Market Update
US tsys moving lower & flatter inearly NA trade after Yellen said rate hike is appropriate ‘relatively soon’ in text speech before JEC later this morning. Cash US 10Y now above 2.25% after CPI & jobless claims which fell 19k to 235k the lwoest in 40 yrs. In Asia Tsys traded higher as the BOJ said it was read to buy an unlimited amount of bonds to achieve its yield curve goals, stem the latest rapid increase in yields. Tsys pressured in Europe on supply from Spain, gilts hammered on better than exp UK retail sales. GOCs lower curve steeper out to 10yrs yet longs well bid 10s30s unch at 62bps vs US tsy curve ~3bps steeper. Provi spreads closed ~2bps better despite CMB & QC 10Y supply – the latter saw strong demand. In corps we traded more of the new MRCCN 20s as well as new SAPCn 23s – both look like good value.
News headlines
Treasuries Pare Gains as Dollar Weakens Before Yellen; Oil Rises (Bloomberg) Bonds pared gains as oil advanced and investors awaited testimony from Federal Reserve Chair Janet Yellen that may help shape the outlook for interest rates. Government securities in Europe and the U.S. rose earlier and Japanese bonds halted a five-day selloff after the Bank of Japan offered to buy an unlimited amount of debt at fixed yields. Bloomberg’s dollar index slipped from a nine-month high. Crude reversed declines as OPEC and Russia prepared to meet in Doha for more talks. European shares were little changed, and Asian equities rose with Japan’s Topix measure closing on the brink of a bull market.
BOJ Fires Warning at Bond Market With Unlimited Buying Plan (Bloomberg) The Bank of Japan fired a warning shot at the government bond market Thursday, announcing its first offer to buy an unlimited amount of securities to maintain its yield-curve target.
ECB minutes firmly point to Dec for decision over asset buys (Reuters) European Central Bank rate setters meeting last month agreed on the need to maintain unprecedented monetary stimulus and to decide in December whether to extend the ECB’s 1.74 trillion euro asset buys, minutes of the meeting showed on Thursday. Core inflation still lacks a convincing upward trend and wage growth has been unexpectedly subdued, but the euro zone economy is developing along the path seen earlier so it was premature to make a call either way, minutes of the Oct 20 meeting showed, repeating policymakers widely discussed view.
Oil prices rise on Saudi optimism over OPEC deal (Reuters) Oil prices rose on Thursday as expectations of an OPEC deal to limit production outweighed growing evidence of global oversupply and rising inventories, particularly in the United States. Saudi Energy Minister Khalid al-Falih said on Thursday he was optimistic OPEC would formalize a preliminary oil output deal reached in Algeria in September.
German finance minister sees no room for euro zone fiscal stimulus (Reuters) The German Finance Ministry on Thursday rejected a call by the European Union’s executive for governments in the 19-country euro zone to spur growth and jobs by loosening overall budget policy next year. The European Commission on Wednesday effectively urged Berlin to spend more, moving further away from its mantra of austerity.
Suncor sees higher production, lower spending in 2017 (TheGlobeAndMail) Suncor Energy Inc , Canada’s largest oil and gas company, said it expected production to rise by more than 13 per cent next year and spending to fall by more than $1-billion. Oil producers continue to keep a tight lid on spending to cope with a 60 per cent fall in oil prices since mid-2014.
Overnight markets
Overview: US 10yr note futures are down -0.1112% at 126-11, S&P 500 futures are up 0.06% at 2174, Crude oil futures are up 1.23% at $46.13, Gold futures are down -0.08% at $1222.9, DXY is up 0.07% at 100.48, CAD/USD is down -0.08% at 0.7443.
US Economic Data
| 8:30 AM | Housing Starts, Oct, 1323k, est. 1156k (prior 1047k, revised 1054k) |
| Housing Starts, m/m, Oct, 25.5%, est. 10.4% (prior -9.0%, revised) | |
| Building Permits, Oct, 1229k, est. 1193k (prior 1225k) | |
| Building Permits, m/m, Oct, 0.3%, est. -2.7% (prior 6.3%) | |
| CPI, m/m, Oct, 0.4%, est. 0.4% (prior 0.3%) | |
| CPI Ex Food and Energy, m/m, Oct, 0.1%, est. 0.2% (prior 0.1%) | |
| CPI, y/y, Oct, 1.6%, est. 1.6% (prior 1.5%) | |
| CPI Ex Food and Energy, y/y, Oct, 2.1%, est. 2.2% (prior 2.2%) | |
| Initial Jobless Claims, Nov 12th, 235k, est. 257k (prior 254k) | |
| Continuing Claims, Nov 5th, 1977k, est. 2030k (prior 2041k, revised 2043k) | |
| Philadelphia Fed Index, Nov, 7.6, est. 7.8 (prior 9.7) |
Canadian Economic Data
| 8:30 AM | Int’l Securities Transactions, Sep, 11.77b, (prior 12.74b, revised 12.75b) |
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