Comments

Market Update

US tsys higher, yields 3-4bps lower with the 10Y 2.55 (-3.7bps) in thin volumes. Tsys higher in Asia on safe haven after China seized a US underwater drone.  Core Euro bonds also higher thou volume in bund futures ~50% of recent avg., 10Y bund 0.287% (-2.8bps), with little reaction to better than expected German IFO – now at the highest since Feb 2014. No scheduled supply in the Eurozone this week, with the ECB set to wind down its purchase program on Dec 22nd until the new year. Econ data in the US scant until Thursday’s Q3 GDP, thou Fed Yellen gives a speech on the labor mkt this aft. GOCs opening higher lagging the US by  ~1bp thru the curve.  Provincial spreads closed Friday at the tightest levels of the year, opening unch this morning. Interest in FRNs picking up lately as y/e approaches and considering the spike in CDOR. Futures mkts now pricing in ~25% odds of a rate hike in Cda by the middle of next year.

News headlines 

Dollar, yields, stocks all cool their jets (Reuters) The dollar and U.S. bond yields fell on Monday while Asian shares hit a four-week low, as investors cashed in on some of their recent bets that the anticipated fiscal boost from the incoming Trump administration will support riskier assets. Wall Street hit record highs and the dollar rose to a 14-year peak last week, but as the last full trading week of the year got underway investors chose to take some of those chips off the table.

OPEC Deal Makes Oil Investors Most Bullish Since Slump Began (Bloomberg) Investors are the most optimistic on oil since the slump began two and a half years ago. Money managers boosted bets on rising West Texas Intermediate crude prices to the highest level since July 2014 after the Organization of Petroleum Exporting Countries and producers outside the group agreed to coordinate crude production cuts. Prices advanced to a 17-month high on Dec. 12 on speculation that the curbs will reduce the global inventory glut next year.

Japan Has Trade Surplus for 3rd Month as Imports Fall (Bloomberg) Japan posted a trade surplus for a third straight month in November as imports continued to fall faster than exports. Export values declined at the slowest pace since September 2015, with exports to China rising for the first time since February.

China’s moves to cool home-price spike kick in, but issues linger (Reuters) China’s home prices rose at a slower pace in November as government lending curbs took out some heat in major cities, but a supply shortage in some places and sizable inventories elsewhere underscored challenges policymakers face trying to stabilize a polarized market.

Neutral PBOC Sets Up First U.S.-China Tightening Since 2006 (Bloomberg) China’s leaders are pledging a harder push to rein in risk next year and emphasizing prudent and neutral monetary policy. With the Federal Reserve flagging a steeper interest-rate path, that sets the scene for the first U.S.-China tightening since 2006.

Carney Advances BOE Overhaul as Brexit, Trump Jolt World Order (Bloomberg) The Bank of England appointed a new international director to lead the team responsible for its strategy toward European and global matters, part of Governor Mark Carney’s revamp in the wake of the Brexit vote.

‘What does not change, dies’: Bombardier Transportation head looks to the future (Financial Post) The president of Bombardier Transportation, in New York this week to discuss trains, not planes, dismisses the idea that the time and money poured into the troubled aircraft over the past eight years distracted the parent company from his own division, which is responsible for more than half the company’s revenue and most of its global manufacturing presence, with operations in more than 60 countries.

Overnight markets                                                                     

Overview: US 10yr note futures are up 0.318% at 123-7, S&P 500 futures are up 0.08% at 2257, Crude oil futures are down -0.46% at $51.66, Gold futures are up 0.33% at $1141.1, DXY is up 0.04% at 102.99, CAD/USD is up 0.36% at 0.747

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 tsys higher, yields 2-3bps lower with the 10Y 2.57% (-3bps) and the curve ~3bps flatter.  Similar story in Canada, GOC yields lower, 10Y 1.796 (-3.5bps). Tsys well bid thru the Asia, supported by JGBs where 30Y yields fell another 7bps (13bps this week) as the BOJ fine tunes its yield curve control strategy to reflect the upward pressure in global yields. Core euro bonds sharply higher, l.t. bund yields 10bps lower @ 1.035%, bund futures hit daily highs earlier on news of deteriorating liquidity at Monte Paschi. GOCs & tsys paring earlier gains despite weak US Housing Starts. The belly of the GOC curve taking the brunt of the weakness for a second day, 2/5/10 surging past the highs of August. Flows yest included CB selling as WTI fell back to ~$50. Provi spds well bid all week, yest no exception, spds closing 1-5bps tighter.

