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Market Update

US tsys trading higher, yields 1-4 bps lower, curve flatter, US 10Y 2.32 (-4bps).  Tsys saw buying in Asian hours then tapering off in Europe as German bunds declined on higher oil – speculation of a deal at the next OPEC meeting in Vienna. Fed Fischer said there’s a need for fiscal measures/infrastructure investment to lift growth. The US tsy auctions 2/5/7Y notes for $88bln this week. Inflation expectations have surged since Trump won the election, based on 10Y breakevens while mkts are pricing in ~98% odds of a rate hike at the Dec 14th FOMC.  GOCs are higher, with spds 2bps wider vs tsys. Provis openign unch after closing 1-2 bps tighter last week, Ont 10/30 credit curve 0.5bps tighter – Ont 10Y spds at the tighest lvls since Aug 2015 despite significant provi & corp supply last week there was good appetite for longer spd product in advance of the Dec 1 extension & higher GOC yields.

News headlines 

Futures up as oil prices rise; Fed’s Fischer in focus (Reuters) U.S. stock index futures inched up on Monday, supported by higher oil prices and the lingering effects of a rally sparked by Donald Trump’s surprise victory in the U.S. election.

Oil Climbs as Iran, Iraq Signal Deal Hope Before Vienna Meeting (Bloomberg) Oil extended gains as Iran signaled optimism OPEC will agree to a supply-cut deal and Iraq said it will offer new proposals to help bolster the group’s unity before members meet next week in Vienna. Prices rose as much as 2.1 percent in New York, adding to last week’s 5.3 percent gain. Iran Oil Minister Bijan Namdar Zanganeh said it’s “highly probable” members will reach a consensus, according to comments published by Shana news service.

German growth to pick up significantly in fourth quarter: Bundesbank (Reuters) Manufacturing is expected to drive a rebound in German economic growth in the fourth quarter after several lackluster months, Germany’s central bank said in a monthly report on Monday. With sentiment improving and new orders rising, employment growth is expected to continue, boosting the euro zone’s biggest economy after several relatively modest quarters, the Bundesbank said.

Japan October exports fall more than expected as strong yen drags (Reuters) Japan’s exports fell in October for a 13th consecutive month and by more than expected as the strength of the yen and sluggish foreign demand weighed on trade, although current yen weakness could change the outlook. Ministry of Finance (MOF) data showed on Monday that exports fell 10.3 percent in the year to October, pulled down by a strong rise in the value of the yen and lower export volumes, much weaker than the expected 8.6 percent drop and September’s 6.9 percent decline.

BoE to raise deposit ‘insurance’ after pound’s Brexit plunge (Reuters) The Bank of England has proposed raising “insurance” on bank account deposits back to 85,000 pounds ($105,000) from Jan. 30, 2017, to reflect the sharp fall in sterling following Britain’s decision to leave the European Union. The level of deposit account protection is set under EU rules at 100,000 euros or its equivalent in member states that do not use the single currency.

First cluster of diamonds to be auctioned from Quebec mine (TheGlobeAndMail) Stornoway Diamond Corp. is selling its first cluster of Quebec gemstones this week, the introductory auction of what it believes will be a strong market for its diamonds in the years ahead as overall industry supply begins to dwindle. The Longueuil, Que.-based producer will test the value of its initial batch of diamonds on the open market in Antwerp, Belgium, in a multiday sale ending Nov. 23. Stornoway said it will sell about 91,000 carats of gemstones in roughly two dozen lots arranged by size and quality in a tender process organized by diamond broker Bonas Group. The best offer takes each lot.

Ottawa to announce coal phase-out, aims for virtual elimination by 2030 (TheGlobeAndMail) The Liberal government is set to announce its plan to virtually eliminate the use of traditional coal-fired electricity by 2030, but will offer some flexibility to the provinces, sources have told The Globe and Mail. Environment Minister Catherine McKenna is expected to reveal the coal-phase-out plan Monday as one of a series of measures that Ottawa is unveiling ahead of the first ministers’ meeting in December, when Prime Minister Justin Trudeau hopes to conclude a pan-Canadian climate accord.

