cti2015header-morning comments web

Market Update

US tsys higher, yields 3-4bps lower with the 10Y 2.55 (-3.7bps) in thin volumes. Tsys higher in Asia on safe haven after China seized a US underwater drone.  Core Euro bonds also higher thou volume in bund futures ~50% of recent avg., 10Y bund 0.287% (-2.8bps), with little reaction to better than expected German IFO – now at the highest since Feb 2014. No scheduled supply in the Eurozone this week, with the ECB set to wind down its purchase program on Dec 22nd until the new year. Econ data in the US scant until Thursday’s Q3 GDP, thou Fed Yellen gives a speech on the labor mkt this aft. GOCs opening higher lagging the US by  ~1bp thru the curve.  Provincial spreads closed Friday at the tightest levels of the year, opening unch this morning. Interest in FRNs picking up lately as y/e approaches and considering the spike in CDOR. Futures mkts now pricing in ~25% odds of a rate hike in Cda by the middle of next year.

News headlines 

Dollar, yields, stocks all cool their jets (Reuters) The dollar and U.S. bond yields fell on Monday while Asian shares hit a four-week low, as investors cashed in on some of their recent bets that the anticipated fiscal boost from the incoming Trump administration will support riskier assets. Wall Street hit record highs and the dollar rose to a 14-year peak last week, but as the last full trading week of the year got underway investors chose to take some of those chips off the table.

OPEC Deal Makes Oil Investors Most Bullish Since Slump Began (Bloomberg) Investors are the most optimistic on oil since the slump began two and a half years ago. Money managers boosted bets on rising West Texas Intermediate crude prices to the highest level since July 2014 after the Organization of Petroleum Exporting Countries and producers outside the group agreed to coordinate crude production cuts. Prices advanced to a 17-month high on Dec. 12 on speculation that the curbs will reduce the global inventory glut next year.

Japan Has Trade Surplus for 3rd Month as Imports Fall (Bloomberg) Japan posted a trade surplus for a third straight month in November as imports continued to fall faster than exports. Export values declined at the slowest pace since September 2015, with exports to China rising for the first time since February.

China’s moves to cool home-price spike kick in, but issues linger (Reuters) China’s home prices rose at a slower pace in November as government lending curbs took out some heat in major cities, but a supply shortage in some places and sizable inventories elsewhere underscored challenges policymakers face trying to stabilize a polarized market.

Neutral PBOC Sets Up First U.S.-China Tightening Since 2006 (Bloomberg) China’s leaders are pledging a harder push to rein in risk next year and emphasizing prudent and neutral monetary policy. With the Federal Reserve flagging a steeper interest-rate path, that sets the scene for the first U.S.-China tightening since 2006.

Carney Advances BOE Overhaul as Brexit, Trump Jolt World Order (Bloomberg) The Bank of England appointed a new international director to lead the team responsible for its strategy toward European and global matters, part of Governor Mark Carney’s revamp in the wake of the Brexit vote.

‘What does not change, dies’: Bombardier Transportation head looks to the future (Financial Post) The president of Bombardier Transportation, in New York this week to discuss trains, not planes, dismisses the idea that the time and money poured into the troubled aircraft over the past eight years distracted the parent company from his own division, which is responsible for more than half the company’s revenue and most of its global manufacturing presence, with operations in more than 60 countries.

Overnight markets                                                                     

Overview: US 10yr note futures are up 0.318% at 123-7, S&P 500 futures are up 0.08% at 2257, Crude oil futures are down -0.46% at $51.66, Gold futures are up 0.33% at $1141.1, DXY is up 0.04% at 102.99, CAD/USD is up 0.36% at 0.747

US Economic Data

9:45 AM Markit US Services PMI, Dec P, est. 55.2  (prior 54.6)
Markit US Composite PMI, Dec P, (prior 54.9)

Canadian Economic Data

10:00 AM Bloomberg Nanos Confidence Index, Dec 16 (prior 56.2)


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