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Market Update

Tsys slightly weaker led by the 10Y rising above 2.63% for the first time since March 14th, curve steeper for a second day after 5bps selloff in longs yesterday.  Fear of a govt shutdown weighing on stocks, giving a boost to tsys which are off the o/n lows. Core Euro bonds lower in line with tsys, 10Y bund 0.58%, closing in on the 0.60% level from last July. In Canada, despite BOC ‘dovish hike’, yields pressured higher led by the 10Y sector . The 5Y auction yest (March 2023 reopening) saw better than avg b/c with a 0.2bp tail. Longs continue to be bid on the curve, even as the tsy curve steepened 10s30s, the 10s30s Can/US box at a two month low. provis ended 1-2bps wider despie a well received 10Y Quebec issue @ 54 , now 56/55, QC/Ont 10Y unch -3.2bps.  Primary mkt busy yest with H&R reit 5Y,  Toyota 5Y & 2.5Y FRN , as well as Lloyds 7Y Maple @ 135 which broke 3bps tighter. 

News headlines

U.S. House Passes Spending Bill to Avoid Government Shutdown, Senate in Doubt ( Bloomberg) The House passed a spending bill Thursday to avoid a U.S. government shutdown, but Senate Democrats say they have the votes to block the measure in a bid to force Republicans and President Donald Trump to include protection for young immigrants.

IEA Sees ‘Explosive’ Growth in U.S. Oil Output as Prices Rally (Bloomberg) OPEC’s fear that another surge of shale oil could neutralize its production cuts might be coming true. U.S. oil output is set for “explosive” growth this year as prices rally, the International Energy Agency said on Friday. That was just one of a chorus of voices from Goldman Sachs group Inc. to OPEC itself warning of a looming output surge reminiscent of the “heady days” of the first shale boom.

Morneau Was Reassured About Higher Canadian Rates Last Summer (Bloomberg) Canadian government officials reassured Finance Minister Bill Morneau last summer to not worry too much about coming hikes in interest rates, claiming they would be easily absorbed by the nation’s growing economy. In an analysis delivered to Morneau in August on the impact of higher rates, the finance department said the extent of likely increases — based on economist expectations at the time — would be gradual and take place within a backdrop of a growing economy.

White House Considers Fed Insider Williams for Vice Chair (Bloomberg) Long-time Federal Reserve insider John Williams has been interviewed by the White House for the post of vice chairman of the U.S. central bank, according to a person familiar with the discussions, though he was not viewed as being on the short-list for the job. Williams, 55, is currently president of the Fed’s regional bank in San Francisco, where he took the reins in 2011 from Janet Yellen, who went on to become Fed Chair. He began his Fed career in 1994 in Washington and has also lectured at Stanford University. Williams served as a senior economist in President Bill Clinton’s Council of Economic Advisers.

U.K. Retailers See Black Friday Hangover as Sales Slump (Bloomberg) U.K. retail sales fell the most in 18 months in December as a post-Black Friday lull rounded off a rough year for British shops. It’s further evidence that inflation and shaky consumer confidence are hitting British stores, many of whom remain cautious about the outlook for the coming year. Fourth quarter sales gained just 0.4 percent, half the pace seen in the previous three months.

Bond Markets’ Last Line of Resistance Faces Digital Encroachment (Bloomberg) Digital disruption, which has changed the face of trading equities, currencies and some government debt, is arriving at one of the last bastions of resistance: the syndicate desk, where corporate bonds are priced and distributed. Selling new issues is a linchpin of investment banks’ profitability. Bond arranging generated about $14 billion for the eight largest banks in the first three quarters of 2017, more than double the haul from equity underwriting, according to data compiled by Bloomberg Intelligence.

U.S. said to be losing patience over NAFTA talks (BNN) The U.S. is running out of patience with Canadian and Mexican resistance to key American proposals ahead of talks next week on a new North American Free Trade Agreement, two people familiar with the matter said. The U.S. is serious about its threat to withdraw from the North American Free Trade Agreement if there’s no breakthrough on proposals the Trump administration has made that are intended to rebalance trade, said one of the people, who spoke on condition of anonymity because the negotiations aren’t public. The Trump administration wants to see serious counteroffers to U.S. demands like tightening content requirements for cars.

Overnight markets

Overview: US 10yr note futures are down 0% at 122-15, S&P 500 futures are up 0.1% at 2799, Crude oil futures are down -1.34% at $63.09, Gold futures are up 0.59% at $1335, DXY is down -0.05% at 90.452, CAD/USD is up 0.19% at 0.8039.

US Economic Data

Canadian Economic Data

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

Market Update

Tsys trading weaker, close to overnight lows, with the 10Y above 2.60% since March, now 2.61 (+2bps), heavy volume in TY futures (580k), stops triggered in futures, convexity holding on break above 2.60% (MNI). Core Euro bonds also lower, thou 10Y bund has rebounded from o/n losses on comments from Bundesbank Pres Weidmann that Germany should not expand fiscal policy, the 10Y tsy/bund spd widening from 10bps over the week to 204. GOCs weaker in line with tsys, curve steeper.  GOC made round trip yesterday, yields essentially unch in wake of ‘dovish hike’  – with the curve ~1bp steeper. 10Y GOC above 2.20% resistance, highest since Sep 2014. 

News headlines

House Heads for Vote on Stopgap Funding Plan: Shutdown Update (Bloomberg) Temporary government funding runs out Jan. 19 and the House and Senate will have to pass a temporary extension to avoid a partial shutdown of the federal government. Democrats are demanding that spending legislation include a provision permanently shielding about 690,000 undocumented immigrants brought to the U.S. as children from deportation.

