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Market update

US tsys opening lower, curve steeper, global stocks higher, crude oil up for a 2nd day. US 10Y ~3 bps higher @ 2.24% after in line Nov CPI (0.2%). Core Euro bonds lower, 10Y German bunds 8bps higher @0.65% retracing ~80% of last week’s rally. GOCs also lower, steeper spds unch vs tsys despite weaker than exp Oct Manufacturing Sales. Provi spreads opening unch after widening 1-2bps yest, supply expected if positive tone in credit, oil mkts holds up.

News headlines

• Bond investor anxiety rises ahead of Fed rates decision (FT) Further weakness for corporate debt highlighted deepening anxiety in bond markets on Monday, just two days before the US Federal Reserve is expected to declare a formal end to the era of cheap money.

• Global stocks rise but oil, Fed keep investors nervous (Reuters) Stocks rose in Europe and Asia on Tuesday, though volatile oil prices kept investors cautious before a widely anticipated increase in U.S. interest rates later in the week.

• Mortgage growth expected to slow as Canadian banks assume more risk (FP) It’s going to get more expensive for Canadian banks to do business in the country’s housing market as the government seeks to limit its exposure to surging home prices and the risk of default.

• Junk bond ETFs hit record trading levels (FT) Trading in the biggest junk bond exchange traded funds soared to record levels during the recent market sell-off, intensifying a debate about whether high-yield ETFs contribute to financial stability or put it at risk.

• Sweden holds rates, notes ‘somewhat stronger’ economy (FT) Sweden’s Riksbank has decided to hold its key rate at a super-low minus 0.35 per cent, as expected. In a statement, the central bank said developments in the Swedish economy had been “somewhat stronger than expected” – a cheerful note that has kicked the krona higher.

• German business confidence shows December boost (CNBC) Business confidence in Germany rose in December to hit a four-month high in spite of the economic challenges of the European migrant crisis and slowdown in emerging economies, latest figures from the country’s ZEW institute show.

• UK inflation rate rises to 0.1% in November (BBC) The UK has escaped deflation. Consumer prices in the UK edged up 0.1% year-over-year in November. The positive reading comes after two months of -0.1% YoY prints and is the first to note rising prices in four months. The British pound is up 0.1% at 1.5155.

Overnight markets

• Overview: IG25 5Y 90.330/91.015 (-2.041), US 10yr note futures are down -0.20% at 126-05+, S&P 500 futures are up +0.81% at 2025.75, Crude oil futures are up +0.06% at 36.33$, Gold futures are up +0.02% at $1063.0, DXY is down -0.01% at 97.594.

 US Economic Data

•  CPI is flat 0.0% MoM (+0.5% YoY) in November (0.0% MoM and 0.4% YoY Expec) versus October 0.2% MoM (0.2% YoY).
• CPI core came in at 0.2% MoM (2.0% YoY) in November (0.2% MoM and 2.0% YoY Expec) compared to previous month 0.2% MoM (1.9% YoY).
• Empire manufacturing increased to -4.59 in December from a reading of -10.74 in November. Analysts had expected the index to rise to -7.0.
• Real avg weekly earnings for November came at 1.6% YoY lower than the revised 2.4% increase in previous month.
• NAHB housing market index is forecast at 63.0 in December higher than 62.0 in November.
• Net long-term TIC flows for October will be release at 16:00.

Canadian Economic Data

•  Manufacturing sales decreased -1.1% MoM in October compared to -1.5% for previous month.
• Existing home sales for November will be release at 9:00.

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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Market update

US tsys opening lower , curve ~2 bps flatter US 10Y 2.16 (+3bps). Oil fell below $35 on supply worries as Iran expected to boost exports (see above). Global stocks weaker, except Shanghai comp which rose 2.5%.  Short end of US tsy curve under pressure, WSJ article by Fed watcher Hilsenrath saying FOMC expected to raise rates this Wed, thou lack of inflation & poss of recession could force Fed to backtrack. Core Euro bonds lower, 10Y bunds ~3bps higher thou bund futures got a boost as oil continued to slide in early NY trading. GOCs trading lower, yields ~1bp higher across the curve , outperforming tsys , Cda/US at 5 mnth lows. Provis wider, 10Y Ont 99.5/98.5 (+1bp), Ont 46/25 bx unch @ 11, Qc/Ont 45 5.5/5.0 (unch).

