Market Update Tsys trading lower, 10Y above 2.65% (+3.7bps), curve 2bps steeper, above avg volume in TY futures (380k). Tsys pressured by UK gilts after strong UK labor mkt data (102k vs -12k exp) – 10Y gilt above 1.40% for the first time since Feb. USD fell to a new low (DXY -0.64%) after Mnuchin said a weaker USD ‘is good for us’.  The Eurozone PMI rose to 58.6 in Jan, the highest since 2006 and above 57.9 consensus. In Canada GOCs are lower, outperforming tsys in 2s & 30s (~2bps) with 10s wider on the curve +2bps vs 2s30s, the cheapest since August. OIS mkt pricing in  ~40% odds of a rate hike at the April BOC meeting vs 98% pre rate hike last Wednesday.  

News headlines

Trump Team at Davos Backs Weaker Dollar, Sharpens Trade War Talk (Bloomberg) President Donald Trump’s top economic advisers set the stage for the rollout of his « America First » manifesto on the world stage. A day before Trump’s scheduled arrival in the Swiss ski resort of Davos for the World Economic Forum’s annual meeting, Treasury Secretary Steven Mnuchin endorsed the dollar’s decline as a benefit to the American economy and Commerce Secretary Wilbur Ross said the U.S. would fight harder to protect its exporters.

Euro-Area Economy Opens 2018 With Best Growth in Almost 12 Years (Bloomberg) The euro-area economy strengthened further at the start of 2018, bringing with it signs of a long-awaited pickup in inflation. The improvement lifted IHS Markit’s Purchasing Managers’ Index to 58.6 from 58.1 in December, higher than economists had forecast. The gauge is now at a level suggesting quarterly economic growth of close to 1 percent, according to the report.

U.K. Labor Market Unexpectedly Strong as Employment Rises (Bloomberg) The U.K. labor market displayed unexpected resilience in the three months through November as employment jumped and wage growth ticked higher. The number of people in work rose 102,000 to a record high, confounding market expectations that employment would fall. Basic pay growth quickened to 2.4 percent, the highest in almost a year, though it still lags well behind the rate of inflation.

Dollar Woes Deepen as Stocks Edge Up; Gold Rises: Markets Wrap (Bloomberg) There was no respite for the dollar on Wednesday, with the greenback extending the decline that’s taken it to the lowest level in three years. U.S. stock futures advanced as European equities nudged higher, and gold added to recent gains.

China Vows Further Opening as U.S. Talks Trade War: Davos Update (Bloomberg) Billionaires, world leaders and investors are gathered in Davos, Switzerland, for the World Economic Forum’s annual meeting to hobnob and discuss topics ranging from the global economy and sexual harassment, to the risks and opportunities of artificial intelligence. Not to mention hear a speech by President Donald Trump.

NAFTA negotiators open key round of talks amid upbeat signs (Reuters) Officials opened a key round of negotiations to modernize NAFTA on Tuesday amidst optimistic signs, as U.S. President Donald Trump said the talks were going “pretty well” and Canada’s chief negotiator said he had high hopes for progress.

U.S. Senate approves Powell to follow Yellen as Federal Reserve chair (CBC) The U.S. Senate on Tuesday approved President Donald Trump’s selection of Jerome Powell to be the next chairman of the Federal Reserve beginning next month. Senators voted 85-12 to confirm Powell to lead the nation’s central bank, a post that is considered the most powerful economic position in government. 

Overnight markets

Overview: US 10yr note futures are down -0.166% at 122-07, S&P 500 futures are up 0.31% at 2848.25, Crude oil futures are up 0.29% at $64.66, Gold futures are up 1.14% at $1357, DXY is down -0.7% at 89.494, CAD/USD is down -0.76% at 0.8114.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.814% 2 Year 2.068%
5 Year 2.047% 5 Year 2.438%
10 Year 2.26% 10 Year 2.656%
30 Year 2.381% 30 Year 2.947%

US Economic Data

7:00 AM MBA Mortgage Applications, Jan 19th 4.5% (4.1% prior)
9:00 AM FHFA House Price Index MoM, Nov est 0.5% (0.5% prior)
9:45 AM Markit US Manufacturing PMI, Jan est 55.0 (55.1 prior)
  Markit US Services PMI, Jan est 54.3 (53.7 prior)
  Markit US Composite Jan (54.1 prior)
10:00 AM Existing Home Sales, Dec est 5.70m (5.81m prior)
  Existing Home Sales MoM, Dec est -1.9% (5.6% prior)

Canadian Economic Data

There is no Canadian economic data for 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, Hugues Savard

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230