Market Update

Global govt bonds selling off this morning, US tsy& bund yields 3-6bps higher, muted rise in gilt yields 0.5-2bps. Tsy yields easily breaching resist,  10s above 2.70% for the first time since April 2014 on heavy volume in TY futures (>860k), despite month end extensions, FOMC/labor mkt data, and the potential for rebalancing out of equities into tsys.  Slight uptick in tsy after Personal Income/Spending data. GOCs lower, outperforming tsy by 102 bps, longs outperforming – 6bps vs tsys over the week with 5s & 10s unch. 

News headlines

German Five-Year Yield Rises to Highest Level in Over Two Years (Bloomberg) German five-year bond yields broke above zero percent for the first time since December 2015 after a member of the European Central Bank Governing Council said there isn’t a single reason anymore to continue with quantitative easing.

Treasuries Slide, Dollar Gains as Busy Week Begins: Markets Wrap (Bloomberg) U.S. Treasuries extended a selloff that’s taken yields to the highest since early 2014 as traders gear up for a hectic week of data and policy announcements. The dollar climbed and stocks edged lower as the euro, Swiss franc, yen and pound all retreated.

British Lords Get Ready to Disrupt Brexit (Bloomberg) The bumpy journey toward Brexit reaches another fork in the road this week as the upper chamber of the British parliament plans to rewrite a key piece of Prime Minister Theresa May’s legislation.

Hedge Funds Are Betting Big on Oil (Bloomberg) Hedge funds reported record wagers on continued price increases for both U.S. and global oil benchmarks, along with gasoline and diesel. Meanwhile, producers are hedging production at record rates as oil experiences its best January since 2006.

Russian Bonds Retreat Before Long-Awaited U.S. Sanctions Report (Bloomberg) Russian bonds slid, with some yields climbing to the highest in two months, and UBS Group AG recommended taking profit on the ruble before a U.S. Treasury report gauging the impact of possible sanctions on the nation’s sovereign debt.

U.S. lawmakers at NAFTA talks express optimism about modernizing trade pact (Reuters) U.S. lawmakers attending NAFTA talks in Montreal expressed optimism on Sunday that efforts to update the trade pact would avoid collapse and start gaining momentum and said they urged negotiators not to bind themselves to a specific deadline.

U.S. trade body backs Canadian plane maker Bombardier against Boeing (Reuters) A U.S. trade commission on Friday handed an unexpected victory to Bombardier Inc against Boeing Co, in a ruling that allows the Canadian company to sell its newest jets to U.S. airlines without heavy duties, sending Bombardier’s shares up 15 percent.

ICBC posts $935M in net losses in first nine months of fiscal year (BNN) The financial crisis at British Columbia’s public auto insurer is deepening, as $1.3 billion in net losses are now projected by the end of the current fiscal year. The Insurance Corporation of B.C. said the « sizable and significant loss » is evidence of the growing financial pressures from a rapid increase in the number of collisions in the province, as well as the rising costs of those claims.

Overnight markets

Overview: US 10yr note futures are down -0.32% at 121-22, S&P 500 futures are down -0.24% at 2867.5, Crude oil futures are down -0.7% at $65.68, Gold futures are down -0.69% at $1347.9, DXY is up 0.32% at 89.348, CAD/USD is up 0.16% at 0.8105.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.835% 2 Year 2.142%
5 Year 2.096% 5 Year 2.516%
10 Year 2.298% 10 Year 2.712%
30 Year 2.364% 30 Year 2.961%

US Economic Data

8:30 AM Personal Income, Dec 0.4% est 0.3% (0.3% prior)
  Personal Spending, Dec 0.4% est 0.4% (0.6% prior)
  Real Personal Spending, Dec 0.3% est 0.4% (0.4% prior)
  PCE Deflator MoM, Dec 0.1% est 0.1% (0.2% prior)
  PCE Deflator YoY, Dec 1.7% est 1.7% (1.8% prior)
  PCE Core MoM, Dec 0.2% est 0.2% (0.1% prior)
  PCE Core YoY, Dec 1.5% est 1.5% (1.5% prior)
10:30 AM Dallas Fed Manf. Activity, Jan est 25.4 (29.7 prior)

Canadian Economic Data

10:00 AM Bloomberg Nanos Confidence, Jan 26th (60 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