Market Update

US tsys mixed with longer maturities slightly higher, curve flatter, 10Y 2.424%, lagging the rally in bunds after the ECB unveiled its QE plan which met expectations for a nine-month extension and reduction in purchases to E30bln/mnth. According to a source at Politico, Janet Yellen is out of the running for Fed chair, the USD rising against the EUR on the news.  GOCs better bid in the long end, 0.5bps narrower vs tsys. The BOC’s decision to stay on the sidelines after two successive hikes was not a surprise, yet the downgrading of the inflation forecast contributed to the rally in GOCs, 2bps tighter vs tsys. The BOC auctions $3bln in reopened June 1 2028 bonds at noon with the roll 6.3/6.0. The roll has widened ~1bp since mid Sep after trending narrower after the 28s were first auctioned on July 27th, this is consistent with the widening in the 10Y roll over the past month.

News headlines 

ECB unveils plan to cut, but extend, its massive bond-buying program (CNBC)  The European Central Bank (ECB) decided Thursday to cut the level of bonds it purchases every month, but extend the length of time that its stimulus program runs. Its purchases will fall to 30 billion euros ($35 billion) from 60 billion euros, starting in January. The central bank said it will extend its monetary stimulus program until at last September of next year.

House Leaders Face State-and-Local Storm to Begin Tax Debate (Bloomberg) House leaders announced plans to press on with a budget vote Thursday that represents an attempt to stick to their ambitious goal of delivering tax-overhaul legislation by year’s end.

Trump Wants to Make Own Mark on Fed But Calls Yellen ‘Terrific’ (Bloomberg) President Donald Trump said he’s thinking about giving Janet Yellen another term as U.S. Federal Reserve chair as he balances the desire to put his stamp on the central bank with the risk of changing leadership amid a stock market rally.

Saudi Crown Prince Backs Extending OPEC Cuts Into 2018 (Bloomberg)  Saudi Arabian Crown Prince Mohammed bin Salman backed the extension of OPEC production cuts beyond March 2018, making it all but certain the cartel and its allies will roll over the curbs at a meeting next month.

Catalan Brinkmanship Enters Crunch Time as Spain Readies to Act (Bloomberg) Regional President Carles Puigdemont faces a make-or-break decision that could either ease tensions or see him unilaterally declare Catalonia a sovereign republic. It risks deepening the biggest constitutional crisis in western Europe’s fifth-largest country since an attempted coup in 1981.

Barclays and Deutsche Bank Fall Behind U.S. Peers Again in Trading (Bloomberg) Deutsche Bank AG and Barclays Plc, reported declines in trading revenue that were worse than analysts had expected and exceeded falls at U.S. rivals, a sign that Europe’s biggest securities firms are further losing their grip. Revenue from trading stocks and bonds at Frankfurt-based Deutsche Bank slid 30 percent to 1.5 billion euros ($1.8 billion), compared with the average decline of about 15 percent at the five biggest U.S. investment banks. London-based Barclays reported a fall of 31 percent to 977 million pounds, missing estimates from UBS Group AG and Jefferies Group LLC.

Chinese construction group to buy Canada’s Aecon (Reuters) Canadian construction company Aecon Group Inc (ARE.TO) said on Thursday it agreed to be bought by China’s CCC International Holding Ltd in a deal with an enterprise value of C$1.51 billion ($1.18 billion).

Restaurant Brands earns $91.4M in third quarter, boosts dividend (BNN) Restaurant Brands International Inc. (QSR.TO) says it earned US$91.4 million in its latest quarter as sales at its Burger King restaurants improved. The company, which is also the parent company of Tim Hortons and Popeyes Louisiana Kitchen, also boosted its quarterly dividend by a penny to 21 cents per share.

Twitter stock jumps as much as 11% as the social media company nears first profitable quarter (CNBC) Twitter stock jumped as much as 11 percent in premarket trading Thursday after the company beat expectations on revenue and gave higher-than-expected guidance for the fourth quarter.The company said in its guidance for next quarter that if it hit the high end of its adjusted EBITDA estimates of $220 million to $240 million, it could be GAAP profitable.

Canada’s Teck Resources third-quarter profit surges on higher coal, metal prices (Reuters) Canada’s Teck Resources Ltd, the world’s second-biggest exporter of steelmaking coal, said its third-quarter profit more than doubled from a year ago, lifted by higher coal and metal prices.

Overnight markets 

Overview: US 10yr note futures are up 0.088% at 124-18, S&P 500 futures are up 0.1% at 2561, Crude oil futures are up 0.04% at $52.2, Gold futures are down -0.21% at $1276.3, DXY is up 0.37% at 94.054, CAD/USD is up 0.1% at 0.7807. 

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.473% 2 Year 1.599%
5 Year 1.703% 5 Year 2.048%
10 Year 2.03% 10 Year 2.425%
30 Year 2.377% 30 Year 2.933%

US Economic Data

8:30 AM Initial Jobless Claims, Oct 21st 233k est 235k (222k prior)
Continuing Claim, Oct 14th 1893k est 1890k (1888k prior)
Advance Goods Trade Balance, Sep -64.1b est -64.0b (-62.9b prior)
Wholesale Inventories MoM, Sep 0.3% est 0.4% (0.9% prior)
Retail Inventories MoM, Sep -1.0% (0.7% prior)
9:45 AM Bloomberg Consumer Comfort, Oct 22nd (51.1 prior)
10:00 AM Pending Home Sales MoM, Sep est 0.4% (-2.6% prior)
Pending Home Sales NSA YoY, Sep est -4.2% (-3.1% prior)
11:00 AM Kansas City Fed Manf. Activity, Oct est 17 (17 prior)

Canadian Economic Data

10/26 CFIB Business Barometer, Oct 57.2 (56.9 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