News headlines 

Dollar Hits Speed Bump in Fed-Driven Rally; Bonds Stem Declines (Bloomberg) The dollar’s advance stalled as the dust settled on a new financial-market landscape created by the Federal Reserve’s shift to a tighter policy path in 2017. The greenback fell against the euro after touching the highest since 2003 on Thursday while stocks rose. Treasuries stemmed six days of declines underpinned by the Fed’s more hawkish outlook for interest-rate increases next year. Gold trimmed its sixth weekly drop, and copper fell.

Oil rises on signs of producers’ compliance with output cuts (Reuters) Oil rose on Friday, edging closer to new 17-month highs as producers showed signs of adhering to a global deal to reduce output. Brent crude futures were trading at $54.55 per barrel at 1225 GMT, up 53 cents on the previous day’s close. U.S. West Texas Intermediate (WTI) crude was up 33 cents at $51.23 per barrel.

Poloz sticks to script after Fed hikes rates (GlobeandMail) Bank of Canada Governor Stephen Poloz suggested that rising U.S. and global bond-market interest rates are leaning against the Canadian central bank’s stimulative low-rate policies, in the bank’s latest signal that it has no intention to follow the U.S. Federal Reserve’s lead in raising its official rate.

Battered euro and yen recover after dollar surge (Reuters) The euro, yen and pound all recovered some ground against the dollar on Friday after slides of 3 percent or more in reaction to the Federal Reserve’s steer on U.S. interest rates next year. Before the Fed meeting on Wednesday, markets had seen little chance of another surge in the dollar before the end of the year.

Paschi Gets Approval to Extend Bond Swap Offer to Dec. 21 (Bloomberg) Banca Monte dei Paschi di Siena SpA received regulatory approval to extend and expand a debt-for-equity swap in a last-ditch effort to raise 5 billion euros ($5.2 billion) privately and avoid a state rescue. The exchange offer will involve about 4.5 billion euros of Tier 1 and Tier 2 securities and will start Friday and run until 2 p.m. on Dec. 21, the Siena-based bank said in a statement. Monte Paschi, which faces a Dec. 31 deadline to complete the fundraising, will also promote a swap on 1 billion euros of hybrid securities issued in 2008 known as FRESH at 23.2 percent of face value, the lender said in a filing on its website.

Statoil’s exit is the starkest sign yet Canada’s oilsands resource has lost its lustre (Financial Post) Not long ago, Norway’s Statoil ASA was going to build a $10 billion oilsands project in Alberta, put its reputation on the line to defend the deposits in its home country against a smear campaign led by Greenpeace, and even contemplated a massive upgrader near Edmonton. It all came to a halt late Wednesday when Statoil sold out of the oilsands altogether at a loss, leaving it with no operated assets in Western Canada.

Bombardier says its worst days are behind it, as executives make their pitch to investors (Financial Post) Bombardier Inc. will burn through less cash and earn higher margins, profit and revenue in 2017, a sign that the company’s worst days are behind it, company executives told investors Thursday in New York. Bombardier is one year into a five-year turnaround plan initiated by chief executive Alain Bellemare, who was appointed in early 2015 at the depths of the company’s crisis. Bombardier was struggling to bring the CSeries jetliner, its biggest aircraft ever, to market amid delays and cost overruns, while also pouring resources into several other big programs as revenues shrank and losses widened.

Overnight markets                                                                     

Overview: US 10yr note futures are up 0.0254% at 122-31, S&P 500 futures are up 0.19% at 2262.75, Crude oil futures are up 0.77% at $51.29, Gold futures are up 0.45% at $1134.9, DXY is down -0.05% at 102.97, CAD/USD is up 0.2% at 0.7484.

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 tsys  lower in follow thru to yest FOMC led by the 5Y which is 6bps higher @ 2.10%, ~22bps in two days or the highest since Apr 2011.  Small bounce after as expected CPI, thou both Phili Fed and Empire Man came in stronger. Foreign central bank selling across the US tsy curve in European, real money selling 30Y bonds according to MNI.  The USD index surging higher another 1.3%, the euro below 1.04 the lowest since Jan 2003. European stocks higher led by financials, S&P futures slightly lower.  Core Euro bonds in catchup mode, 10Y gilts 12 bps higher, bunds +7bps. German Manufacturing PMI came in above exp for Dec, 55.5 vs 54.5, while UK Retail Sales also rose more than exp in Nov. Foreign central bank selling across the US tsy curve in European hrs, real money selling 30Y bonds according to MNI.  GOCs lower, lagging the move in tsys for a second day after yesterday’s massive outperformance. The 10Y reached 1.845% earlier, vs 1.70% pre FOMC. Provi spreads closed tighter yest for a thrid day, led by the front end. Provi FRNs have lagged the rally and continue to offer attractive pickup vs fixed ASW., ~6bps in 2019s.

