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Market Update

US tsy yields 1-3 bps lower, curve flatter , 10Y 2.388 (-3.1bps). S&P futures lower and crude off 2.0%.  Tsys higher since early European trading as oil slid while UK gilts rally(10Y 1.325 -5.3bps) on Brexit concerns following comments from PM May, also USD softer vs Yen. ECB buying of peripherals rumoured according to MNI, explains  strong tightening in Italy, Spain vs bunds. GOCs higher , outperforming tsys by ~1bp in 10s, block trade in CGBs (1800 ct at 7:51). The US is scheduled to 3/10/30Y bonds starting Tuesday for $56bln, while the BOC auctions $3.9bln in reopened Feb 19s (2Y) notes on Wednesday which will become benchmark.

News headlines

U.S. stock futures dip with oil prices; all eyes on Dow 20,000 (Reuters) U.S. stock index futures were slightly lower as oil prices dipped on Monday, after the Dow Jones Industrial Average came tantalizingly close to 20,000 on Friday. The Dow hit 19,999.63 points on Friday after a late pop in Apple (AAPL.O) and other technology stocks. Wall Street has rallied since Donald Trump won the U.S. election in November as investors bet he will stimulate the economy with lower taxes and infrastructure spending.

Oil down on concerns rising U.S. production could dampen output cut deal (Reuters) Oil fell 2 percent on Monday as signs of growing U.S. production outweighed optimism that many other producers, including Russia, were sticking to a deal to cut supplies in a bid to bolster the market. Brent crude futures LCOc1 were down $1.08, or 1.9 percent, at $56.02 a barrel at 1227 GMT (7:27 a.m. ET), after touching a intra-day low of $55.85. U.S. crude futures CLc1 were trading at $52.99 per barrel, down $1, or 1.9 percent, compared with a session low of $52.85.

Russia cuts oil output by 100,000 bpd in early January: industry sources (Reuters) Russia cut its oil production in early January by around 100,000 barrels per day (bpd) from the previous month after an agreement with OPEC to cap global crude output, two sources from the energy sector told Reuters on Monday. Russia’s oil and gas condensate output averaged 11.1 million barrels per day (bpd) in the period from Jan. 1 to Jan. 8, according to the two sources. This was down from 11.21 million bpd in December and October’s level of 11.247 million bpd, a starting point for output reduction agreed with the Organization of the Petroleum Exporting Countries.

May Signals U.K. to Quit Single Market to Curb Immigration (Bloomberg) U.K. Prime Minister Theresa May signaled regaining control of immigration and lawmaking are her Brexit priorities even if that means quitting Europe’s single market. The pound fell to a 10-week low. In her first televised interview of the new year, May told Sky News on Sunday that leaving the European Union will be about “getting the right relationship, not about keeping bits of membership.”

Offshore Yuan Falls for Second Day as Bears Reload After Squeeze (Bloomberg) The yuan’s volatile start to 2017 showed no signs of abating, with the offshore currency tumbling for a second day as China’s central bank weakened its fixing by the most since June. The exchange rate fell 0.5 percent to 6.8844 per dollar as of 5:24 p.m. in Hong Kong, extending a 0.9 percent drop on Friday that was the biggest in a year. The offshore yuan is set to post the biggest two-day slump since June today, after moving 0.5 percent or more in four of the six trading sessions so far this year, a magnitude it only surpassed 11 times in all of 2016.

Magna International Inc gears up for 42% revenue boom over the next decade as cars get more complicated (Financial Post) Cars have never been more complex, and with that complexity comes an opportunity for parts suppliers to significantly increase their content per vehicle, according to the chief technology officer of Magna International Inc. Cars have never been more complex, and with that complexity comes an opportunity for parts suppliers to significantly increase their content per vehicle, according to the chief technology officer of Magna International Inc.

