Market Update
Tsys trade slightly weaker, US 10Y 2.33%, heavy volume in TY futures 9>535k) mostly due to Dec/Mar roll ahead of Thursday’s first notice. Equities firmer in Europe led by energy, after Royal Dutch Shell (+3.25%) boosted guidance and restored its dividend. Crude down another 0.60% 57.75 even as OPEC is set to announce extension of production cuts on Thursday. Core EGBs mixed, bund curve flatter, 10Y bund 0.4bps lower @ 0.338% a two-week low. GOCs well bid, outperforming tsys ~1bp in 10s after yesterday’s 1.5bp narrowing after a large block trade in CGBs yest morning. Provis trading down 0.5bps to start ahead of supply – new long Ont 2049 exp, Ont 48/46 roll -1.7bps so ~-1bp thru Ont 48s makes sense.
News headlines
GOP Panel Members Threaten to Bottle Bill Up: Tax Debate Update (Bloomberg) The Senate tax bill is headed for a marathon debate this week with the aim to hold a floor vote as early as Thursday. Should it pass, Republican leaders will have to hammer out a compromise between different provisions in the House and Senate bills.
Jerome Powell Sees Rates Rising Somewhat Further (Bloomberg) President Donald Trump’s nominee to head the Federal Reserve is making one thing clear as he prepares to testify before lawmakers: He’s not here to shake things up at the U.S. central bank.
Fox Says U.K. Has Done Enough for Brexit Talks to Move Forward (Bloomberg) U.K. Trade Secretary Liam Fox called on the European Union to allow Brexit negotiations to move on to future trade links, saying his government has done enough to satisfy the bloc’s demands for money.
Oil Extends Declines Before OPEC Meeting on Output-Cut Extension (Bloomberg) Brent crude slipped toward $63 a barrel before OPEC and its allies meet this week to discuss prolonging their output cuts beyond March. Futures dropped as much as 1.2 percent in London, extending Monday’s decline. Uncertainty over the outcome of Thursday’s meeting is creating the risk of a slide in prices, which have gained on assumptions that the curbs will be prolonged for nine months, according to Goldman Sachs Group Inc. OPEC backs such an extension but is still waiting for commitments from Russia, according to people familiar with the matter.
Asian Stocks Fall for a Second Day Amid North Korea Missile Risk (Bloomberg) Asian stocks declined for a second day as investors turned cautious after reports that North Korea may be preparing a missile launch. The MSCI Asia Pacific Index lost 0.1 percent to 172.13 as of 4:45 p.m. in Hong Kong, led by material stocks such as BHP Billiton Ltd. Japanese stocks dropped as the yen unwound gains spurred by North Korea reports. Stocks in South Korea gained.
Stocks Rise as Energy Shares Jump; Dollar Steady: Markets Wrap (Bloomberg) Stocks in Europe advanced as energy companies gained after a bullish outlook from one of the sector’s bellwethers. The dollar and Treasury yields edged higher ahead of a Federal Reserve confirmation hearing and debate on U.S. tax reform.
Scotiabank bids $2.9 billion to buy majority stake in BBVA Chile (Financial Post) Scotiabank says it has submitted an offer to buy a majority stake in a Chilean bank for $2.9 billion. Scotiabank (TSX:BNS) seeks to acquire Banco Bilbao Vizcaya Argentaria, S.A.’s (BBVA) shares in its Chilean banking operation, BBVA Chile. The Canadian bank, which releases its quarterly results early Tuesday, says BBVA is willing to accept the deal if its minority partner, the Said family, does not exercise its right of first refusal under a shareholders agreement. BBVA currently owns 68.19 per cent of BBVA Chile and the Said family owns 31.62 per cent. he transaction would double Scotiabank’s market share in Chile to approximately 14 per cent and would be in line with Scotiabank’s strategy to increase scale within Chile and the Pacific Alliance countries.
Crunch looms as house correction puts some Canadians under water (Reuters) A drop in Canadian home prices has put some recent buyers under water, particularly in Toronto, the nation’s largest market, just as rising interest rates and record levels of household debt have put the squeeze on borrowers.
Overnight markets
Overview: US 10yr note futures are down -0.025% at 125-03, S&P 500 futures are up 0.11% at 2604.5, Crude oil futures are down -0.72% at $57.69, Gold futures are up 0.02% at $1299.2, DXY is up 0.17% at 93.059, CAD/USD is up 0.19% at 0.7816.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.427% | 2 Year | 1.742% |
| 5 Year | 1.609% | 5 Year | 2.051% |
| 10 Year | 1.856% | 10 Year | 2.329% |
| 30 Year | 2.221% | 30 Year | 2.775% |
US Economic Data
| 8:30 AM | Advance Goods Trade Balance, Oct -68.3b est -64.9b (-64.1b prior) |
| Wholesale Inventories MoM, Oct -0.4% est 0.4% (0.3% prior) | |
| Retail Inventories, Oct -0.1% (-1.0% prior) | |
| 9:00 AM | FHFA House Price Index MoM, Sep est 0.5% (0.7% prior) |
| House Price Purchase Index QoQ, 3Q (1.6% prior) | |
| S&P CoreLogic CS 20-City MoM SA, Sep est 0.3% (0.45% prior) | |
| S&P CoreLogic CS 20-City YoY, Sep est 6.04% (5.92% prior) | |
| 10:00 AM | Conf. Board Consumer Confidence, Nov est 124.0 (125.9 prior) |
| Richmond Fed Manufact. Index, Nov est 14 (12 prior) |
Canadian Economic Data
| 8:30 AM | Industrial Product Price MoM, Oct est 0.5% (prior -0.3%) |
| Raw Material Price Index MoM, Oct est 3.0% (-0.1% 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