Overnight markets

Overview: US 10yr note futures are up 0.1742% at 125-25, S&P 500 futures are up 0.25% at 2186.25, Crude oil futures are up 2.71% at $46.93, Gold futures are up 0.46% at $1214.2, DXY is down -0.39% at 100.82, CAD/USD is down -0.62% at 0.7449.

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 2.283 (-2bps) at the lower end of the o/n range. Early Asian trade saw follow thru selling from Thurs, 10s hit 2.34% new high before rebounding in Europe with bunds. Bunds recovering from earlier weakness, ECB Pres Draghi reiterating accommodative stance on mon policy, doesn’t see any inflation threat. GOCs higher, maintaining gains after Cdn CPI came in as exp for Oct , 0.2% with the core softer 0.2% vs 0.3% (1.7% y/y vs 1.8%). Provincial spreads closed another 1-2bps yest, Ont issued reopened 10s @ 84bps which was very well received closing 83/82. CMB spds also moving in, yet 10Y CMBs look particularly attractive vs Onts, the Ont/CMB 26 spd at the bottom of the range ~27bps. (26-31 bps 6mnth range). PSP Capital (Aaa/AAA) priced its 7Y @ 83 bps vs GOC curve or ~8bps over ontarios.

News headlines  

Dollar Extends Trump-Trade Rally as Gold Declines With Stocks (Bloomberg) The dollar jumped versus all of its major counterparts, adding to its best rally in more than 15 years against the yen and its longest winning run since the euro was created. Central banks in Asia were compelled to take steps to shore up their currencies, while the greenback’s strength also weighed on commodities from metals to oil.

ECB’s Draghi, Weidmann differ on inflation ahead of key decision (Reuters) European Central Bank chief Mario Draghi said on Friday the rebound in euro zone inflation was weak, while his top critic, Bundesbank head Jens Weidmann, said price pressures would build eventually and ‘extra care’ was needed with even temporary unconventional measures.

Hot China house prices cool in October as curbs on speculation bite (Reuters) China’s booming property market showed early signs of a softening in October after a fast and furious price rally that propped up economic growth this year. A National Bureau of Statistics (NBS) survey out on Friday showed October’s monthly price growth virtually halved to 1.1 percent from September’s 2.1 percent, as most of China’s first- and second-tier cities posted slowing price growth.

Volkswagen to cut 30,000 jobs at VW brand by 2020 (Reuters) Volkswagen (VOWG_p.DE) and its powerful labor unions agreed to cut 30,000 jobs at the core VW brand in exchange for avoiding forced redundancies in Germany until 2025, a compromise which leaves the carmaker’s profitability still lagging rivals. The turnaround plan announced on Friday will lead to 3.7 billion euros ($3.9 billion) in annual efficiency gains and lift the VW brand’s operating margin to 4 percent by 2020, from an expected 2 percent this year.

CMHC’s mortgage insurance business vulnerable to sharply rising interest rates (TheGlobeAndMail) A sudden sharp rise in interest rates that could cause Canadian home prices to plunge 30 per cent would trigger more than $1-billion in losses to the country’s government-backed mortgage insurer, according to the results of stress tests released today by the federal housing agency.

Canada is naive if it thinks Donald Trump will play nice on NAFTA (Financial Post) There are two Donald Trumps. There’s the firebrand xenophobe progressives see, the one who spouted conspiracy theories and insults during his shockingly abrasive, fear-mongering campaign. The other Trump is more recent, and less scary: The one who gave a surprisingly conciliatory victory speech in the wee hours of Nov. 9; who praised Hillary Clinton for her service to her country; who at times seems more a would-be statesman than a rabble-rouser; the one who’s going to temper his incendiary campaign positions — which, you know, he maybe only said to get elected.

