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Market Update

US tsys mixed, curve 3bps steeper with the 30Y +2.5bps @2.38, 10Y 2.367 (+1bp), .  Tsys saw mild bid in Asia after Yellen noted there was ‘some hint’ inflation expectations were drifting lower. Prices reverted to o/n lows in Europe with German bunds as ECB member Coeure sounded hawkish in interview with German newspaper saying the link between QE and inflation could be loosened before Sep, questions effectiveness of APP on inflation.  German 2s10s bund curve ~1bp flatter @ 106 – the narrowest since July, the UST curve close to flattest in a decade.  Gilt curve also flattening after UK budget lowers 2018 growth forecast but raises total borrowings by 0.9bln  to Stg 115.1bln. In Canada, GOCs unch, lagging the steepening in the US, Can/US 2Y ~2bps wider @ -29bps close to richest levels since July before today’s 2Y auction $3.6bln reopened Feb 20s with the roll 3.1/2.9. The relative attraction of our front end vs the US is not as apparent after steady outperformance since Oct yet the roll vs 2s looks cheap @3bps given it has averaged ~2.5bps over the past month. Provincials in focus – Ontario 10Y yest @ 62, now 60/59 – strong demand across the curve. QC/Ont 48 -1/-1.2  unch, Quebec fiscal update announced $1.1bln in tax cuts,  with 2017-18 borrowing set to increase from $11.3bln to $14.8bln. No impact on spreads. Upcoming index extension is expected to be a tailwind for long provis –  the provi index is expected to rise ~0.03 yrs in Dec, accounting for half of the universe 0.06 yr increase.

News headlines

Fed Debate Over Rate-Hike Pace in Focus Amid Strong Job Market (Bloomberg) Federal Reserve officials have penciled in a gradual path for raising interest rates, but minutes of their last meeting may show increasing concern that the U.S. labor market is overheating.

Dollar, Bonds Slip as Stocks Climb; Pound Retreats: Markets Wrap (Bloomberg) The dollar edged lower with Treasuries after Federal Reserve Chair Janet Yellen warned against rapid interest rate increases. European government bonds also fell, while stocks in the region tracked a global rally. The pound fell as investors digested the U.K. budget.

 U.K. Budget Deficit Widens as Inflation Boosts Debt Costs (Bloomberg) Britain’s fiscal deficit unexpectedly widened as inflation saw debt costs rise to the highest for any October in four years. Net borrowing was 8 billion pounds ($10.6 billion) compared with 7.5 billion pounds a year earlier, the Office for National Statistics said Tuesday. Economists had expected it to narrow to 7.1 billion pounds, the median estimate in a Bloomberg survey showed.

Oil Climbs to Two-Year High as Stockpiles Fall Before OPEC Meets (Bloomberg) Oil climbed to a two-year high as U.S. industry data showed crude stockpiles resumed declines and investors awaited a decision by OPEC on extending output cuts. January futures rose as much as 2.2 percent in New York, the highest since mid-2015. U.S. inventories fell by 6.36 million barrels last week, the American Petroleum Institute was said to report. That’s more than forecast in a Bloomberg survey, which shows a drop of 2.2 million barrels ahead of government data later Wednesday.

S&P 500 Hits Record; Nafta Progress Boosts Peso: Markets Wrap (Bloomberg) U.S. stocks hit a new high, while the Canadian dollar and Mexican peso scored gains after a report of progress in negotiations over the North American Free Trade Agreement.

US existing home sales increase more than expected (CNBC) U.S. home sales increased more than expected in October as hurricane-related disruptions dissipated, but a chronic shortage of houses which is pushing prices beyond the reach of some first-time buyers remains an obstacle.

Grocer Metro Inc. reports fourth-quarter profit up from year ago, sales higher (Canadian Press) Metro Inc. says it earned $154.9 million in its fourth quarter up from $145.0 million a year ago. The grocer (TSX:MRU) says the profit amounted to 66 cents per diluted share for the quarter which included an extra week compared with the fourth quarter last year when it earned 60 cents per diluted share. Sales totalled $3.23 billion, up from $2.93 billion, while same store sales gained 0.4 per cent.

