Comments

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 

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

Market Update

US tsys higher, erasing earlier slight losses, 10Y 2.506 after a miss on Q4 – mostly on trade as final sales rose 2.1% vs 1.8%. Light volume overnight as China closed for New Year. Core European bonds higher, 10Y gilts 2.5bps lower @ 1.485% on no data but before BOE MPC & inflation report next week. The 10Y gilt yield reached a new closing high 1.515 yest on the back of stronger Q4 GDP & odds of a rate hike before y/e have increased substantially just in the last month despite uncertainty raised by the Brexit vote. Month end extensions in the Eurozone should also support the flattening thesis, with the Bloomberg-Barclays Pan Euro Agg rising 0.12 vs 0.05 last Feb. Eurozone sovereign bond issuance next week expected to be ~E24bln against heavy redemptions from Germany & the Neth of ~E45bln, so net supply drops off heavily from E25bln this week to E-35bln per estimates from MNI. GOCs unch, 10Y 1.82%, curve 0.5bps steeper. Provis unch from yest close despite another QC 10Y and Ontario 5Y Green Bond.  Power Corp issued $250mln (upsized) longs @ 232 which broke 8-10 tighter.

News headlines 

Dollar Pares Weekly Loss, Global Stock Rally Eases: Markets Wrap (Bloomberg) The dollar pared its weekly loss, benefiting from central bank action in Japan and heightened political risks from Turkey to Mexico. European stocks retreated as UBS Group AG led a decline in banking shares.

Oil prices fall as focus shifts to U.S. output (Reuters) Oil prices slipped on Friday, giving up gains from earlier in the day, as market shifted its focus towards production increases in the United States from efforts by OPEC and other producers to support prices by cutting supplies.

Weak exports may crimp U.S. fourth-quarter economic growth (Reuters) U.S. economic growth likely slowed in the fourth quarter as a plunge in shipments of soybeans weighed on exports, but a healthy increase in consumer spending and rising business investment should underscore the economy’s underlying momentum.

CMHC issues alert for Victoria housing, warns of ‘overvaluation’ (GlobeandMail) Canada’s housing agency has added Victoria to its list of real estate markets with problems, seeing danger signs in the B.C. capital’s home values. Canada Mortgage and Housing Corp. said Thursday that it is maintaining its “red warning” for the country’s real estate market as a whole, with high prices in and around Vancouver and Toronto among its top concerns.

Japan Dec core consumer prices fall at slowest pace in nearly a year (Reuters) Japan’s core consumer prices fell at the slowest annual pace in nearly a year in December, data showed on Friday, a sign inflation should pick up in coming months on a rebound in oil costs and rising import costs from a weak yen.

Hackers are bombarding the Bank of Canada with cyber attacks and the chink in the bank’s armour is its employees (Financial Post) Employees at the Bank of Canada in November 2015 were bombarded with 25,000 similar, innocuous-looking emails. The messages came in both official languages, politely asking recipients to review an invoice in an attached Microsoft Word document. The document was armed with code that would attempt to install a colourfully named program — putinanalking.exe — carrying malware designed to steal banking credentials. 

Overnight markets 

Overview: US 10yr note futures are down -0.0378% at 0-0, S&P 500 futures are down 0% at 2294, Crude oil futures are down -0.58% at $53.47, Gold futures are down -0.43% at $1187.4, DXY is up 0.16% at 100.54, CAD/USD is up 0.14% at 0.7626.

US Economic Data

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