News headlines 

Dollar Climbs to Strongest Since 2003 on Fed Path; Bonds Drop (Bloomberg) The dollar climbed the highest level since 2003 against the euro as the prospect of a steeper path for U.S. interest rates next year filtered through markets. European bank stocks climbed while bonds and gold slumped. The greenback extended its advance against major and emerging-market peers after the Federal Reserve’s first and only interest-rate hike of 2016 was accompanied with a signal of three increases next year.

Bank of England Holds Rate and Says Inflation Rise May Slow in 2017 (Bloomberg) The Bank of England kept its key interest rate at a record low and noted that the pound’s recent appreciation may mean a slower pickup in inflation next year. In its last policy decision of 2016, the Monetary Policy Committee said sterling’s advance could mean “less of an overshoot” above its 2 percent goal than previously predicted. It still sees a pickup in price growth and repeated its line that it has limited tolerance for exceeding its target.

Euro zone businesses end year on a high note – PMI (Reuters) Businesses across the euro zone ended the year on an upbeat note as expected, according to a survey that showed they achieved solid growth and raised prices at the steepest rate since the middle of 2011. The positive survey will please policymakers at the European Central Bank, who in a surprise move last week trimmed their asset purchases but promised protracted stimulus to aid a still-fragile recovery and bolster weak inflation.

OPEC Threatened by Tiny Oklahoma Town With Soaring Supplies (Bloomberg) For OPEC, there are few enemies more fearsome than the tiny Oklahoma town of Cushing. With oil inventories at Cushing creeping near an all-time high, U.S. benchmark futures prices are struggling to advance despite the promised production cuts agreed to by OPEC, Russia and other producers. And the storage tanks are likely to stay full as refiners park crude in Oklahoma to lower their tax bills.

Carney Said to Meet at ECB as Central Banks Seek Brexit Help (Bloomberg) European monetary policy makers can ask for some of the best insight available into the economic implications of Brexit on Thursday, when Mark Carney visits Frankfurt. The Bank of England governor will attend a meeting of the General Council, the forum for the central banks of the 28-nation European Union, according to people familiar with the matter. Hosted by the European Central Bank, the event is highly likely to see him questioned about the British decision to leave the EU, the people said, asking not to be named because the session is private.

Bombardier sees improved profit next year as cost-cutting takes hold (GlobeAndMail) Bombardier Inc. says it expects to improve profit and grow revenue next year as it cranks up sales of rail equipment and C Series planes while the benefits of a deep cost-cutting effort take hold. The Montreal plane and train maker released financial guidance for fiscal 2017 after the close of markets Wednesday. It expects to tally earnings before interest and taxes in the range of $530-million (U.S.) and $630-million next year before special items, a roughly 50 per cent improvement over 2016. The profit target will be driven mostly by restructuring initiatives launched by chief executive officer Alain Bellemare, who replaced Pierre Beaudoin in the job in February of last year.

TD raises key mortgage rate for third time in a month (GlobeAndMail) Toronto-Dominion Bank has hiked its main mortgage rate for the third time in a month, reversing earlier plans to compete with its biggest rival on price. TD raised the rate on its five-year fixed mortgages to 2.94 per cent, a jump of 10 basis points, or 0.1 per cent. The change follows Royal Bank of Canada’s decision in mid-November to hike its equivalent rate by 30 basis points, to 2.94 per cent. Although RBC is TD’s largest competitor, TD decided not to follow suit at the time, and instead raised its own rate by 10 basis points, to 2.69 per cent.

Overnight markets                                                                     

Overview: US 10yr note futures are down -0.4558% at 122-27, S&P 500 futures are up 0.04% at 2253, Crude oil futures are down -1.49% at $50.28, Gold futures are down -2.76% at $1131.6, DXY is up 1.17% at 102.95, CAD/USD is up 0.53% at 0.7488.

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