US tsys yields ~1bp higher led by 5s for a second day with the curve ~0.5bps steeper out to 10yrs, longs outperforming. Core Euro bonds higher, 10Y bunds -4bps @ 0.48% new low as EU stocks hit hard -1.6% led by financials – Italian banks in focus after disappointment with ‘bad bank’ deal, shares of BMPI – 10%. Also some catchup with yest post FOMC rally in tsys as stmt was less dovish than exp. US auctions $29bln in 7Y notes at 1:00PM with yields close to recent lows, while the 7Y looks rich on the cash tsy curve vs 5s/10s – 7 bps vs 15bps @ last auction on Dec 30th. So could expect similar setup going into 7Y auction as yesterday’s somewhat dissapointing (1bp tail) 5Y auction. Provis opening 1bp tighter, Ont 25s lifted @ 108.5 from yest 110/109 clse, Ont 46 trading up @119. Still expect Ont to come one of these days, 10Y rumoured as wel as QC longs.
- Wall Street Turmoil to Bend, Not Break, U.S. Economic Expansion (Bloomberg) The turmoil in financial markets may slow the U.S. economic expansion. But it probably won’t kill it.While the threat of a downturn has risen, consumers and companies have the wherewithal to weather the turbulence in stocks and keep the economy afloat, economists say.
- S. Federal Reserve leaves rates unchanged, closely monitoring global economy (FP) The U.S. Federal Reserve raised concerns about the U.S. economy’s growth late last year and said it is “closely monitoring” the turmoil in global markets as it decided to leave its benchmark interest rate unchanged Wednesday.
- Euro Rises Against Dollar in Longest Winning Run Since September (Bloomberg) The euro rose for a fourth day, headed for its longest winning streak since September. The shared currency erased its earlier slide versus the dollar after data showed inflation accelerated this month in four out of the six German states to report figures. The euro was also buoyed after the Federal Reserve said Wednesday that officials are “closely monitoring” developments from China to Europe, prompting speculation a dollar-boosting March interest-rate increase is unlikely.
- UK economy grows 0.5% in fourth quarter (BBC) The UK economy grew by 0.5% in the three months to the end of December, official figures show, taking the annual rate of growth for 2015 to 2.2%. The Office for National Statistics show an improvement on the third quarter figure of 0.4%. But the 2.2% annual growth in 2015 was down compared with 2.9% in 2014.
- CMHC adds Calgary housing market to list of cities with ‘problematic conditions’ (Financial Post) Canada Mortgage and Housing Corp. will tell you the housing market has what it calls “problematic conditions,” but one word the federal agency doesn’t like to use is “correction.”
- Oil Trade Slows as Storage Glut Snares Tankers in Bottlenecks (Bloomberg) The world’s biggest oil companies are asking tanker operators to slow down delivery of crude amid an ever-expanding supply glut on land, Europe’s largest owner of supertankers said.
- Brazil Signals Rate to Stay Flat on Impact of China Slowdown (Bloomberg) Brazil’s central bank president Alexandre Tombini is betting on a weak domestic economy and slowing Chinese demand to help bring inflation down this year, signaling the benchmark lending rate will stay on hold.
- Deutsche Bank Confirms the Damage: A Record Loss (NYTimes) Deutsche Bank, confirming bad news it had previewed last week, on Thursday made it official: The giant German bank had a record loss of 6.8 billion euros, or $7.4 billion, in 2015, as it set aside money to cover lawsuits and official investigations, and it suffered a decline in revenue in its investment banking unit.
- Facebook cashes in on digital advertising (FT) The social networking company had pulled off a remarkably quick transition of its business to mobile devices. From a standing start in early 2012, mobile advertising grew to account for 78 per cent of revenues by the third quarter of last year. With fourth-quarter earnings, Facebook has shown it is in position to capitalise on the acceleration of spending on mobile advertisers as brands belatedly seek to follow their audiences to smartphones.
- Overview: US 10yr note futures are up 0.11% at 129-0, S&P 500 futures are up 0.41% at 1882.75, Crude oil futures are up 1.8% at $32.88, Gold futures are up 0.52% at $1122.1, DXY is down-0.2% at 98.7.
US Economic Data
- Initial jobless claims fell last week after touching a seven-month high earlier in January, offering fresh evidence the labor market is still doing pretty well despite a slower U.S. economy. The 4wk average of initial claims also tacked lower, down 2,250 to 283,000, the Labor Department said Thursday. Continuing claims were 49,000 higher compared to the prior week.
- Durable goods, excluding defence and transportation orders, fell 0.2 percent last month as November’s decline was revised down to a steeper 1.1 per cent. Durable goods, excluding defence and transportation orders, fell 0.2 percent last month as November’s decline was revised down to a steeper 1.1 per cent.
- Pending home sales will be released at 10ham. Consensus forecasts that the pending home sales index rose by 0.9% in December.
- Kansas City Fed manufacturing index will be published at 11ham (prior -9.0).
Canadian Economic Data
- A free-falling dollar and the decline of oil have driven Canadian small business confidence levels to new post-recession lows in January as the national Business Barometer® Index dropped to 54.3, about 10 points below the level associated with normal economic growth.
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