Quebec to monitor property sales to foreign buyers, no tax planned (Reuters) Quebec said on Tuesday it plans to monitor the sale of property to and by foreign investors in the Canadian province by requiring the address of their primary residences in a bid to track overseas inflows into the real estate market.

Overnight markets

Overview: US 10yr note futures are up 0.025% at 124-23, S&P 500 futures are up 0.1% at 2598.75, Crude oil futures are up 1.85% at $57.88, Gold futures are up 0.23% at $1284.6, DXY is down -0.11% at 93.844, CAD/USD is down -0.25% at 0.7846.

US Economic Data

Canadian Economic Data

There is no Canadian Economic Data 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, Hugues Savard

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Market Update

Tsys mixed, long end outperforming, new lows for 2s10s new low 58.73 overnite, 10Y 2.36%. Equities firmer (S&P fut +7.5), gold recovering somewhat after yesterday’s $15 decline, the largest since Sep. Crude reversing earlier gains now flat @ 56.33. Core EGB curves flatter as well, gilt curve 2bps flatter led by the long end- UK Budget tomorrow with some analysts expecting a cut in gilt issuance for 2017-18 fy from this year’s GBP 114.2bln. German 10Y bund yield 1bp lower @ 0.35%, long end leading with 30Y @ new low 1.20% – gross EGB supply falls to only E2.2bln (Finland 10Y and Germany 30Y) from over E35bln last week, seasonal slowing of issuance into y/e.  GOCs higher outperforming tsys in 10s by ~1.5bps  after spike  in CGBS , longs lagging on the curve. Yest saw Can/US end 1-2bps cheaper led by the long end after more 30Y provi/corp supply – $300mln Manitoba 48s @  86 (onts +12), deal went so-so, $430mln CU longs @ 124 (guidance 126 +/- 3) broke 1wider.

News headlines 

Yellen Says She’ll Leave Fed Once Powell Is Sworn In as Chairman (Bloomberg) Federal Reserve Chair Janet Yellen said she will step down from its Board of Governors once her successor is sworn into the office, widening the scope for President Donald Trump to shape the U.S. central bank’s leadership for years to come.

AT&T, U.S. Prepare to Battle in Court Over Time Warner Merger (Bloomberg) A defiant Randall Stephenson told antitrust enforcers that AT&T Inc. would see them in court after the Justice Department sued to block the company’s $85.4 billion bid to buy Time Warner Inc.

Brexit-Hit Banks to Start Moving Staff Abroad in Early 2018 (Bloomberg) U.K. politicians are fighting to get a deal early next year that will ease businesses’ panic about Brexit. For some industries, it’s probably too late. Barring some major breakthrough, global banks will implement their relocation plans early next year to guarantee they’re able to have new offices inside the European Union running by the time the U.K. exits, people with knowledge of the matter said. There’s little Prime Minister Theresa May can do to stop lenders from executing their contingency plans, if they haven’t already, said one of the people.

Merkel Tells Her German Rivals: Back Me or Face Voters Again (Bloomberg) German Chancellor Angela Merkel said she’s ready to face voters again to break the country’s political stalemate, betting they won’t blame her for failed talks on forming a coalition.

Global Stocks Gain as Bonds Rise; Dollar Slips: Markets Wrap (Bloomberg) Stocks pushed higher, while bonds across Europe followed a rise in Treasuries after the European Central Bank was said to be likely to make only small adjustments to its guidance on monetary policy next year.

Turkey Lifts Bank-Funding Cost as Lira Drops to All-Time Low (Bloomberg) The Turkish lira weakened to a record low and bonds tumbled, pressuring policy makers to find ways of staunching a market rout that’s putting them at odds with President Recep Tayyip Erdogan.

Royal Bank of Canada Designated a Global Systemically Important Bank (Newswire) Royal Bank of Canada (RY on TSX and NYSE) today announced it has been named a Global Systemically Important Bank (G-SIB) by the Financial Stability Board (FSB), based in Basel, Switzerland. This designation reflects the size and scale of RBC’s global operations.

Nebraska OKs ‘alternative route’ for Keystone XL pipeline (CBC) TransCanada Corp.’s Keystone XL pipeline won approval Monday from regulators in Nebraska, but state regulators did not OK the company’s preferred route. Instead, the commission approved the so-called “mainline alternative route” for the pipeline, which is a slightly different path from the preferred route proposed by TransCanada. Pipeline opponents were cheered by the result.

