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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

Market Update

US tsys lower, off the lows of the  wide overnight range after weaker than exp PPI (0.0% vs 0.3%, core -0.2% vs 0.2%), TY futures heavy volume 646k. US 10Y 2.273%, Fed fund futures now pricing in 96% odds of a rate hike in Dec, with the USD index at new highs, Euro/Yen at new lows.  Core European bonds lower, 10Y gilts lower on better than exp UK unemployment rate (4.8% vs 4.9%). JGB 10Y yield reached 0.015%, March highs after poor results in BOJ purchase operation. David Malpass, senior Trump advisor, urged the Fed to downsize its balance sheet saying the Fed purchases have been ‘very harmful’. CMB 10Y & 5Y FRN this morning with the 10Y fixed ~58.5 well placed.  Provis 0.5bps weaker yesterday despite 3bp rally in IG, and are opening with a softer tone on expectations of supply.

News headlines 

Government Bonds Fall Worldwide on Trump-Fed Nexus; Oil Declines (Bloomberg) Government bonds tumbled around the world and the dollar rose on speculation that the economic outlook is sufficiently strong to allow the Federal Reserve to step up the pace of interest-rate hikes. Metals and crude oil fell.

Oil falls on higher U.S. crude inventories, strong dollar (Reuters) Oil prices shed more than one percent on Wednesday, returning some of the gains made in one of the year’s biggest rallies a day earlier, after weekly U.S. crude stocks rose beyond expectations and a strong dollar weighed on commodities.

Dollar index surges to 14-year high (Reuters) The dollar soared to its highest since April 2003 against a basket of currencies on Wednesday, reaching its strongest in a year against the euro as major banks and investors debated the possibility of another move toward euro-dollar parity.

U.K. Unemployment Lowest in Over a Decade (WSJ) The U.K.’s unemployment rate fell to its lowest level in over a decade in the three months to September, official data showed Wednesday, suggesting the labor market has held up well following Britain’s June decision to leave the European Union.

OPEC pushes for consensus on oil cut, gaps narrowing: sources (Reuters) OPEC officials are working to nail down details of their plan to limit oil supply and gaps over some sticking points are narrowing, OPEC sources said, a sign of progress in finalizing the exporter group’s first such deal since 2008.

Loblaw’s profit jumps (TheGlobeAndMail) Canadian grocery and pharmacy retailer Loblaw Cos Ltd reported a 25.5 per cent rise in quarterly profit, helped by a drop in expenses and improved performances by its financial services and property businesses.

RBC sets new course on mortgage rates (TheGlobeAndMail) Under pricing pressure from spiking bond yields and Ottawa’s housing market crackdown, Royal Bank of Canada is boosting its most important fixed-rate mortgages. RBC is also introducing a new pricing structure, charging different rates for mortgages with amortization periods of 25 years or less and for those with longer maturities — a first for Canada.

Overnight markets                                                                     

Overview: US 10yr note futures are down -0.1854% at 126-6, S&P 500 futures are down -0.37% at 2171.25, Crude oil futures are down -0.9% at $45.4, Gold futures are up 0.13% at $1226.1, DXY is up 0.02% at 100.25, CAD/USD is up 0.04% at 0.7433.

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