Market Update

Tsys weaker, yields up 1-2 bps with the long end outperforming, 10Y 2.557% (+2bps), equities slightly lower in Europe while S&P futures are +9.75 while the USD index is higher after falling to a three year low yesterday – dovish comments from ECB members Contancio & Nowotny undercut earlier EUR strength above $1.23. GS Q4 earnings beat yet the stock 0.8% lower, FICC revenues fell 50%, overall trading fell 34% vs -22% consensus Core Euro bonds higher, Eurozone inflation in line with expectations, German 30Y bund auction saw solid demand even as the 10s30s bund curve has collapsed over the past week from 85 to 72 a low since last April.  In Canada, GOCs lower, outperforming tsys across the curve . BOC rate decision & MPR at 10:00, a 25bp hike widely expected with OIS pricing in ~80% odds. Citi pricing a three tranche deal today – 5NC4 fixed-floater, 5NC4 FRN and a 21NC20. The 5NC4 fixed guidance @ 87.5 looks ~6bps cheaper to the C 3.39 21 Maple. 

News headlines

House GOP Bid to Avert Shutdown Gains Steam as Deadline Nears (Bloomberg)  House Republicans are coalescing around a plan to try and force the Senate to accept a short-term spending bill this week that doesn’t address immigration issues and other demands from Democrats in order to avoid a government shutdown after Jan. 19.

Bitcoin Adds to Slump That Shook Global Cryptocurrency Market (Bloomberg) Bitcoin slowed its decline on Wednesday in the wake of a 23 percent plunge that rocked the global market for digital assets and sparked deeper questions about its future. The biggest cryptocurrency slid 2.2 percent to $10,487 as of 12:28 p.m. in London, giving up an earlier 10 percent gain and approaching the $10,000 level not seen since December. Its tepid resilience helped buoy other large cryptocurrencies, with ripple and ethereum fluctuating with single-digit gains and losses.

Goldman’s Commodity Revenue Drops 75% to Lowest on Record (Bloomberg) Goldman Sachs Group Inc. suffered the worst annual commodities performance in its history as a public company as a drop of about 75 percent in net revenue in 2017 put it behind long-time rival Morgan Stanley, according to people familiar with the matter.

Stock Gains Ease as Dollar Strengthens; Oil Slips: Markets Wrap (Bloomberg) European stocks struggled for traction following declines for many Asian peers as the earnings season got into full swing. U.S. futures rallied along with the dollar, and gold extended Tuesday’s drop.

Currency Traders Brace for Possible ‘Hawkish Hold’ by Bank of Canada (Bloomberg) Foreign-exchange traders who had all but priced in a Bank of Canada rate hike are suddenly paying up to hedge against the risk of a letdown at Wednesday’s policy meeting.

Stocks pull back from record highs, set for second day of losses in new year (Reuters) World shares pulled back from record highs on Wednesday, set for only their second day of losses in the new year as lower commodity prices and a string of downbeat updates from companies dampened the mood in global markets.

Bank of America profit slumps on $2.9 billion tax charge (Reuters)  The lender’s net income fell to $2.37 billion, or 20 cents per share, for the quarter ended Dec. 31 from $4.54 billion, or 39 cents per share, in the year earlier period.

Overnight markets

Overview: US 10yr note futures are down -0.127% at 122-27, S&P 500 futures are up 0.34% at 2792, Crude oil futures are down -0.11% at $63.66, Gold futures are down -0.08% at $1336, DXY is up 0.41% at 90.763, CAD/USD is up 0.01% at 0.8041.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.777% 2 Year 2.031%
5 Year 1.997% 5 Year 2.372%
10 Year 2.187% 10 Year 2.556%
30 Year 2.352% 30 Year 2.834%

US Economic Data

7:00 AM MBA Mortgage Applications, Jan 12th 4.1% (8.3% prior)
9:15 AM Industrial Production MoM, Dec est 0.5% (0.2% prior)
  Capacity Utilization, Dec est 77.4% (77.1% prior)
  Manufacturing (SIC) Production, Dec est 0.3% (0.2% prior)
10 :00 AM NAHB Housing Market Index, Jan est 72 (74 prior)
14:00 PM U.S. Federal Reserve Releases Beige Book
16:00 PM Total Net TIC Flows, Nov (151.2b prior)
  Net Long-term TIC Flows, Nov (23.2b)

Canadian Economic Data

10:00 AM Bank of Canada Rate Decision, Jan 17th est 1.25% (1.00% 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