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Market Update

Tsys slightly lower, reversing most of the earlier losses which saw the 10Y touch 2.509% at 5:22am ET, now 2.47% (+0.5bps). Tsys weaker in Europe tracking core EGBs with l.t. bund yields 3bps higher, gilts yields higher despite very weak retail sales for Dec (-2.0% vs -0.4%)yet before long gilt syndication next week. GOCs higher, 3 bps tighter vs tsys after Dec Cdn CPI surprised to the downside falling 0.2% vs unch (1.7% vs 1.5% exp) with weakness in food prices (-1.3% , the third monthly decline) offsetting a 5.5% increase in energy. CAD is lower for a third day to a two week low. Provis closed well bid yest for a second day, the positive tone in credit and a well received 10Y OPB Fin deal contributing.OPB issued $750 mln 10s @ 123 vs 10s (117 OTC) with bonds closing 120/117 – still 40 bps back of 10Y Ontarios & ~20 over deposit notes!. Manitoba longs rumoured today (MP46/ONT46 15/14).

News headlines 

 U.S. Futures, Dollar Advance Before Trump Sworn In: Markets Wrap (Bloomberg) U.S. futures climbed with the dollar and Treasuries fell as investors await the start of Donald Trump’s presidency. The Stoxx Europe 600 Index was poised for its worst week since early December while the pound slid after a report showed U.K. retail sales fell at the fastest pace in almost five years last month. Gold headed for a fourth weekly advance.

U.K. Retail-Sales Slump Hints at Cracks in Britain’s Brexit Boom (Bloomberg) U.K. Chancellor of the Exchequer Philip Hammond told a Davos gathering on Friday that an inflation pickup will put a damper on consumers this year. The first signs may already be appearing. Less than an hour before Hammond spoke, data showed retail sales fell at the fastest pace in almost five years in December, recording a 1.9 percent drop that far exceeded even the most pessimistic forecasts in a Bloomberg survey.

EU Said to Warn Deutsche Boerse-LSE Merger May Crush Rivals (Bloomberg) European Union regulators told Deutsche Boerse AG and London Stock Exchange Group Plc that their $12 billion deal to create the region’s dominant exchange operator risks eliminating rivals for clearing services, according to two people who’ve seen the statement of objections.

GE profit rises 35.7 percent (Reuters) General Electric Co reported on Friday a 35.7 percent rise in quarterly profit, helped by strength in its power and renewable energy businesses. Earnings from continuing operations attributable to GE shareholders rose to $3.48 billion in the fourth quarter ended Dec. 31 from $2.57 billion a year earlier.

Rail industry consolidation could be back on the table as Harrison steps down from CP (Financial Post) Consolidation in the rail industry could be back on the front burner after battle-scarred veteran Hunter Harrison stepped down from the head of Canadian Pacific Railway Ltd., reportedly to work his magic at another underperforming railroad.

Fed’s Yellen says unwise to allow U.S. economy to run ‘hot’ (Reuters) With monetary policy still modestly accommodative, the U.S. central bank should continue to raise interest rates slowly or risk harm to the recovery the Fed has sought to nurture, Federal Reserve Chair Janet Yellen said on Thursday.

 Overnight markets 

Overview: US 10yr note futures are down -0.1258% at 124-1, S&P 500 futures are up 0.24% at 2267, Crude oil futures are up 1.52% at $52.15, Gold futures are up 0.05% at $1202.1, DXY is up 0.21% at 101.36, CAD/USD is up 0.48% at 0.7473.

US Economic Data 

There is no major economic news for today

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, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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

Market Update

Tsys still on the back foot with the 10Y 2.44 (+1bp) after stronger eco data (housing starts +11.3%) and after Yellen yest afternoon said the economy is close to the dual mandate goals of full employment and stable inflation, hinting at the possibility of more than two rate increases this yr. Core European bonds in catch-up mode , 10Y gilts 4bps higher, bund yields 2-3bps higher with prices off the lows since ECB decision. As expected the ECB left its bond buying unchanged noting QE could be expended if conditions worsen. Draghi press reiterating need for continued monetary stimulus saying underlying inflation remains subdues. GOCs slightly lower on the open, with Can/US 7-10 bps tighter led by the short end after Poloz mentioned further rate cuts should downside risks be realized , citing ‘significant uncertainties’ with respect to trade under the new US administration.

News headlines 

Futures flat as countdown to Trump’s inauguration begins (Reuters) U.S. stock index futures were little changed on Thursday, with investors seemingly wary of taking on risk ahead of Donald Trump’s swearing-in as U.S. president on Friday.

ECB keeps rates, asset-buying plan unchanged as expected (Reuters) The European Central Bank left interest rates and the main parameters of its asset purchase scheme unchanged as expected on Thursday, keeping unprecedented stimulus in place to aid the bloc’s slow but steady recovery. Markets now turn their attention to ECB President Mario Draghi’s 1330 GMT news conference.

OPEC Seeks to Quiet Doubts on Supply Cuts as Rally Falters (Bloomberg) When OPEC and Russia meet this weekend to gauge progress on their oil-supply deal, they’ll be trying to dispel the shadow of previous unfulfilled promises. Oil prices rose 20 percent in the month after OPEC agreed to cut output, reaching $54.06 a barrel in New York on Dec. 28. Since then, they’ve slipped almost 5 percent as traders, with one eye on rising U.S. shale production, await proof that OPEC and other producers will live up to their deal. They recall how Russia broke its pledge during cutbacks in 2008, while some members of the producers group failed to fully implement the agreement.

Australian Unemployment Rate Climbs as More Join Search for Work (Bloomberg) Australia’s economy added jobs in December, although not enough to prevent the unemployment rate edging up as participation in the workforce increased. December’s data caps a volatile year for Australian jobs, as declining participation for much of 2016 signaled more spare capacity than improved hiring figures suggested.

Don’t Assume Canada Will Rally With U.S., Poloz Warns Investors (Bloomberg) Bank of Canada Governor Stephen Poloz has a message for those betting Canada’s economy will ride shotgun on the U.S. recovery: think again. Canada’s central bank chief spelled out Wednesday how his economy is still diverging from the U.S. two years after an oil shock took hold. His statements cast doubt on the recent rally in the country’s dollar and bond yields that, in the past, have accompanied similar rallies in the U.S.

Canadian Pacific Railway Ltd chief executive steps down early to pursue opportunities at competitors (Financial Post) It appears that larger-than-life railroad executive Hunter Harrison isn’t quite ready to head back to his horse farm. Canadian Pacific Railway Ltd. announced Wednesday that Harrison, 72, will step down immediately. He had originally planned to retire in July, but now intends to “pursue opportunities involving other Class 1 railroads,” CP said, using the industry term to refer to the largest North American railways by revenue.

Overnight markets 

Overview: US 10yr note futures are down -0.426% at 124-6, S&P 500 futures are down -0.04% at 2265.5, Crude oil futures are up 0.96% at $51.57, Gold futures are down -0.96% at $1200.5, DXY is up 0.55% at 101.49, CAD/USD is down 0% at 0.7535.

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, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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