PMO held talks with Trump team to avert trade war (TheGlobeAndMail) Prime Minister Justin Trudeau’s most trusted lieutenants have held talks with top advisers to U.S. president-elect Donald Trump in an attempt to avert a costly trade war between the neighbouring nations. Mr. Trudeau’s principal secretary Gerald Butts, chief of staff Katie Telford and Canada’s ambassador to the United States, David MacNaughton, have met several times in Washington, in what have been described as bridge-building talks with Jared Kushner, Mr. Trump’s son-in-law, and Stephen Bannon, chief strategist and senior counsellor to the incoming Republican president.

Overnight markets 

Overview: US 10yr note futures are up 0.3014% at 124-25, S&P 500 futures are down -0.15% at 2268, Crude oil futures are down -1.98% at $52.92, Gold futures are up 0.64% at $1180.9, DXY is up 0.04% at 102.26, CAD/USD is up 0.07% at 0.755.

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

Market Update

Post non farm :US tsys sharply lower after Dec payrolls fell short (156k vs 175k) but AHE rose 2.9% vs 2.8% exp. while Nov payrolls where revised sharply higher to 204k from 178k.  Yields 2-4 bps higher led by the 5Y, with the 10Y 2.386% from 2.33% low pre eco data. Cdn data also very strong:  employment rose 53.7k last month vs -2.5k exp – even accounting for monthly vol this is a strong beat!, full time rising 81.3k vs -8.7k .  Can/US ~5-7bps wider even in the downtrade. Considering how much the mkt has rallied just since mid Dec ~20bps in US 10s , the mkt is ripe for a correction even thou specs (CFTC 10Y specs) are the are record short 341k contracts.  Keep in mind there is $56bln in Tsy supply next week while US IG supply which came in above $20bln thi week is likely to be heavy next week as well with associated rate locks limiting any potential rebound.

News headlines 

Second Wind for Dollar Before Jobs Undercuts Bonds: Markets Wrap (Bloomberg) The dollar rebounded as Treasuries fell before U.S. data expected to show sustained growth in hiring. Global stocks headed for the best start to the year since 2013. As the greenback stabilized Friday after a two-day tumble, the yen, euro and British pound all weakened and the Turkish lira extended losses. China’s offshore yuan pared a record weekly rally triggered by government curbs while a second intervention by Mexico’s central bank sent the peso to the top of the stack among major currencies. Oil declined and Treasuries snapped their biggest post-Brexit rally.

Oil prices post gains on OPEC hopes, but doubts linger (Reuters) Oil prices edged higher on Friday as output cuts by OPEC members met with lingering concern that other producers could try to shirk their share of planned decreases aimed at curbing global oversupply.

Yuan Pares Record Rally as Goldman Says Now’s the Time to Sell (Bloomberg) The offshore yuan pared its record weekly rally as China’s central bank raised its fixing less than projected and some analysts reiterated their bearish views on the currency. The exchange rate fell as much as 1.1 percent to 6.8623 a dollar in Hong Kong, the most since this day last year, after a 2.5 percent surge over the past two sessions. Goldman Sachs Group Inc. advised clients that the best times to bet against the yuan have tended to be after interventions that flushed out bearish positions, or when China concerns were off traders’ radar screens.

Euro-Area Economic Confidence Jumps to Highest Since 2011 (Bloomberg) Euro-area economic confidence jumped to the highest since 2011 at the end of last year after the European Central Bank extended its stimulus and the recovery in the 19-nation region showed further signs of strengthening. An index of executive and consumer sentiment increased to 107.8 in December from a revised 106.6 in November, the European Commission in Brussels said on Friday. That’s the strongest reading since March 2011 and compares with a forecast of 106.8 in a Bloomberg survey.

China central bank urges rational investment in bitcoin (Reuters) China’s institutional and individual investors should take a rational approach to investing in virtual currencies such as bitcoin, the central bank said on Friday. Bitcoin prices had showed abnormal fluctuations, the Shanghai head office of the People’s Bank of China (PBOC) said in a notice.