Overnight markets                                                                     

Overview: US 10yr note futures are down -0.062% at 126-0, S&P 500 futures are down -0.02% at 2183.75, Crude oil futures are down -0.07% at $45.39, Gold futures are down -0.41% at $1211.9, DXY is up 0.2% at 101.09, CAD/USD is up 0.03% at 0.7393.

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 moving lower & flatter inearly NA trade after Yellen said rate hike is appropriate ‘relatively soon’ in text speech before JEC later this morning. Cash US 10Y now above 2.25% after CPI & jobless claims which fell 19k to 235k the lwoest in 40 yrs. In Asia Tsys traded higher as the BOJ said it was read to buy an unlimited amount of bonds to achieve its yield curve goals, stem the latest rapid increase in yields. Tsys pressured in Europe on supply from Spain, gilts hammered on better than exp UK retail sales. GOCs lower curve steeper out to 10yrs yet longs well bid 10s30s unch at 62bps vs US tsy curve ~3bps steeper. Provi spreads closed ~2bps better despite CMB & QC 10Y supply – the latter saw strong demand.  In corps we traded more of the new MRCCN 20s as well as new SAPCn 23s – both look like good value.

News headlines  

Treasuries Pare Gains as Dollar Weakens Before Yellen; Oil Rises (Bloomberg) Bonds pared gains as oil advanced and investors awaited testimony from Federal Reserve Chair Janet Yellen that may help shape the outlook for interest rates. Government securities in Europe and the U.S. rose earlier and Japanese bonds halted a five-day selloff after the Bank of Japan offered to buy an unlimited amount of debt at fixed yields. Bloomberg’s dollar index slipped from a nine-month high. Crude reversed declines as OPEC and Russia prepared to meet in Doha for more talks. European shares were little changed, and Asian equities rose with Japan’s Topix measure closing on the brink of a bull market.

BOJ Fires Warning at Bond Market With Unlimited Buying Plan (Bloomberg) The Bank of Japan fired a warning shot at the government bond market Thursday, announcing its first offer to buy an unlimited amount of securities to maintain its yield-curve target.

ECB minutes firmly point to Dec for decision over asset buys (Reuters) European Central Bank rate setters meeting last month agreed on the need to maintain unprecedented monetary stimulus and to decide in December whether to extend the ECB’s 1.74 trillion euro asset buys, minutes of the meeting showed on Thursday. Core inflation still lacks a convincing upward trend and wage growth has been unexpectedly subdued, but the euro zone economy is developing along the path seen earlier so it was premature to make a call either way, minutes of the Oct 20 meeting showed, repeating policymakers widely discussed view.

Oil prices rise on Saudi optimism over OPEC deal (Reuters) Oil prices rose on Thursday as expectations of an OPEC deal to limit production outweighed growing evidence of global oversupply and rising inventories, particularly in the United States. Saudi Energy Minister Khalid al-Falih said on Thursday he was optimistic OPEC would formalize a preliminary oil output deal reached in Algeria in September.

German finance minister sees no room for euro zone fiscal stimulus (Reuters) The German Finance Ministry on Thursday rejected a call by the European Union’s executive for governments in the 19-country euro zone to spur growth and jobs by loosening overall budget policy next year. The European Commission on Wednesday effectively urged Berlin to spend more, moving further away from its mantra of austerity.

Suncor sees higher production, lower spending in 2017 (TheGlobeAndMail) Suncor Energy Inc , Canada’s largest oil and gas company, said it expected production to rise by more than 13 per cent next year and spending to fall by more than $1-billion. Oil producers continue to keep a tight lid on spending to cope with a 60 per cent fall in oil prices since mid-2014.

Overnight markets                                                                     

Overview: US 10yr note futures are down -0.1112% at 126-11, S&P 500 futures are up 0.06% at 2174, Crude oil futures are up 1.23% at $46.13, Gold futures are down -0.08% at $1222.9, DXY is up 0.07% at 100.48, CAD/USD is down -0.08% at 0.7443.

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