Market Update
US tsys higher, yields 2-3bps lower with the 10Y 2.57% (-3bps) and the curve ~3bps flatter. Similar story in Canada, GOC yields lower, 10Y 1.796 (-3.5bps). Tsys well bid thru the Asia, supported by JGBs where 30Y yields fell another 7bps (13bps this week) as the BOJ fine tunes its yield curve control strategy to reflect the upward pressure in global yields. Core euro bonds sharply higher, l.t. bund yields 10bps lower @ 1.035%, bund futures hit daily highs earlier on news of deteriorating liquidity at Monte Paschi. GOCs & tsys paring earlier gains despite weak US Housing Starts. The belly of the GOC curve taking the brunt of the weakness for a second day, 2/5/10 surging past the highs of August. Flows yest included CB selling as WTI fell back to ~$50. Provi spds well bid all week, yest no exception, spds closing 1-5bps tighter.
News headlines
Dollar Hits Speed Bump in Fed-Driven Rally; Bonds Stem Declines (Bloomberg) The dollar’s advance stalled as the dust settled on a new financial-market landscape created by the Federal Reserve’s shift to a tighter policy path in 2017. The greenback fell against the euro after touching the highest since 2003 on Thursday while stocks rose. Treasuries stemmed six days of declines underpinned by the Fed’s more hawkish outlook for interest-rate increases next year. Gold trimmed its sixth weekly drop, and copper fell.
Oil rises on signs of producers’ compliance with output cuts (Reuters) Oil rose on Friday, edging closer to new 17-month highs as producers showed signs of adhering to a global deal to reduce output. Brent crude futures were trading at $54.55 per barrel at 1225 GMT, up 53 cents on the previous day’s close. U.S. West Texas Intermediate (WTI) crude was up 33 cents at $51.23 per barrel.
Poloz sticks to script after Fed hikes rates (GlobeandMail) Bank of Canada Governor Stephen Poloz suggested that rising U.S. and global bond-market interest rates are leaning against the Canadian central bank’s stimulative low-rate policies, in the bank’s latest signal that it has no intention to follow the U.S. Federal Reserve’s lead in raising its official rate.
Battered euro and yen recover after dollar surge (Reuters) The euro, yen and pound all recovered some ground against the dollar on Friday after slides of 3 percent or more in reaction to the Federal Reserve’s steer on U.S. interest rates next year. Before the Fed meeting on Wednesday, markets had seen little chance of another surge in the dollar before the end of the year.
Paschi Gets Approval to Extend Bond Swap Offer to Dec. 21 (Bloomberg) Banca Monte dei Paschi di Siena SpA received regulatory approval to extend and expand a debt-for-equity swap in a last-ditch effort to raise 5 billion euros ($5.2 billion) privately and avoid a state rescue. The exchange offer will involve about 4.5 billion euros of Tier 1 and Tier 2 securities and will start Friday and run until 2 p.m. on Dec. 21, the Siena-based bank said in a statement. Monte Paschi, which faces a Dec. 31 deadline to complete the fundraising, will also promote a swap on 1 billion euros of hybrid securities issued in 2008 known as FRESH at 23.2 percent of face value, the lender said in a filing on its website.
Statoil’s exit is the starkest sign yet Canada’s oilsands resource has lost its lustre (Financial Post) Not long ago, Norway’s Statoil ASA was going to build a $10 billion oilsands project in Alberta, put its reputation on the line to defend the deposits in its home country against a smear campaign led by Greenpeace, and even contemplated a massive upgrader near Edmonton. It all came to a halt late Wednesday when Statoil sold out of the oilsands altogether at a loss, leaving it with no operated assets in Western Canada.
Bombardier says its worst days are behind it, as executives make their pitch to investors (Financial Post) Bombardier Inc. will burn through less cash and earn higher margins, profit and revenue in 2017, a sign that the company’s worst days are behind it, company executives told investors Thursday in New York. Bombardier is one year into a five-year turnaround plan initiated by chief executive Alain Bellemare, who was appointed in early 2015 at the depths of the company’s crisis. Bombardier was struggling to bring the CSeries jetliner, its biggest aircraft ever, to market amid delays and cost overruns, while also pouring resources into several other big programs as revenues shrank and losses widened.
Overnight markets
Overview: US 10yr note futures are up 0.0254% at 122-31, S&P 500 futures are up 0.19% at 2262.75, Crude oil futures are up 0.77% at $51.29, Gold futures are up 0.45% at $1134.9, DXY is down -0.05% at 102.97, CAD/USD is up 0.2% at 0.7484.
US Economic Data
| 8:30 AM | Housing Starts, Nov, 1090k, est. 1230k (prior 1323k, revised 1340k) |
| Housing Starts, m/m, Nov, -18.7%, est. -7.0% (prior 25.5%, revised 27.4%) | |
| Building Permits, Nov, 1201k, est. 1240k (prior 1229k, revised 1260k) | |
| Building Permits, m/m, Nov, -4.7%, est. -1.6% (prior 0.3%, revised 2.9%) |
Canadian Economic Data
| 8:30 AM | Int’l Securities Transactions, Oct, 15.75b, (prior 11.77b, revised 11.79b) |
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