Market Update
US tsys mixed, slightly higher out to five years with the back end lagging, curve 1bp steeper, 10Y 2.49%. Little reaction to PCE which came in below exp (0.3% vs 0.4%). Prices off the lows after Jan German inflation came in below exp(1.9% vs 2.0%) . Peripheral debt sharply lower, Italy yields 6-12bps higher, Spain 3-5bps – Unicredit shares down 6% on reports ECB requested revised strategic plan to improve capital ratios, belly of the BTP curve hit the hardest as long end benefits from month end extensions. Latest CFTC COT report showed large specs paring back shorts in the FF, Eurodollars 5s & 10s while scaling back longs/adding to shorts in 2s, 30s and ultra longs. GOCs slightly lower, ~1bp wider in the belly as the US curve is ~2bps steeper. Provis ~1bp wider, Ontario 26s 81/80.5. Ontario 5Y Green bond has backed 2bps since last week.
News headlines
European Bonds Hit by Inflation as Stocks Retreat: Markets Wrap (Bloomberg) European bonds fell on signs inflation was quickening in Germany and equities retreated. The dollar weakened earlier as Donald Trump’s order halting some immigration reverberated around the world.
Oil steady but U.S. drilling weakens deal to cut output (Reuters) Oil prices were steady on Monday, but news of another increase in U.S. drilling activity spread concern over rising output just as many of the world’s oil producers are trying to comply with a deal to pump less in an attempt to prop up prices.
German inflation hits 3-1/2 year high in January (Reuters) German annual inflation increased further in January, hitting the highest level in three-and-a-half years to reach the European Central Bank’s price stability target of just under 2 percent, preliminary data showed on Monday.
Dutch central bank raises growth forecasts for Netherlands (Reuters) The Dutch central bank on Monday upgraded its forecast for economic growth in 2017 to 2.3 percent, up from a previous 1.9 percent in June, citing strong domestic consumption, falling unemployment and a rebounding housing market.
Russia appeals to WTO over EU duties on Russian steel (Reuters) Russia said on Monday it was appealing to the World Trade Organization to settle a dispute with the European Union over anti-dumping duties imposed on its steelmakers. The EU in August introduced duties of up to 36.1 percent on Russian cold rolled steel, a product used in the construction and automotive industries, following allegations Russian steelmakers were exporting at unfairly low prices. It also imposed duties on Chinese cold rolled steel.
Why smaller banks take bigger slice of the growing medical marijuana business (Financial Post) The buzz around the cannabis business in 2016 reached an inflection point with medical marijuana companies raising more than $466 million on Canadian capital markets last year.
Canadian tech firms ask Ottawa to give immediate visas after U.S. ban (Reuters) A group of Canadian technology company founders, executives and investors on Sunday called in a letter for Ottawa to immediately give temporary residency to those displaced by a U.S. order banning the entry of people from seven Muslim-majority countries.
Overnight markets
Overview: US 10yr note futures are up 0.0503% at 0-0, S&P 500 futures are down -0.36% at 2280.75, Crude oil futures are down 0% at $53.17, Gold futures are up 0.27% at $1194.3, DXY is up 0.29% at 100.82, CAD/USD is down -0.2% at 0.7618.
US Economic Data
| 8:30 AM | Personal Income, Dec, 0.3%, est. 0.4% (prior 0.0%, revised 0.1%) |
| Personal Spending, Dec, 0.5%, est. 0.5% (prior 0.2%) | |
| PCE Core, m/m, Dec, 0.1%, est. 0.1% (prior 0.0%) | |
| PCE Core, y/y, Dec, 1.7%, est. 1.7% (prior 1.6%, revised 1.7%) | |
| 10:00 AM | Pending Home Sales, m/m, Dec, est. 1.1% (prior -2.5%) |
| Pending Home Sales, NSA, y/y, Dec (prior 1.6%) | |
| 10:30 AM | Dallas Fed Manufacturing Activity, Jan, est. 15.0 (prior 15.5) |
Canadian Economic Data
There is no major economic news for today.
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