News headlines

• Cooking the books: Government officials in China’s ‘rust belt’ falsified economic figures (SCMP) Provincial government officials in the northeast of China have admitted seriously falsifying economic data for years, leading to distorted policy decisions and fomenting corruption in the region, according to report by the state-run news agency Xinhua. The officials admitted falsifying statistics after the Communist Party’s graft watchdog examined inflated figures issued by cadres, the report said.

• Oil Sinks to Lowest in Almost 7 Years as Iran Vows More Supply (Bloomberg) Oil extended declines from the lowest price since February 2009 as Iran pledged to boost crude exports, bolstering speculation OPEC members will exacerbate the global oversupply.

• Natural Gas Falls to Lowest Since 2002 on Mild Weather Outlook (Bloomberg) U.S. natural gas tumbled to the lowest intraday level since January 2002 amid forecasts that mild weather will persist through the end of the month. January futures fell as much as 5.6 percent to $1.879 a million British thermal units on the New York Mercantile Exchange and traded at $1.881 at 12:14 p.m. London time. Gas is down 35 percent this year, headed for its second annual decline.

• Fed Officials Worry Interest Rates Will Go Up, Only to Come Back Down (WSJ) Federal Reserve officials are likely to raise their benchmark short-term interest rate from near zero Wednesday, expecting to slowly ratchet it higher to above 3% in three years.

• The Mystery of Missing Inflation Weighs on Fed Rate Move (WSJ) Federal Reserve officials this week are expected to raise interest rates for the first time in nine years on the expectation that employment and inflation will hit targets reflecting a healthy U.S. economy.

• Wells Fargo warns of ‘stresses’ in its energy portfolio (FT) The head of corporate banking at Wells Fargo, the biggest bank in the world by market capitalisation, has warned of “stresses” in its energy portfolio, as the ongoing slump in the price of oil begins to weigh heavily on servicers and producers.

• Lucidus Has Liquidated $900 Million Credit Funds, Plans to Shut (Bloomberg) Lucidus Capital Partners, a high-yield credit fund founded in 2009 by former employees of Bruce Kovner’s Caxton Associates, has liquidated its entire portfolio and plans to return the $900 million it has under management to investors next month, according to a statement Monday from the London-based company.

• Ottawa forces homeowners to save more for down payment, reducing its risk in housing market (FinancialPost) The governing political party has changed but the general housing message is still the same — reducing Ottawa’s exposure to the housing market.

• India Wholesale Prices Fall 1.99% in November (WSJ) India’s wholesale price index fell for the 13th month in a row in November, though the pace of decline slowed as costs of pulses and vegetables continued to rise, government data showed Monday.

Overnight markets

• Overview: IG25 5Y 96.419/97.057 (+0.413), US 10yr note futures are down -0.21% at 126-28+, S&P 500 futures are down -0.16% at 1998.0, Crude oil futures are down -2.47% at 34.74$, Gold futures are down -0.44% at $1071.0, DXY is up +0.18% at 97.739.

US Economic Data

• There is no major economic data today.

Canadian Economic Data

• Teranet/National bank housing price index for the month of November came in at 0.2% MoM and 6.1% YoY.
• Bloomberg Nanos Canadian Confidence Index will be released today at 10:00am.

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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Market update

US tsys opening higher US 10Y 2.20 (-3bps), with only slight pullback after better than expected readings on Nov Retail Sales & PPI. Weakness in crude as prices hit 2008 low, emerging mkt stocks down or 8th day. Core Euro bonds higher led by 10Y UK gilts – comments from ECB Coeure said biggest tisk to inflation is off the table due to QE. GOCs are higher underperforming tsys out the curve by ~1.5bps. Provis not seeing any relief from recent widening despite little supply & lower GOC yields – Ont 46 108.5/107.5 (+0.5bps), Alberta/Ont 46 4/3, QC/Ont 45 5.5/5.0.

