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Market update

US tsys yields ~1bp higher led by 5s for a second day with the curve ~0.5bps steeper out to 10yrs, longs outperforming. Core Euro bonds higher, 10Y bunds -4bps  @ 0.48% new low as EU stocks hit hard -1.6%  led by financials – Italian banks in focus after disappointment with ‘bad bank’ deal, shares of BMPI – 10%. Also some catchup with yest post FOMC rally in tsys as stmt was less dovish than exp. US auctions $29bln in 7Y notes at 1:00PM with yields close to recent lows, while the 7Y looks rich on the cash tsy curve vs 5s/10s – 7 bps vs 15bps @ last auction on Dec 30th. So could expect similar setup going into 7Y auction as yesterday’s somewhat dissapointing (1bp tail) 5Y auction. Provis opening 1bp tighter, Ont 25s lifted @ 108.5 from yest 110/109 clse, Ont 46 trading up @119. Still expect Ont to come one of these days, 10Y rumoured  as wel as QC longs.

News headlines

• Wall Street Turmoil to Bend, Not Break, U.S. Economic Expansion (Bloomberg) The turmoil in financial markets may slow the U.S. economic expansion. But it probably won’t kill it.While the threat of a downturn has risen, consumers and companies have the wherewithal to weather the turbulence in stocks and keep the economy afloat, economists say.

• S. Federal Reserve leaves rates unchanged, closely monitoring global economy (FP) The U.S. Federal Reserve raised concerns about the U.S. economy’s growth late last year and said it is “closely monitoring” the turmoil in global markets as it decided to leave its benchmark interest rate unchanged Wednesday.
• Euro Rises Against Dollar in Longest Winning Run Since September (Bloomberg)  The euro rose for a fourth day, headed for its longest winning streak since September. The shared currency erased its earlier slide versus the dollar after data showed inflation accelerated this month in four out of the six German states to report figures. The euro was also buoyed after the Federal Reserve said Wednesday that officials are “closely monitoring” developments from China to Europe, prompting speculation a dollar-boosting March interest-rate increase is unlikely.
• UK economy grows 0.5% in fourth quarter (BBC) The UK economy grew by 0.5% in the three months to the end of December, official figures show, taking the annual rate of growth for 2015 to 2.2%. The Office for National Statistics show an improvement on the third quarter figure of 0.4%. But the 2.2% annual growth in 2015 was down compared with 2.9% in 2014.
• CMHC adds Calgary housing market to list of cities with ‘problematic conditions’ (Financial Post) Canada Mortgage and Housing Corp. will tell you the housing market has what it calls “problematic conditions,” but one word the federal agency doesn’t like to use is “correction.”
• Oil Trade Slows as Storage Glut Snares Tankers in Bottlenecks (Bloomberg) The world’s biggest oil companies are asking tanker operators to slow down delivery of crude amid an ever-expanding supply glut on land, Europe’s largest owner of supertankers said.
• Brazil Signals Rate to Stay Flat on Impact of China Slowdown (Bloomberg) Brazil’s central bank president Alexandre Tombini is betting on a weak domestic economy and slowing Chinese demand to help bring inflation down this year, signaling the benchmark lending rate will stay on hold.
• Deutsche Bank Confirms the Damage: A Record Loss (NYTimes) Deutsche Bank, confirming bad news it had previewed last week, on Thursday made it official: The giant German bank had a record loss of 6.8 billion euros, or $7.4 billion, in 2015, as it set aside money to cover lawsuits and official investigations, and it suffered a decline in revenue in its investment banking unit.
• Facebook cashes in on digital advertising (FT) The social networking company had pulled off a remarkably quick transition of its business to mobile devices. From a standing start in early 2012, mobile advertising grew to account for 78 per cent of revenues by the third quarter of last year. With fourth-quarter earnings, Facebook has shown it is in position to capitalise on the acceleration of spending on mobile advertisers as brands belatedly seek to follow their audiences to smartphones.

Overnight markets

• Overview: US 10yr note futures are up 0.11% at 129-0, S&P 500 futures are up 0.41% at 1882.75, Crude oil futures are up 1.8% at $32.88, Gold futures are up 0.52% at $1122.1, DXY is down-0.2% at 98.7.

US Economic Data

• Initial jobless claims fell last week after touching a seven-month high earlier in January, offering fresh evidence the labor market is still doing pretty well despite a slower U.S. economy. The 4wk average of initial claims also tacked lower, down 2,250 to 283,000, the Labor Department said Thursday. Continuing claims were 49,000 higher compared to the prior week.
• Durable goods, excluding defence and transportation orders, fell 0.2 percent last month as November’s decline was revised down to a steeper 1.1 per cent. Durable goods, excluding defence and transportation orders, fell 0.2 percent last month as November’s decline was revised down to a steeper 1.1 per cent.
• Pending home sales will be released at 10ham. Consensus forecasts that the pending home sales index rose by 0.9% in December.
• Kansas City Fed manufacturing index will be published at 11ham (prior -9.0).

 Canadian Economic Data

• A free-falling dollar and the decline of oil have driven Canadian small business confidence levels to new post-recession lows in January as the national Business Barometer® Index dropped to 54.3, about 10 points below the level associated with normal economic growth.