China’s economy grew 6.9% in 2017, topping both the official target and 2016’s growth (NBC) China’s economy grew 6.9 percent in 2017, ending the year on a positive note as official figures topped the government target of around 6.5 percent, the country’s statistics bureau said on Thursday.

OPEC-Russia Oil Deal Faces a New Danger: Too Much Winning (Bloomberg) When OPEC and Russia meet this weekend to review their strategy for clearing a global oil glut, they’ll face an unusual problem: it could be working just a bit too well.

Goldman Is Worth Less Than Morgan Stanley for the First Time in a Decade (Bloomberg) For the first time in over a decade, Goldman Sachs Group Inc. is worth less than its longtime rival, Morgan Stanley, at least in the eyes of equity investors. After reporting a plunge in bond trading, Goldman’s market capitalization fell to $99.4 billion at the close on Wednesday, a fraction less than Morgan Stanley. That snapped a 4,105-day streak, which started on Oct. 23, 2006.

U.S. Treasury Yield Hits 2.6%; Europe Stocks Mixed: Markets Wrap (Bloomberg) U.S. bonds extended a drop to send the 10-year Treasury yield above 2.6 percent for the first time since March, though it did little to help the dollar hold on to Wednesday’s gain. The euro strengthened while European stocks were mixed.

Bank of Canada hikes rates, takes dovish tone amid NAFTA clouds (Reuters) The Bank of Canada raised interest rates on Wednesday, as expected, as job growth and firmer inflation outweighed the cloud of NAFTA uncertainty, but the head of the central bank admitted the decision was not a no-brainer.

Trump says terminating NAFTA would yield the ‘best deal’ in renegotiations (Reuters) U.S. President Donald Trump on Wednesday said that terminating the North American Free Trade Agreement would result in the “best deal” to revamp the 24-year-old trade pact with Canada and Mexico in favor of U.S. interests.

Overnight markets

Overview: US 10yr note futures are down -0.178% at 122-14, S&P 500 futures are down -0.1% at 2801, Crude oil futures are up 0.14% at $64.06, Gold futures are down -0.77% at $1328.9, DXY is up 0.05% at 90.585, CAD/USD is up 0.14% at 0.8032.

US Economic Data

Canadian Economic Data

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

Market Update

Tsys weaker, yields up 1-2 bps with the long end outperforming, 10Y 2.557% (+2bps), equities slightly lower in Europe while S&P futures are +9.75 while the USD index is higher after falling to a three year low yesterday – dovish comments from ECB members Contancio & Nowotny undercut earlier EUR strength above $1.23. GS Q4 earnings beat yet the stock 0.8% lower, FICC revenues fell 50%, overall trading fell 34% vs -22% consensus Core Euro bonds higher, Eurozone inflation in line with expectations, German 30Y bund auction saw solid demand even as the 10s30s bund curve has collapsed over the past week from 85 to 72 a low since last April.  In Canada, GOCs lower, outperforming tsys across the curve . BOC rate decision & MPR at 10:00, a 25bp hike widely expected with OIS pricing in ~80% odds. Citi pricing a three tranche deal today – 5NC4 fixed-floater, 5NC4 FRN and a 21NC20. The 5NC4 fixed guidance @ 87.5 looks ~6bps cheaper to the C 3.39 21 Maple. 

News headlines

House GOP Bid to Avert Shutdown Gains Steam as Deadline Nears (Bloomberg)  House Republicans are coalescing around a plan to try and force the Senate to accept a short-term spending bill this week that doesn’t address immigration issues and other demands from Democrats in order to avoid a government shutdown after Jan. 19.

Bitcoin Adds to Slump That Shook Global Cryptocurrency Market (Bloomberg) Bitcoin slowed its decline on Wednesday in the wake of a 23 percent plunge that rocked the global market for digital assets and sparked deeper questions about its future. The biggest cryptocurrency slid 2.2 percent to $10,487 as of 12:28 p.m. in London, giving up an earlier 10 percent gain and approaching the $10,000 level not seen since December. Its tepid resilience helped buoy other large cryptocurrencies, with ripple and ethereum fluctuating with single-digit gains and losses.

Goldman’s Commodity Revenue Drops 75% to Lowest on Record (Bloomberg) Goldman Sachs Group Inc. suffered the worst annual commodities performance in its history as a public company as a drop of about 75 percent in net revenue in 2017 put it behind long-time rival Morgan Stanley, according to people familiar with the matter.

Stock Gains Ease as Dollar Strengthens; Oil Slips: Markets Wrap (Bloomberg) European stocks struggled for traction following declines for many Asian peers as the earnings season got into full swing. U.S. futures rallied along with the dollar, and gold extended Tuesday’s drop.

Currency Traders Brace for Possible ‘Hawkish Hold’ by Bank of Canada (Bloomberg) Foreign-exchange traders who had all but priced in a Bank of Canada rate hike are suddenly paying up to hedge against the risk of a letdown at Wednesday’s policy meeting.

Stocks pull back from record highs, set for second day of losses in new year (Reuters) World shares pulled back from record highs on Wednesday, set for only their second day of losses in the new year as lower commodity prices and a string of downbeat updates from companies dampened the mood in global markets.

Bank of America profit slumps on $2.9 billion tax charge (Reuters)  The lender’s net income fell to $2.37 billion, or 20 cents per share, for the quarter ended Dec. 31 from $4.54 billion, or 39 cents per share, in the year earlier period.

Overnight markets

Overview: US 10yr note futures are down -0.127% at 122-27, S&P 500 futures are up 0.34% at 2792, Crude oil futures are down -0.11% at $63.66, Gold futures are down -0.08% at $1336, DXY is up 0.41% at 90.763, CAD/USD is up 0.01% at 0.8041.

US Economic Data

Canadian Economic Data

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