Market Update
US tsys lower, off the lows of the wide overnight range after weaker than exp PPI (0.0% vs 0.3%, core -0.2% vs 0.2%), TY futures heavy volume 646k. US 10Y 2.273%, Fed fund futures now pricing in 96% odds of a rate hike in Dec, with the USD index at new highs, Euro/Yen at new lows. Core European bonds lower, 10Y gilts lower on better than exp UK unemployment rate (4.8% vs 4.9%). JGB 10Y yield reached 0.015%, March highs after poor results in BOJ purchase operation. David Malpass, senior Trump advisor, urged the Fed to downsize its balance sheet saying the Fed purchases have been ‘very harmful’. CMB 10Y & 5Y FRN this morning with the 10Y fixed ~58.5 well placed. Provis 0.5bps weaker yesterday despite 3bp rally in IG, and are opening with a softer tone on expectations of supply.
News headlines
Government Bonds Fall Worldwide on Trump-Fed Nexus; Oil Declines (Bloomberg) Government bonds tumbled around the world and the dollar rose on speculation that the economic outlook is sufficiently strong to allow the Federal Reserve to step up the pace of interest-rate hikes. Metals and crude oil fell.
Oil falls on higher U.S. crude inventories, strong dollar (Reuters) Oil prices shed more than one percent on Wednesday, returning some of the gains made in one of the year’s biggest rallies a day earlier, after weekly U.S. crude stocks rose beyond expectations and a strong dollar weighed on commodities.
Dollar index surges to 14-year high (Reuters) The dollar soared to its highest since April 2003 against a basket of currencies on Wednesday, reaching its strongest in a year against the euro as major banks and investors debated the possibility of another move toward euro-dollar parity.
U.K. Unemployment Lowest in Over a Decade (WSJ) The U.K.’s unemployment rate fell to its lowest level in over a decade in the three months to September, official data showed Wednesday, suggesting the labor market has held up well following Britain’s June decision to leave the European Union.
OPEC pushes for consensus on oil cut, gaps narrowing: sources (Reuters) OPEC officials are working to nail down details of their plan to limit oil supply and gaps over some sticking points are narrowing, OPEC sources said, a sign of progress in finalizing the exporter group’s first such deal since 2008.
Loblaw’s profit jumps (TheGlobeAndMail) Canadian grocery and pharmacy retailer Loblaw Cos Ltd reported a 25.5 per cent rise in quarterly profit, helped by a drop in expenses and improved performances by its financial services and property businesses.
RBC sets new course on mortgage rates (TheGlobeAndMail) Under pricing pressure from spiking bond yields and Ottawa’s housing market crackdown, Royal Bank of Canada is boosting its most important fixed-rate mortgages. RBC is also introducing a new pricing structure, charging different rates for mortgages with amortization periods of 25 years or less and for those with longer maturities — a first for Canada.
Overnight markets
Overview: US 10yr note futures are down -0.1854% at 126-6, S&P 500 futures are down -0.37% at 2171.25, Crude oil futures are down -0.9% at $45.4, Gold futures are up 0.13% at $1226.1, DXY is up 0.02% at 100.25, CAD/USD is up 0.04% at 0.7433.
US Economic Data
| 8:30 AM | PPI Final Demand, m/m, Oct, 0.0%, est. 0.3% (prior 0.3%) |
| 8:30 AM | PPI Final Demand Ex Food and Energy, m/m, Oct, -0.2%, est. 0.2% (prior 0.2%) |
| 9:15 AM | Industrial Production m/m, Oct, est. 0.2% (prior 0.1%) |
| 9:15 AM | Capacity Utilization, Oct, est. 75.5% (prior 75.4%) |
| 10:00 AM | NAHB Housing Market Index, Nov, est. 63 (prior 63) |
| 16:00 AM | Total Net TIC Flows, Sep, (prior 73.8b) |
| 16:00 AM | Net Long-term TIC Flows, Sep, (prior 43.8b) |
Canadian Economic Data
| 8:30 AM | Manufacturing Sales, m/m, Sep, 0.3%, est. 0.1% (prior 0.9%) |
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