cti2015header-morning comments web

Market update

US tsys sharply higher, curve ~1bp flatter, US 10Y 1.92% ( -7bps) on surprise move by BOJ , thou some pullback post Q4 GDP, ECI  as PCE better than exp (2.2 vs 1.8). BOJ announced negative rates, cutting rates on reserves by 20bps to -0.10% – this comes barely a week after Kuroda said adopting negative rates was not on his plan (http://goo.gl/IryM5k). Crude higher for a 4th day, up 1.6% @ 33.77 – Russia denying reports of meeting with OPEC to discuss prod cuts. Core Euro bonds higher, curves ~4bps flatter with 2& 5Y German govts hitting fresh lows in yield, 10Y low since May of last yr. GOCs higher led by 10s, which are 3bps better on the curve. Provis opening another 1bp tighter after closing firmer yest as well, expect supply given lower GOC yields & tighter spds. Yest OPB Fin trust (AA+/AAH) issued CAD $250mm in 10Y bonds @ 163 OTC , we had the OPB 22s at 120, so ~45 bps in credit for 4yrs –didnt’t seem like much of a concession still the bonds broke 2bps (original guidance was 165 +/- 2)

News headlines

  • Stocks Rally With Bonds as BOJ Ends Grim January on High Note (Bloomberg) Stocks and bonds rallied around the world as the Bank of Japan unexpectedly stepped up monetary stimulus, joining other central banks responding to this month’s financial-market turmoil. The yen tumbled, while oil pared gains.
  • Yen slides after BOJ stuns markets with negative rates (Reuters) The yen was on track for its biggest daily fall against the dollar in over a year on Friday after the Bank of Japan stunned markets by joining a handful of major central banks in adopting negative interest rates.
  • Oil heading for weekly gain on supply cut deal hopes (Reuters) Oil edged up above $34 a barrel on Friday, a gain of some 25 percent from the 12-year lows seen earlier in January, on hopes that a deal between major exporters to cut production could help reduce one of the worst oil gluts in history.
  • Brazilian Budget Gap Hits Record as Commodity Boom Turns to Bust (Bloomberg) Brazil reported its largest budget deficit on record last year, underscoring the Latin American country’s struggles to cope with falling tax revenue as the commodity boom ends.
  • S. GDP Advances 0.7% in Fourth Quarter (WSJ) The U.S. economy sputtered in the final months of 2015, a sign of flagging momentum amid global weakness and financial market turmoil. Gross domestic product, a broad measure of economic output, expanded at a 0.7% seasonally adjusted annualized rate in the fourth quarter, the Commerce Department said on Friday.
  • Indian Lender Surges Most Since 2013 on Asset Quality Surprise (Bloomberg) Yes Bank Ltd., the Indian lender with the lowest bad-loan ratio, gained the most since September 2013 months after saying it expects an improvement in its asset quality this quarter, making it the nation’s best-performing banking stock this month.
  • Lehman Pulled Money Out of Anglo Irish Days Before Bankruptcy (Bloomberg) Days before Lehman Brothers Holdings Inc. filed for bankruptcy in 2008, the U.S. investment bank pulled 350 million euros ($380 million) out of Anglo Irish Bank Corp., exacerbating the Irish lender’s funding crisis.


Overnight markets

  • Overview: US 10yr note futures are up 0.38% at 129-17, S&P 500 futures are up 0.64% at 1892.75, Crude oil futures are up 2.41% at $34.02, Gold futures are down -0.14% at $1114.5, DXY is up0.95% at 99.449.

US Economic Data

  • The quarterly growth of the US GDP was 0.8%, down 1.2% from Q3 2015 and missing the estimate by 0.1%
  • The GDP Price Index growth came in at 0.8% as expected and down 0.5% from prior number.
  • The Personal Consumption number for Q4 2015 came in at 2.2%, down 0.8% from previous quarter and beating the expectation by 0.4%
  • The Core PCE QoQ number came in at 1.2% as expected and down 0.2% from previous quarter
  • The Employment Cost Index number came in at 0.6% as expected and was at the same level of the previous quarter
  • The ISM Milwaukee was released at 50.36, better than expected and up 1.47 from Q3 2015
  • Chicago PMI for January will be released at 9h45am and is expected at 44.0 from 42.9 in December and 48.7 in November.
  • US Michigan Consumer Sentiment will be released at 10am  The second release on January Michigan Sentiment is out today and should reveal a 93.5 (median 93.1) headline following 93.3 in the first release and 92.6 in December.

 Canadian Economic Data

  • The GDP MoM and YoY came in at 0.3% and 0.2% respectively just as expected by the analysts.
  • The Industrial Product Price MoM change came in at -0.3% for December, beating the estimate by 0.1% and being down 0.1% from the last month
  • The raw material price Index number was released at -5.0% down 1% from Q3 2015 and missing the analyst’s estimate by 1%


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