News headlines

• Dow Chemical and DuPont Set Merger and Plans to Split (NYTimes) DuPont and Dow Chemical, with more than three centuries of history between them, said on Friday they had agreed to merge, in one of the biggest deals of the year. The combined company, which would be known as DowDuPont, would result from an all-stock merger of equals. Once the two are combined, they plan to split into three separate companies, consisting of agricultural chemicals, specialty products, and materials, like plastics.

• Senate Extends Deadline Again To Prevent Government Shutdown (HuffPost) he Senate decided by a unanimous voice vote Thursday to keep the government open for five more days, preventing a shutdown — for now at least. The Senate will have until the middle of next week to reach an agreement on a year-end omnibus spending and tax extenders package. The House is expected to follow suit on Friday, passing its own continuing resolution to extend the funding deadline — originally set for Dec. 11 — into next week.

• Oil hits new seven-year low on glut warning (BBC) The oil price has fallen to a new seven-year low after the International Energy Agency (IEA) forecast a slowdown in growth in demand for oil. The price of Brent crude oil fell below $39 a barrel at one point, its lowest since December 2008. The IEA said demand in the current quarter was growing by 1.3 million barrels a day, down from 2.2 million barrels in the previous quarter. The IEA predicts that will slip back to 1.2 million barrels a day next year.

• Third Avenue shuts doors on $800m high-yield bond fund (FT) US retail investors are pulling money out of high-yield bond funds at the fastest pace in more than a year, and one mutual fund has barred further redemptions, in the latest intimations of distress in corners of the credit markets.

• As Fed Sets Pace on Rate Increases, Watch Inflation (WSJ) The U.S. Federal Reserve says historically low inflation is transitory. The market begs to differ. Inflation has fallen short of the Fed’s 2% target for more than three years. And while the central bank is all but set to raise interest rates next week, the inflation conundrum should give the Fed pause as it weighs the pace of rate increases in 2016 and perhaps beyond.

• Russian central bank leaves key interest rate on hold (Reuters) Russia’s central bank left its main interest rate on hold at 11 percent on Friday, saying it recognised growing inflation risks and that risks of economic cooling remained. Economists had expected the central bank to leave its one-week minimum auction repo rate unchanged, extending a pause in the monetary easing cycle.

• China’s Credit Rebounds as Stimulus Helps Boost Loan Demand (Bloomberg) China’s broadest measure of new credit rebounded in November, signalling that the economy continues to stabilize as fresh rounds of government easing help to boost demand for loans. Aggregate financing rose to 1.02 trillion yuan ($158 billion) in November, according to a report from the People’s Bank of China on Friday. That compared to the median forecast of 970 billion yuan in a Bloomberg survey.

Overnight markets

• Overview: IG24 5Y 86.089/86.954 (+2.029), US 10yr note futures are up +0.21% at 126-19, S&P 500 futures are down -0.70% at 2026.25, Crude oil futures are down -0.95% at 36.41$, Gold futures are down -0.68% at $1064.7, DXY is down -0.08% at 97.863.

US Economic Data

• Retail sales increased 0.2% MoM in November, below expectations (0.3%), after increasing 0.1% the previous month.
• Retail sales excluding automobiles increased 0.4% in November, compared to consensus of a 0.3% increase, and a revised 0.1% increase in October.
• PPI came in at 0.3% MoM (-1.1% YoY) in November versus October -0.4% MoM (-1.6% YoY).
• PPI core increased 0.3% MoM (+0.5% YoY) in November compared to previous month -0.3% MoM (0.1% YoY).
• Business inventories are forecast to increase 0.1% MoM in October, lower than previous month increase (0.3%).
• University of Michigan confidence (P) is expected at 92.0 in December 0.7 point higher than previous month.

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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230