Canadian pensions see boost from rising bond yields after Trump victory (TheGlobeAndMail) Canadian pension plans ended 2016 with an average 95-per-cent solvency funding level, a dramatic improvement from the start of the year due to major gains from equity investments and climbing bond yields following Donald Trump’s election victory. An analysis by pension-consulting firm Aon Hewitt shows more than 35 per cent of the firm’s Canadian pension-plan clients were fully funded or had a surplus by the end of 2016, up from just 10.7 per cent at the start of the year, giving many more plans a cushion to weather future volatility.

Overnight markets                                                                     

Overview: US 10yr note futures are down -0.2378% at 124-17, S&P 500 futures are up 0.06% at 2265.5, Crude oil futures are up 0.33% at $53.94, Gold futures are down -0.66% at $1173.5, DXY is up 0.5% at 102.03, CAD/USD is down -0.08% at 0.7568.

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

Market Update

Tsys prices open NY higher, but well off 2am ET highs, after FX-tied buying in Asia was followed by UK drift. High-grade corporate bond issuance busy. US ADP sees 153’000 for December private Payrolls. Treasuries gain mildly on softer than expected ADP, 10Y note now is at 2.432%.

News headlines 

Dollar Rally Stymied by China, Fed as Gold Climbs: Markets Wrap (Bloomberg) The dollar faced further headwinds as Chinese efforts to stem capital outflows and the Federal Reserve conspired to halt the strongest rally in the currency in more than a decade. Gold rose.

Oil prices rise as Saudi Arabia discusses supply cuts (Reuters) Oil prices rose on Thursday after Saudi Arabia started talks with customers about a reduction in crude sales to support a plan by OPEC to reduce global supply. The Organization of the Petroleum Exporting Countries promised in November to cut output to help prop up prices.

China’s yuan soars against dollar as liquidity tightens offshore (Reuters) China’s yuan soared against the U.S. dollar on Thursday following a sharp rise in the offshore spot rate as China worked to stem capital flows and stabilise the currency ahead of Donald Trump’s inauguration as U.S. president and the Lunar New Year.

Canadian, U.S. car sales hit record levels in 2016 (TheGlobeAndMail) Canadians and Americans wore out the showroom floors of car dealerships in 2016, driving auto makers to record sales years in both markets. Auto makers sold 1.95 million vehicles in Canada, the fourth consecutive year that sales have hit a record. The 2016 level was achieved despite a plunge in oil prices that sent sales tumbling in Alberta, the third largest market in the country

UK services sector grows at fastest pace for more than a year (TheGuardian) Britain’s services sector grew at the fastest pace for 17 months in December, according to a survey that has raised hopes for a strong end to 2016 for the economy. There was also a pick-up in new business and job creation, according to the poll of firms from the UK’s biggest sector, which includes banks, hotels and transport. But news that companies increased their prices at the fastest pace for more than five years will intensify worries over the weak pound stoking inflation in the months ahead and raises the prospect of interest rates going up this year.

Toronto Housing Has a Record Year Amid Supply Shortages (Bloomberg) Toronto’s housing market posted a record year in 2016 that saw double-digit price gains, tightening supply and the cost of an average home surpass C$700,000 ($526,355) for the first time. Sales figures released Thursday by the Toronto Real Estate Board show the city’s realtors sold C$82.6 billion worth of homes last year, an increase of almost C$20 billion from 2015. Unit sales rose 12 percent and prices increased by more than C$100,000 to an average C$729,922. That’s up 17 percent from last year — the largest annual gain since 1989.

Top Forecaster Sees Loonie Extending G-10’s Best Advance in 2017 (Bloomberg) The Canadian dollar will strengthen in 2017 as the country’s economy accelerates in the second half of the year and worries over U.S. President-elect Donald Trump’s trade policies fade, according to the most accurate forecaster of the currency.

Overnight markets  

Overview: US 10yr note futures are up 0.1637% at 124-10, S&P 500 futures are down -0.15% at 2260.75, Crude oil futures are up 0.73% at $53.65, Gold futures are up 0.88% at $1175.5, DXY is down -0.42% at 102.27, CAD/USD is down 0% at 0.7519.

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