Commentaires

Market Update

US tsys trading lower, yields 1.6 – 2.3 higher across the curve, US 10Y 2.388 (+2.4bps), curve 0.5bps steeper after US small business optimism, as measured by the NFIB index, rose to a 12-year high in Dec to 105.8. Tsys pressured in Europe after unch Asia session despite China factory prices rising to a five year high in Dec. France IP surged 2.2% vs 0.6% exp , the UK FTSE  for 9th straight day to record high. The CITI Eurozone eco surprise index has surged to a three year high, and coupled with renewed inflation concerns (the EUR 5Y5Y infl swap pushing above 1.75%) and EGB supply (Netherlands & Austria longs) raises odds of a retracement in 10Y bund yields back above 0.40% from ~0.28% currently.  GOCs lower, CGBs moving lower in lockstep with tsys in recent trade. Provis opening unch with supply expected to materialize as generic spreads are at one year tights,  new Ont 10Y 2027 rumoured. Algonquin Power (BBB/BBBL) in road show – no deal imminent , next maturity is 2018 thou the company has been in acquisition mode. Honda Finance (A1/AH) in the mkt with a 3.25Y FRN & $400 mln 5.5Y fixed (July 2022) @ ~ 105bps, which looks 2-3bps cheap based on Dec 21s at 95 OTC.

News headlines 

Stocks and dollar fall; sterling reels from Brexit pain (Reuters) Risky assets hit the skids on Tuesday, with stocks and sterling tumbling over political uncertainty over Britain’s future ties with the European Union and the policies of the incoming U.S. president, Donald Trump. European stock markets opened broadly lower , with the exception of Britain’s blue-chip FTSE stock index .FTSE, which hit a fresh record high on the back of sterling’s fall to multi-week lows — seen as beneficial to exporters.

Oil prices steady after recent falls on weaker dollar (Reuters) Oil prices stabilized on Tuesday after a sharp sell-off as a fall in the dollar triggered a bout of short-covering, but analysts said the market remained vulnerable to further falls. Rising oil prices through December encouraged investors to buy large volumes of crude oil futures contracts and many of these « long » positions are likely to be unwound unless the market stays strong, analysts and brokers say.

China consumer inflation slows down in December (Market Watch) China’s consumer inflation slowed in December, losing speed for the first time in four months, but producer inflation quickened at a pace much faster than economists expected, official data showed Tuesday. China’s consumer price index increased 2.1% in December from a year earlier, rising at slower pace than a 2.3% year-over-year gain in November, the National Bureau of Statistics said, adding that a higher base for comparison from the year-earlier period was the main factor weighing on the headline figure.

Carney Faces Lawmakers as Brexit Battles Sweep Into New Year (Bloomberg) Mark Carney is starting 2017 exactly where he left off: in front of his fiercest critics. In parliament’s first week back from recess, lawmakers have the chance to haul the Bank of England governor over the coals again. He faces the Treasury Committee on Wednesday after multiple fiery exchanges last year in which he was grilled on the Brexit vote, record-low interest rates, central bank independence and even his own tenure.

Valeant to sell assets for $2.12 billion to ease debt load (Reuters) Valeant Pharmaceuticals International (VRX.TO) is selling its Dendreon cancer business and three skincare brands for about $2.12 billion as the troubled Canadian drugmaker looks to pay down its more than $30 billion debt. Valeant’s U.S.-listed shares rose 15 percent to $17.65 in premarket trading on Tuesday.

Refiners shun new Canadian crude blend offer from Enbridge line (Reuters) Enbridge Inc has approved a new stream of heavy Canadian crude for export on one of its major oil pipelines to the United States, according to four trading sources. The only problem? No one wants it. Canada produces more heavy than light crude because of its vast oil sands projects in northern Alberta. Space on the Enbridge system for heavy barrels is in short supply, with congestion set to worsen as oil sands production grows.

Overnight markets 

Overview: US 10yr note futures are down -0.0501% at 124-23, S&P 500 futures are down -0.03% at 2264.25, Crude oil futures are down -0.08% at $51.92, Gold futures are down -0.18% at $1182.8, DXY is up 0.1% at 102.03, CAD/USD is up 0.04% at 0.7564.

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

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