Market Update
US tsys trading modestly lower, yields 0.5-1bp higher, 10Y 2.355%, TY futures bottom o/n range. Tsy’s earlier boost from bunds after breakdown in German govt coalition now being unwound with reports Merkel unwilling to accept breakdown in coalition talks; German yields unch while the Euro has given up very little (0.20%) of its o/n gains. UK gilts lower after reports PM May is willing to increase her ‘divorce’ payment to the EU. GOCs lower, spds ~0.5bps wider vs tsys. Can/US consolidating across the curve after recent gains, the CAD close to 1.28 resistance with NAFTA talks the main risk this week as the data calendar is fairly thin with only Sep retail sales (Thurs) in top tier. We feel there is asymmetric risk to Can/US in the face of a potential failure in NAFTA talks. Provi spreads opening 0.5bps wider , supply likely to thin out this week after a busy week on the issuance front last week – $1.3bln in provi & $2.5bln CMBs.
News headlines
Merkel’s Attempt to Form a New German Government Collapses (Bloomberg) German Chancellor Angela Merkel’s bid to form a new government failed, raising the prospect of fresh elections in Europe’s largest economy and casting doubt on the future of its longest-serving leader.
Euro Shrugs Off German Impasse as Stocks Rebound: Markets Wrap (Bloomberg) The euro pared a decline and stocks gained as investors judged the failure of German Chancellor Angela Merkel’s coalition talks unlikely to harm the outlook for the region’s economy. Sterling strengthened after reports the U.K. may make concessions to smooth Brexit negotiations.
Republicans’ Sprint to a Tax Overhaul: Public Votes, Private Talks (Bloomberg) The Republican tax-overhaul effort is in for a marathon debate on the Senate floor at the end of this month, with dozens of doomed Democratic amendments. But the real action will be elsewhere, behind closed doors.
Trump Counts on Fed to Help Sustain Economic Bump From Tax Plan (Bloomberg) The Trump administration is banking on the Federal Reserve not to squelch any bump in economic growth from the Republican tax plan. White House chief economist Kevin Hassett argues that the tax overhaul will boost productivity, allowing the U.S. economy to grow more rapidly without risking a damaging bout of higher inflation that would be an anathema to the Fed.
U.K. Preparing Enhanced Brexit Cash Offer Ahead of Summit (Bloomberg) The U.K. could be about to improve its financial offer to the European Union ahead of a crucial meeting of the bloc’s leaders in December. Members of Prime Minister Theresa May’s divided cabinet will consider Britain’s divorce from the EU at a meeting Monday afternoon of the Brexit sub-committee that could be key to unlocking the most controversial matter in the negotiations — money.
China’s Shadow Bank Clampdown Hits Stock Market (Bloomberg) Chinese stocks rallied in late trade as markets took a closer look at the nation’s new plans to rein in shadow banks and some traders speculated that state funds would act to stem excessive losses.
Nebraska to decide fate of controversial Keystone XL pipeline (Reuters) Nebraska regulators will announce their decision on Monday on whether to approve TransCanada Corp’s Keystone XL pipeline route through the state, the last big hurdle for the long-delayed project.
Canada, Mexico to question U.S. auto content demands at NAFTA talks (Reuters) Canada and Mexico will not make counterproposals to U.S. demands for tougher NAFTA automotive content rules but instead will offer rebuttals and pepper American negotiators with technical questions on Monday, people familiar with the talks said.
Overnight markets
Overview: US 10yr note futures are up 0.113% at 125-02, S&P 500 futures are down -0.01% at 2576, Crude oil futures are down -0.58% at $56.22, Gold futures are down -0.26% at $1293.1, DXY is up 0.1% at 93.754, CAD/USD is up 0.18% at 0.7819.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.453% | 2 Year | 1.718% |
| 5 Year | 1.658% | 5 Year | 2.047% |
| 10 Year | 1.933% | 10 Year | 2.335% |
| 30 Year | 2.272% | 30 Year | 2.772% |
US Economic Data
| 10:00 AM | Leading Index, Oct est 0.7% (-0.2% prior) |
Canadian Economic Data
| 10:00 AM | Bloomberg Nanos Confidence, Nov 17th (58.8 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