Market Update
US tsys trading higher, yields 1-4 bps lower, curve flatter, US 10Y 2.32 (-4bps). Tsys saw buying in Asian hours then tapering off in Europe as German bunds declined on higher oil – speculation of a deal at the next OPEC meeting in Vienna. Fed Fischer said there’s a need for fiscal measures/infrastructure investment to lift growth. The US tsy auctions 2/5/7Y notes for $88bln this week. Inflation expectations have surged since Trump won the election, based on 10Y breakevens while mkts are pricing in ~98% odds of a rate hike at the Dec 14th FOMC. GOCs are higher, with spds 2bps wider vs tsys. Provis openign unch after closing 1-2 bps tighter last week, Ont 10/30 credit curve 0.5bps tighter – Ont 10Y spds at the tighest lvls since Aug 2015 despite significant provi & corp supply last week there was good appetite for longer spd product in advance of the Dec 1 extension & higher GOC yields.
News headlines
Futures up as oil prices rise; Fed’s Fischer in focus (Reuters) U.S. stock index futures inched up on Monday, supported by higher oil prices and the lingering effects of a rally sparked by Donald Trump’s surprise victory in the U.S. election.
Oil Climbs as Iran, Iraq Signal Deal Hope Before Vienna Meeting (Bloomberg) Oil extended gains as Iran signaled optimism OPEC will agree to a supply-cut deal and Iraq said it will offer new proposals to help bolster the group’s unity before members meet next week in Vienna. Prices rose as much as 2.1 percent in New York, adding to last week’s 5.3 percent gain. Iran Oil Minister Bijan Namdar Zanganeh said it’s “highly probable” members will reach a consensus, according to comments published by Shana news service.
German growth to pick up significantly in fourth quarter: Bundesbank (Reuters) Manufacturing is expected to drive a rebound in German economic growth in the fourth quarter after several lackluster months, Germany’s central bank said in a monthly report on Monday. With sentiment improving and new orders rising, employment growth is expected to continue, boosting the euro zone’s biggest economy after several relatively modest quarters, the Bundesbank said.
Japan October exports fall more than expected as strong yen drags (Reuters) Japan’s exports fell in October for a 13th consecutive month and by more than expected as the strength of the yen and sluggish foreign demand weighed on trade, although current yen weakness could change the outlook. Ministry of Finance (MOF) data showed on Monday that exports fell 10.3 percent in the year to October, pulled down by a strong rise in the value of the yen and lower export volumes, much weaker than the expected 8.6 percent drop and September’s 6.9 percent decline.
BoE to raise deposit ‘insurance’ after pound’s Brexit plunge (Reuters) The Bank of England has proposed raising “insurance” on bank account deposits back to 85,000 pounds ($105,000) from Jan. 30, 2017, to reflect the sharp fall in sterling following Britain’s decision to leave the European Union. The level of deposit account protection is set under EU rules at 100,000 euros or its equivalent in member states that do not use the single currency.
First cluster of diamonds to be auctioned from Quebec mine (TheGlobeAndMail) Stornoway Diamond Corp. is selling its first cluster of Quebec gemstones this week, the introductory auction of what it believes will be a strong market for its diamonds in the years ahead as overall industry supply begins to dwindle. The Longueuil, Que.-based producer will test the value of its initial batch of diamonds on the open market in Antwerp, Belgium, in a multiday sale ending Nov. 23. Stornoway said it will sell about 91,000 carats of gemstones in roughly two dozen lots arranged by size and quality in a tender process organized by diamond broker Bonas Group. The best offer takes each lot.
Ottawa to announce coal phase-out, aims for virtual elimination by 2030 (TheGlobeAndMail) The Liberal government is set to announce its plan to virtually eliminate the use of traditional coal-fired electricity by 2030, but will offer some flexibility to the provinces, sources have told The Globe and Mail. Environment Minister Catherine McKenna is expected to reveal the coal-phase-out plan Monday as one of a series of measures that Ottawa is unveiling ahead of the first ministers’ meeting in December, when Prime Minister Justin Trudeau hopes to conclude a pan-Canadian climate accord.
Overnight markets
Overview: US 10yr note futures are up 0.1742% at 125-25, S&P 500 futures are up 0.25% at 2186.25, Crude oil futures are up 2.71% at $46.93, Gold futures are up 0.46% at $1214.2, DXY is down -0.39% at 100.82, CAD/USD is down -0.62% at 0.7449.
US Economic Data
| 8:30 AM | Chicago Fed Nat Activity Index, Oct, -0.08, est. 0.00 (prior -0.14, revised-0.23) |
Canadian Economic Data
| 8:30 AM | Wholesale Trade Sales, m/m, Sep, -1.2%, est. 0.5% (prior 0.8%) |
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