Market Update
US tsys mixed, curve flatter, 10Y 2.81%(-0.5bps), avg volume in TY futures (330k), FOMC and Powell press conf key event this aft. Core EGBs higher, gilts 1bp lower after UK inflation slowed to 2.3% in Nov as exp. GOCs slightly higher before Nov CPI (-0.4% exp), 10Y 2.0%, a one-year low. BOC Poloz, in an interview with the CTV, said the pace of rate hikes could be interrupted due to trade and lower crude prices while the housing market continues to look soft in the face of rising household debt levels. Odds of a rate hike in January have fallen to ~4.0% over the past week. The BOC auctions $2.0bln of reopened 0.5% March 2022s tommorrow with the March 22/Nov 20 (2Y) 3.5/3.4
News headlines
Third Canadian Citizen Detained in China, Report Says (Bloomberg) Canada’s foreign service confirmed that a third national was being held in China, the National Post newspaper reported, citing a statement from Global Affairs Canada. An agency spokesperson provided no further details, and drew no link between the case and those of two other Canadians detained last week in China, the National Post said. The Canadian Embassy in Beijing referred questions of the third case to public relations staff in Ottawa, who didn’t immediately respond to a request for comment on Wednesday.
Italy Banks Get Some Relief as EU Budget Deal Lifts Shares (Bloomberg) Italian banks, the most exposed to their own country’s debt in Europe, finally caught a break as a budget agreement that averted European sanctions against Italy boosted both shares and bonds. The accord over Italy’s 2019 spending plans sparked a sovereign bond rally that may improve the balance sheets of the lenders. The European Commission decided against recommending a disciplinary procedure after the country’s populist government promised to rein in its spending, officials said on Wednesday.
China and U.S. Talk on Trade Ahead of January Negotiations (Bloomberg) China and the U.S. held vice-ministerial level talks on Wednesday to discuss the ongoing trade dispute as they move closer to meeting in January. The two sides spoke by phone according to China’s Ministry of Commerce, and have held several rounds of talks in recent weeks, Treasury Secretary Steven Mnuchin told Bloomberg on Tuesday in Washington. They plan to hold a formal, face-to-face meeting in January to negotiate a broader truce in their trade wars but are unlikely to meet in person before then, Mnuchin said.
Stocks Rise Before Fed Decision; Treasuries Steady: Markets Wrap (Bloomberg) Stocks climbed and most sovereign bonds held steady as investors awaited Wednesday’s Federal Reserve policy decision. Oil’s selloff continued to reverberate around markets. The Stoxx Europe 600 Index advanced after four days of declines, with carmakers rising on hopes of a breakthrough on trade. Futures on the S&P 500 Index erased losses made in late trading on Tuesday after earnings from FedEx. Asian shares were mixed following a disappointing market debut for SoftBank Group’s Japanese telecom business. Crude oil held on to most losses after the biggest three-day slump since 2016.
Canada gives struggling oil sector C$1.6 billion boost (Reuters) The Canadian government said on Tuesday that it would spend C$1.6 billion ($1.19 billion), mostly through loans, to assist the country’s oil and gas industry, which has struggled to move energy to U.S. markets due to full pipelines. Natural Resources Minister Amarjeet Sohi said in Edmonton, Alberta, that the aid package would include C$1 billion for energy exporters to invest in new technologies, boost working capital or find new markets.
Facebook says preferential data access was with user permission (Reuters) Facebook Inc (FB.O) said it did not give some companies access to people’s data without their permission, after the New York Times reported on Tuesday that the social network allowed some large technology companies greater access to user data. The paper reported that Facebook allowed Microsoft’s Bing search engine to see the names of virtually all Facebook users’ friends without their consent, citing documents from 2017.
Hostile Husky takeover bid for MEG Energy now expected to succeed as proposed (BNN) A CIBC oil and gas analyst says the recent deterioration in crude oil prices makes it unlikely that a better offer will emerge to force Husky Energy Inc. to sweeten its hostile takeover bid for an oilsands rival. Husky reported Tuesday that it had received all necessary regulatory approvals for the takeover of MEG Energy Corp. and is now waiting for shareholders’ response to its offer which expires in mid-January.
Overnight markets
Overview: US 10yr note futures are up 0.052% at 120-30, S&P 500 futures are up 0.65% at 2554.5, Crude oil futures are up 0.3% at $46.38, Gold futures are down -0.17% at $1251.5, DXY is down -0.29% at 96.823, CAD/USD is down -0.17% at 0.7438.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.919% | 2 Year | 2.65% |
| 5 Year | 1.927% | 5 Year | 2.649% |
| 10 Year | 2.007% | 10 Year | 2.816% |
| 30 Year | 2.176% | 30 Year | 3.067% |
US Economic Data
| 7:00 AM | MBA Mortgage Applications, Dec 14th -5.8% (1.6% prior) |
| 8:30 AM | Current Account Balance, 3Q est -125.0b (-101.5b prior) |
| 10:00 AM | Existing Home Sales, Nov est 5.20m (5.22m prior) |
| Existing Home Sales MoM, Nov est -0.4% (1.4% prior) | |
| 14:00 PM | FOMC Rate Decision (Upper Bound), Dec 19th est 2.50% (2.25% prior) |
| FOMC Rate Decision (Lower Bound), Dec 19th est 2.25% (2.00% prior) |
Canadian Economic Data
| 8:30 AM | CPI NSA MoM, Nov est -0.4% (0.3% prior) |
| CPI YoY, Nov est 1.8% (2.4% prior) | |
| Consumer Price Index, Nov est 134.0 (134.1 prior) | |
| CPI Core- Common YoY%, Nov est 1.9% (1.9% prior) | |
| CPI Core- Median YoY%, Nov (2.0% prior) | |
| CPI Core- Trim YoY%, Nov (2.1% 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
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230