Overnight markets

Overview: US 10yr note futures are up 0.05% at 124-24, S&P 500 futures are up 0.32% at 2590.25, Crude oil futures are up 0.14% at $56.5, Gold futures are up 0.23% at $1278.2, DXY is up 0.05% at 94.126, CAD/USD is down -0.12% at 0.7809.

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

US tsys trading modestly lower, yields 0.5-1bp higher, 10Y 2.355%, TY futures bottom  o/n range. Tsy’s earlier boost from bunds after breakdown in German govt coalition now being unwound with reports Merkel unwilling to accept breakdown in coalition talks; German yields unch  while the Euro has given up very little (0.20%) of its o/n gains. UK gilts lower after reports PM May is willing to increase her ‘divorce’ payment to the EU. GOCs lower, spds  ~0.5bps wider vs tsys. Can/US consolidating across the curve after recent gains, the CAD close to 1.28 resistance with NAFTA talks the main risk this week as the data calendar is fairly thin with only Sep retail sales (Thurs) in top tier.  We feel there is asymmetric risk to Can/US in the face of a potential failure in NAFTA talks.  Provi spreads opening 0.5bps wider , supply likely to thin out this week after a busy week on the issuance front last week – $1.3bln in provi & $2.5bln CMBs.

News headlines  

Merkel’s Attempt to Form a New German Government Collapses (Bloomberg) German Chancellor Angela Merkel’s bid to form a new government failed, raising the prospect of fresh elections in Europe’s largest economy and casting doubt on the future of its longest-serving leader.

Euro Shrugs Off German Impasse as Stocks Rebound: Markets Wrap (Bloomberg) The euro pared a decline and stocks gained as investors judged the failure of German Chancellor Angela Merkel’s coalition talks unlikely to harm the outlook for the region’s economy. Sterling strengthened after reports the U.K. may make concessions to smooth Brexit negotiations.

Republicans’ Sprint to a Tax Overhaul: Public Votes, Private Talks (Bloomberg) The Republican tax-overhaul effort is in for a marathon debate on the Senate floor at the end of this month, with dozens of doomed Democratic amendments. But the real action will be elsewhere, behind closed doors.

Trump Counts on Fed to Help Sustain Economic Bump From Tax Plan (Bloomberg)  The Trump administration is banking on the Federal Reserve not to squelch any bump in economic growth from the Republican tax plan. White House chief economist Kevin Hassett argues that the tax overhaul will boost productivity, allowing the U.S. economy to grow more rapidly without risking a damaging bout of higher inflation that would be an anathema to the Fed.

U.K. Preparing Enhanced Brexit Cash Offer Ahead of Summit (Bloomberg) The U.K. could be about to improve its financial offer to the European Union ahead of a crucial meeting of the bloc’s leaders in December. Members of Prime Minister Theresa May’s divided cabinet will consider Britain’s divorce from the EU at a meeting Monday afternoon of the Brexit sub-committee that could be key to unlocking the most controversial matter in the negotiations — money.

China’s Shadow Bank Clampdown Hits Stock Market (Bloomberg) Chinese stocks rallied in late trade as markets took a closer look at the nation’s new plans to rein in shadow banks and some traders speculated that state funds would act to stem excessive losses.

Nebraska to decide fate of controversial Keystone XL pipeline (Reuters) Nebraska regulators will announce their decision on Monday on whether to approve TransCanada Corp’s Keystone XL pipeline route through the state, the last big hurdle for the long-delayed project.

Canada, Mexico to question U.S. auto content demands at NAFTA talks (Reuters) Canada and Mexico will not make counterproposals to U.S. demands for tougher NAFTA automotive content rules but instead will offer rebuttals and pepper American negotiators with technical questions on Monday, people familiar with the talks said.

Overnight markets

Overview: US 10yr note futures are up 0.113% at 125-02, S&P 500 futures are down -0.01% at 2576, Crude oil futures are down -0.58% at $56.22, Gold futures are down -0.26% at $1293.1, DXY is up 0.1% at 93.754, CAD/USD is up 0.18% at 0.7819.

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