Market update
US tsys trading slightly lower, curve 1bps steeper, US 10Y 2.282 (+1bp). Core Euro bonds higher, curves flatter. German 10Y bunds ~5bps lower, with longs outperforming, 2/30 ~7bps flatter on weaker than exp German IP, lower oil & a rebounding USD. Importantly net supply in the Eurozone turns sharply negative this week according to MNI – Germany is the sole issuer reopening its 2Y this Wed for E3bln, while redemption flows are E14bln. By contrast the US issues $56bln in 3, 10 & 30Y bonds this week starting Tuesday. In Canada, GOCs are higher spds vs tsys unch – Friday saw Can/US tighten to four month lows in the belly on huge divergence in relative employment. We expect provi supply to materialize this week after last week was dominated by banks & Telus.
News headlines
- As Oil Keeps Falling, Nobody Is Blinking (WSJ) The standoff between major global energy producers that has created an oil glut is set to continue next year in full force, as much because of the U.S. as of OPEC.
- Bank of Japan Kuroda says no need to adopt negative deposit rates in Japan (Reuters) Bank of Japan Governor Haruhiko Kuroda said on Monday he saw no need to implement negative deposit rates in Japan as borrowing costs were already very low due to the central bank’s aggressive asset purchases.
- Rate rise belies frailties in US economy (FT) Expectations are carved in stone that the US Federal Reserve will shift borrowing costs higher next week with the central bank’s policy shift seen in some quarters as justifying optimism over the economy.
- China’s forex reserves suffer third-largest monthly decline (FT) China’s foreign exchange reserves posted their third-largest monthly decline on record last month, central bank data showed on Monday, renewing worries about capital outflows after reserves had appeared to stabilise.
- The Stock Market Is Missing the Warning From Junk (WSJ) Junk bonds are headed for their first annual loss since the credit crisis, reflecting concerns among investors that a six-year U.S. economic expansion and accompanying stock-market boom are on borrowed time.
Overnight markets
- Overview: IG24 5Y 78.813/79.683 (+0.834), US 10yr note futures are down -0.04% at 125-28, S&P 500 futures are down -0.17% at 2085.0, Crude oil futures are down -2.85% at 38.83$, Gold futures are down -0.42% at $1079.5, DXY is up +0.44% at 98.783.
US Economic Data
- Labor market conditions for November will be release at 10:00 and is forecasted at 1.6 after a 1.6 level in October.
- Consumer credit is forecast at $19.0B in October versus September $28.9187B.
Canadian Economic Data
- Bloomberg Nanos Canadian Confidence Index will be released today at 10:00am.
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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230