cti2015header-morning comments web

Market update

US tsys opening higher, US 10Y 2.245 (-5.0bps) after mixed 8:30 US eco data, rallying overnite with equities as Fed rate hike seen removing uncertainty which had been looming over mkts. Core Euro bonds higher, outperforming tsys in big flattening move as gradual Fed rate hike path and ongoing ECB stimulus provide little reason to be bearish near term. Short covering in early Asian trading by Jap Hedge funds as well as buying in EGBs in London according to MNI. GOCs higher , slightly wider vs tsys in the post Fed rally – the rally in Can/US seemed to stall out yest despite the bullish backdrop for GOCs (diverging mon policy, lower oil…). Provis opening firmer (0.5bps) after closing tighter post FOMC, supply rumoured fom both Ont  & QC –

News headlines

  • Fed rate rise is first step to rebalance US financial system (FT Yellen will need skill and luck to handle present distortions without sparking another crisis. All eyes are focused on the US Federal Reserve. By announcing a 25 basis point rate rise, Janet Yellen, Fed chair, has started weaning the American economy from its addiction to cheap money. Given the recent mixed economic data, economists are divided about the merits of this decision.
  • Traders see next U.S. Fed rate hike in mid-2016 (Reuters) U.S. interest rates futures slipped on Thursday as traders expected the U.S. Federal Reserve would follow up with another rate increase by mid-2016 after ending its near zero rate policy on Wednesday.
  • German Business Confidence Slips as Risks Weigh on Economy (Bloomberg) German business confidence unexpectedly slipped in December in a sign that companies are concerned about the risks facing Europe’s largest economy. The Ifo institute’s business climate index dropped to 108.7 from 109.0 in November. The median estimate in a Bloomberg survey of economists was for an unchanged reading.
  • Norway keeps interest rates on hold at 0.75% (FT) Norway’s Central Bank has decided to keep its main interest rate on hold at 0.75 per cent – in line with economists’ expectations – but further cuts are expected next year. Norges Bank wrongfooted the market in September when it decided to cut its deposit rate by a quarter of a percentage point to a record low of 0.75 per cent against a backdrop of continued weakness in oil prices – Norway’s main export.
  • FedEx Profit Boosted by Online Holiday Shopping (WSJ) FedEx Corp. on Wednesday said that this year’s peak holiday season is its busiest ever, and the pace has been consistent since Cyber Monday. Company executives said that the boom in e-commerce has resulted in a higher than expected number of packages during this holiday season. On Monday, the company picked up more than 26 million packages globally, executives said, and demand has been particularly high in the Northeast.
  • Boeing Wins $10 Billion Plane Order From China Southern Air (Bloomberg) China Southern Airlines Co., Asia’s largest carrier by number of passengers, ordered 110 planes worth about $10 billion from Boeing Co., adding more efficient aircraft to its fleet with China set to become the world’s largest travel market in the next 20 years.
  • AIG Ramps Up Stock Buyback Plan by $3 Billion (WSJ) American International Group Inc., under pressure from activists investors, said Wednesday that it raised its stock buyback authorization by $3 billion. The addition brings the company’s total authorization to $4.3 billion. AIG has bought back about $9.7 billion in shares this year as of Tuesday; its market capitalization is about $75 billion.
  • Oracle’s Profits Fall on Stronger Dollar (WSJ) Oracle Corp.’s cloud business gained momentum in its latest quarter, but currency woes continued a recent pattern of holding down the company’s top and bottom lines. The big software company reported a 12% drop in profits for the second fiscal quarter. Nonetheless, that was better than Oracle’s predictions and Wall Street expectations, while the company’s 6% decline in revenue was in line with analyst estimates. Excluding the effects of a stronger U.S. dollar, Oracle said its net income fell 3% while revenue was flat.


Overnight markets

  • Overview: IG25 5Y 88.770/89.337 (-0.410), US 10yr note futures are up +0.26% at 126-02+, S&P 500 futures are up +0.17% at 2067.25, Crude oil futures are down -0.56% at 35.32$, Gold futures are down -1.25% at $1063.3, DXY is up +1.12% at 98.972.

 US Economic Data

  • Initial jobless claims came in at 271K  for the week ending December 12th, lower than expectations (275K) and prior week (282K).
  • Continuing claims decreased to 2238K from 2245K but was higher than expected (2200K).
  • Philadelphia Fed came in at -5.9 in December below November level of 1.9.
  • 3Q 2015 US current account balance came in at -124.1bn  vs -118.6bn expected and -111.1bn for previous quarter.
  • Leading index is forecast at 0.1% in November lower than October 0.6% increase.

Canadian Economic Data

  • There is no major economic data today.


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