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 opening lower led by the 5Y (+2.3bps @ 1.45%) with the 10Y 2.01 (+1.9bps)- narrow o/n range with prices breaking lower in the last hr as European equities , crude rebound from losses. FOMC this aft, no change expected yet stmt should reflect deterioration in eco env and risks to growth posed from weakness overseas, lower commodities. Mkt barely pricing in one rate hike all year so a less dovish stmt could impact the short end. GOCs are lower, spds 1-2bps narrower vs tsys, longs still heavy 10/30 @80. Provis 0.5bps wider after closing weaker yest after initial rally, selling vs new issues  a factor keeping spds under pressure (Mcgill , Nwrwpt)

News headlines

• Bond Bulls Bank on Fed Mention of Market Chaos as Drag on Growth (Bloomberg) Bond bulls are looking to the Federal Reserve’s decision Wednesday for vindication as Treasuries head for their best month in a year.
• Alberta lost the most jobs in 2015 since 1980s recession: Statistics Canada (Financial Post) Alberta lost more jobs last year than in any year since the 1982 recession, revised numbers from Statistics Canada show.The updated figures released Tuesday show the province lost 19,600 jobs in 2015, up from an earlier estimate of 14,600.
• Fed seen keeping interest rates steady amid market volatility (Reuters) The Federal Reserve is expected to leave interest rates unchanged on Wednesday and acknowledge that turmoil in financial markets threatens its upbeat view of the U.S. economy, leaving the chances of a March hike diminished but alive.
• Oil falls as inventory build dashes optimism over supply (Reuters) Oil futures fell on Wednesday, after a surprise rise in U.S. inventories wiped out the optimism that had built up the day before over the potential for the world’s largest exporters to cut output enough to stem a 19-month-long price slide.
• Apple Says Sales of iPhones Have Slowed (NYTimes) Apple on Tuesday reported results for its fiscal first quarter that showed iPhone sales rose less than 1 percent from a year earlier, the slowest year-over-year growth rate ever for the device, which accounts for about two-thirds of the company’s revenue. Apple also issued a sales forecast that signaled that the sluggishness would continue, with the company projecting its first revenue decline in more than a decade.

Overnight markets

• Overview: US 10yr note futures are down -0.18% at 128-19, S&P 500 futures are down -0.26% at 1891, Crude oil futures are down -2.16% at $30.77, Gold futures are down -0.14% at $1119, DXY is down-0.52% at 98.845.

US Economic Data

• Mortgage application increased for the third week in a row, rising 8.8% from one week earlier, according to the latest data from the Mortgage Bankers Association’s weekly mortgage applications survey for the week ending Jan. 22, 2016.
• New home sales figures for December are due at 10am. Economists forecast that new-home sales rose 2 percent last month to a seasonally adjusted annual rate of 500,000, according to a survey by data firm FactSet.
• The Federal Reserve concludes its latest Federal Open Market Committee (FOMC) meeting with a statement release due at 2pm.

Canadian Economic Data

• There is no major economic data today.

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 unch, yields on the rise as oil and stocks recover from earlier weakness – US 10Y 2.0% after falling to 1.96% in early European trading. WTI fell ~3.7% to $29.20 then bounced on DJ news that Saudi & Russia were more on oil cuts (BN). US Tsy auctions $26bln 2Y notes at 1:00PM before heavier supply next week (2Y FRN, 5 & 7 Y notes for $79bln). Latest JPM Treasury Client Survey showed the most shorts among All Clients since August 3, 2015 at 27. GOCs opening lower, spds unch with tsys. Eco calendar sparse until Friday’s Nov GDP. Provi spds opening another 0.5-1bp weaker after a brutal session yest. Onts closed 3bps wider, Alberta reopened their June 25s @Ont +12 – they closed 13.5/12.5 and are 15/13 this morn! Even as crude is higher on the day. Deere came with a CAD 3Y @ 135 – recall they issued a USD 3Y back on Jan 5th at t+85/GOCs + 105. So spds ~30 bps wider over 2 weeks, so looked like a 5-10bp  concession to us.

News headlines

• China shares end at 14-month lows after late selling frenzy (Reuters) Chinese shares plunged more than 6 percent to 14-month lows on Tuesday after oil prices dropped again, reviving concerns about global growth and prompting a sell-off in the world’s equity markets.
• Investment inflows into Brazil  soar as external gap meets forecasts (Reuters) Foreign direct investment into Brazil came in December at more than twice the amount estimated by analysts, as a weakening currency and declining asset prices triggered a jump in merger and acquisition activity at the end of last year.
• German two-year yields hit new low as March ECB cut priced in (Reuters) German two-year bond yields hit a record low on Tuesday as another fall in oil prices prompted a dip in money market rates, implying that investors expect the European Central Bank to cut its deposit rate in March.
• ‘Ocean of fear’: Canadian investors sitting on record cash pile risk billions in lost returns (Financial Post) A new report suggests Canadians are sitting on a record $75-billion in excess cash in their portfolios, fearful of making a move in today’s volatile markets.
• Brexit ‘would trigger economic and financial shock’ for UK (The Guardian) A UK vote to leave the EU would trigger a snap recession, prompt a fall in share prices and house prices and knock as much as 2% off GDP, according to analysts at the investment bank Credit Suisse.

Overnight markets

• Overview: US 10yr note futures are up +0.07% at 128-21, S&P 500 futures are up +0.36% at 1877.00, Crude oil futures are up +1.02175%% at 30.65$, Gold futures are up +0.75072% at $1113.90, DXY is down -0.017% at 99.328.

US Economic Data

• The S&P/Case-Shiller 20-City Composite rose 5.8 percent year over year in November, above consensus estimates for a 5.6-percent jump and faster than the 5.5-percent increase in October.
• Markit Services and Composite PMI data is due at 9h45am
• US Consumer Confidence survey and Richmond Fed business survey for January will also be out at 10am

Canadian Economic Data

• There is no major economic data today.

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