoM and 0.4% YoY Expec) versus October 0.2% MoM (0.2% YoY).
- CPI core came in at 0.2% MoM (2.0% YoY) in November (0.2% MoM and 2.0% YoY Expec) compared to previous month 0.2% MoM (1.9% YoY).
- Empire manufacturing increased to -4.59 in December from a reading of -10.74 in November. Analysts had expected the index to rise to -7.0.
- Real avg weekly earnings for November came at 1.6% YoY lower than the revised 2.4% increase in previous month.
- NAHB housing market index is forecast at 63.0 in December higher than 62.0 in November.
- Net long-term TIC flows for October will be release at 16:00.
Canadian Economic Data
- Manufacturing sales decreased -1.1% MoM in October compared to -1.5% for previous month.
- Existing home sales for November will be release at 9:00.
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