Market Update
Tsys trading higher, flatter with the 10Y 3.01% (-1.8bps), TY futures 5 ticks higher @ 119-15 on light volume (281k), current contract is Mar19. Highlights for the day include Chicago PMI, Fed Williams and any news from G20 meeting. Core EGBs higher, Eurozone inflation came in below exp @ 1.0%y/y in Nov vs 1.1% exp. GOCs continuing to grind higher, 10Y 2.285%, low since Sep 10th. the 2s10s30s butterfly now at the richest levels since last Dec. Q3 GDP at 8:30, growth expected to have slowed to 2.0% from 2.9% in Q2. Loblaws priced 2 tranche deal yest – $400mln 5.5y @ 165 and $400mln 10Y @ 217.6, said to be ~4x oversubscribed and leading to some widening in the retail space.
News headlines
The Best Case Scenario: What the Trump-Xi Dinner Could Yield (Bloomberg) Whatever happens in Buenos Aires when President Donald Trump and China’s Xi Jinping dine on Saturday night, the trade wars are set to be with us well into 2019 and possibly beyond. There’s a good reason talk swirls about the world slipping into a new Cold War. Power politics are alive and well. And the issues between the world’s two largest economies are too complex and longstanding to be solved in a few hours.
Euro-Area Inflation Eases as ECB Nears End of Bond Buying (Bloomberg) Euro-area inflation eased off a six-year high and core inflation slipped just as the European Central Bank gets ready to pare back monetary stimulus. The data add to signs that the 19-nation economy is facing a more protracted slowdown after growth halved in the third quarter. While analysts have questioned whether the weaker momentum could force a policy rethink, ECB President Mario Draghi and his peers have stuck to their plans to cap quantitative easing at 2.6 trillion euros ($3 trillion) at the end of the year.
Trump Defends Pursuit of Russia Business During 2016 Campaign (Bloomberg) President Donald Trump defended his company’s pursuit of business in Russia during his 2016 White House bid, saying that his dealings there were legal and that they ultimately ended without a project. In an early morning tweet from Argentina, where he’s taking part in the Group of 20 summit, Trump assailed the scrutiny of his business, calling it a “Witch Hunt.”
Stocks Decline Before G-20; Treasuries Edge Higher: Markets Wrap (Bloomberg) U.S. equity futures dropped with European stocks as investors count down to a meeting between the American and Chinese presidents that could decide the course of the trade war. Benchmark Treasury yields fell and the dollar gained. Carmakers and banks led a retreat in the Stoxx Europe 600 Index, while futures for all three major U.S. indexes slid amid lingering doubts over the prospects for a thaw in relations between Presidents Donald Trump and Xi Jinping. Shares gained in Tokyo, slipped in Seoul and fell in Sydney, with Shanghai and Hong Kong stocks rising even after data showed that China’s economy remains in a weak patch. WTI crude dropped below $51 a barrel, on track for the biggest monthly slump in a decade. The euro weakened after data showed inflation in the common-currency region easing.
Canada signs USMCA on sidelines of high-stakes G20 summit (BNN) After much anticipation, Canada signed the revamped NAFTA in Buenos Aires today on the sidelines of the high-profile G20 summit. Prime Minister Justin Trudeau joined U.S. President Donald Trump and outgoing Mexican President Enrique Pena Nieto at a hotel to formally sign the trade agreement. U.S. tariffs on steel and aluminum remain in place, but a Canadian official says an advantage to signing onto the agreement now is an auto side letter exempting Canada of potential tariffs on exports of up to 2.6 million vehicles — well above current levels. Today marks an important deadline for the trade pact.
Italian economy contracted in third quarter, complicating populists’ growth plans (BNN) Italy’s economy contracted in the third quarter, in a revision that will complicate the populist government’s growth plans. Statistics agency Istat’s final reading showed the economy shrank 0.1 per cent in the three months through September, after a preliminary reading on Oct. 30 showed no change. It was the first contraction since the second quarter of 2014. Istat said Friday that lower domestic demand and a fall in investments slowed the economy in the third quarter, while exports kept up their pace.
Trump’s threats to close the border add thousands to shipping costs (BNN) The traffic is moving again at San Ysidro, one of the busiest border crossings in the world. That doesn’t mean businesses here in Tijuana are resting easy. They’re plotting alternate routes and speeding up shipments from factories that produce everything from semiconductors to pacemakers to seat belts. After the U.S. shocked locals by closing San Ysidro for more than four hours on Sunday, President Donald Trump’s recent Twitter-threat about sealing off the entire border between Mexico and the U.S. didn’t seem so absurd anymore.
Overnight markets
Overview: US 10yr note futures are up 0.131% at 119-15, S&P 500 futures are down -0.42% at 2732.75, Crude oil futures are down -1.44% at $50.71, Gold futures are down -0.3% at $1226.7, DXY is up 0.18% at 96.954, CAD/USD is up 0.12% at 0.752.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.183% | 2 Year | 2.811% |
| 5 Year | 2.221% | 5 Year | 2.838% |
| 10 Year | 2.287% | 10 Year | 3.012% |
| 30 Year | 2.394% | 30 Year | 3.306% |
US Economic Data
| 9:45 AM | Chicago Purchasing Manager, Nov est 58.5 (58.4 prior) |
Canadian Economic Data
| 8:30 AM | Quarterly GDP Annualized, 3Q est 2.0% (2.9% prior) |
| Industrial Product Price MoM, Oct est -0.5% (0.1% prior) | |
| Raw Materials Price Index MoM, Oct est -5.3% (-0.9% prior) | |
| GDP MoM, Sep est 0.1% (0.1% prior) | |
| GDP YoY, Sep est 2.3% (2.5% 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
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230