Market Update
US tsys higher, erasing earlier slight losses, 10Y 2.506 after a miss on Q4 – mostly on trade as final sales rose 2.1% vs 1.8%. Light volume overnight as China closed for New Year. Core European bonds higher, 10Y gilts 2.5bps lower @ 1.485% on no data but before BOE MPC & inflation report next week. The 10Y gilt yield reached a new closing high 1.515 yest on the back of stronger Q4 GDP & odds of a rate hike before y/e have increased substantially just in the last month despite uncertainty raised by the Brexit vote. Month end extensions in the Eurozone should also support the flattening thesis, with the Bloomberg-Barclays Pan Euro Agg rising 0.12 vs 0.05 last Feb. Eurozone sovereign bond issuance next week expected to be ~E24bln against heavy redemptions from Germany & the Neth of ~E45bln, so net supply drops off heavily from E25bln this week to E-35bln per estimates from MNI. GOCs unch, 10Y 1.82%, curve 0.5bps steeper. Provis unch from yest close despite another QC 10Y and Ontario 5Y Green Bond. Power Corp issued $250mln (upsized) longs @ 232 which broke 8-10 tighter.
News headlines
Dollar Pares Weekly Loss, Global Stock Rally Eases: Markets Wrap (Bloomberg) The dollar pared its weekly loss, benefiting from central bank action in Japan and heightened political risks from Turkey to Mexico. European stocks retreated as UBS Group AG led a decline in banking shares.
Oil prices fall as focus shifts to U.S. output (Reuters) Oil prices slipped on Friday, giving up gains from earlier in the day, as market shifted its focus towards production increases in the United States from efforts by OPEC and other producers to support prices by cutting supplies.
Weak exports may crimp U.S. fourth-quarter economic growth (Reuters) U.S. economic growth likely slowed in the fourth quarter as a plunge in shipments of soybeans weighed on exports, but a healthy increase in consumer spending and rising business investment should underscore the economy’s underlying momentum.
CMHC issues alert for Victoria housing, warns of ‘overvaluation’ (GlobeandMail) Canada’s housing agency has added Victoria to its list of real estate markets with problems, seeing danger signs in the B.C. capital’s home values. Canada Mortgage and Housing Corp. said Thursday that it is maintaining its “red warning” for the country’s real estate market as a whole, with high prices in and around Vancouver and Toronto among its top concerns.
Japan Dec core consumer prices fall at slowest pace in nearly a year (Reuters) Japan’s core consumer prices fell at the slowest annual pace in nearly a year in December, data showed on Friday, a sign inflation should pick up in coming months on a rebound in oil costs and rising import costs from a weak yen.
Hackers are bombarding the Bank of Canada with cyber attacks and the chink in the bank’s armour is its employees (Financial Post) Employees at the Bank of Canada in November 2015 were bombarded with 25,000 similar, innocuous-looking emails. The messages came in both official languages, politely asking recipients to review an invoice in an attached Microsoft Word document. The document was armed with code that would attempt to install a colourfully named program — putinanalking.exe — carrying malware designed to steal banking credentials.
Overnight markets
Overview: US 10yr note futures are down -0.0378% at 0-0, S&P 500 futures are down 0% at 2294, Crude oil futures are down -0.58% at $53.47, Gold futures are down -0.43% at $1187.4, DXY is up 0.16% at 100.54, CAD/USD is up 0.14% at 0.7626.
US Economic Data
| 8:30 AM | GDP Annualized q/q, 4Q A, 1.9%, est. 2.2% (prior 3.5%) |
| Personal Consumption, 4Q A, 2.5%, est. 2.5% (prior 3.0%) | |
| GDP Price Index, 4Q A, 2.1%, est. 2.1% (prior 1.4%) | |
| Core PCE, q/q, 4Q A, 1.3%, est. 1.3% (prior 1.7%) | |
| Durable Goods Orders, Dec P, -0.4%, est. 2.5% (prior -4.5%, revised -4.8%) | |
| Durable Ex Transportation, Dec P, 0.5%, est. 0.5% (prior 0.6%, revised 1.0%) | |
| Cap Goods Orders Nondef Ex Air, Dec P, 0.8%, est. 0.2% (prior 0.9%, revised 1.5%) | |
| Cap Goods Ship Nondef Ex Air, Dec P, 1.0%, est. 0.5% (prior 0.2%, revised 0.6%) | |
| 10:00 AM | University of Michigan Sentiment, Jan F, , est. 98.1 (prior 98.1) |
Canadian Economic Data
There is no major economic news 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, David Leclair-Legault
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230