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Market update

US tsys opening slightly lower, curve 1bp flatter after initial claims came in higher than exp, 10Y 2.215. Core Euro bonds higher on lower stocks, except Glencore which rose 10% on debt reduction plans.  Nikkei down for a 3rd day as exports hurt by surge in Yen to one month highs.  BOE left rates unch pointing to low inflation, while huge gain in Aussie employment weighed on front end of Aussie curve. Tsys traded in narrow range o/n before this aft $13bln 30Y auction – which should benefit from latest steepening in US 10/30 curve & renewed weakness in oil prices. In Canada GOCs are higher led by 10s, with notably steeper 10/30 –trading ~4bps wider @ 75.5 with 5/10 1.5bps flatter this week. Two year auction yest was big success after Poloz mention of negative rates – two yr roll is now -0.2bps from 1.5 last week a huge move in the context of 2s/5s only ~3bps flatter. Provis unch , Ont 46s 108/107, QC 48s 113.5/113, QC/Ont 25 4.3 unch. Supply still expected this week before xmas break. CHT 5Y expected tp be announced today.

News headlines

• Bank of England keeps interest rates unchanged (The Guardian) The Bank of England has kept interest rates on hold this month amid expectations that inflation will remain low after another sharp fall in the oil price and a levelling off in wage growth. Minutes from the Bank’s policy-setting meeting showed the MPC thought little had changed in terms of domestic demand or international activity since its last decision was published in November along with economic forecasts

• Swiss National Bank Keeps Record-Low Rate, Says Franc Overvalued (Bloomberg) The Swiss National Bank left interest rates at a record low and maintained its pledge to intervene if needed to push back against pressure on the “significantly overvalued” franc. Announcing its decision on Thursday, the SNB said its measures continue to help weaken the currency, which has been a weight on the economy, holding back growth and pushing down consumer prices. It maintained the rate on sight deposits at minus 0.75 percent, as forecast by 15 of 19 economists in a Bloomberg survey, and kept its target range for three-month Libor unchanged.

• Bank of Korea holds rates in December, as expected (The Globe and Mail) South Korea’s central bank held its policy interest rate steady at a record low for a sixth straight month on Thursday, as expected, just a few days before the U.S. Federal Reserve decides whether to implement a much-anticipated policy tightening.

• Strong jobs data boost Australian dollar (FT) A second successive strong jobs report gave the Australian dollar a boost on Thursday and pushed back the prospect of a rate cut, allaying fears about the economy but exerting pressure on the country’s main stock index. The currency rose by as much as 1.5 per cent to $0.7333 after the data. Against the New Zealand dollar, the Aussie rose 0.6 per cent to NZ$1.0820.

• Rand falls after Jacob Zuma sacks South Africa finance minister (FT) South Africa’s President Jacob Zuma dismissed his finance minister late on Wednesday, in a move that is expected to exacerbate the country’s economic woes and which sent the rand plummeting to new lows. In a brief statement that shed little light on the decision, Mr Zuma, whose six years in office have been characterised by scandals and controversies, said Nhlanhla Nene had been removed from his post “ahead of his deployment to another strategic position”.

• Glencore shares jump on faster debt cutting plans (BBC) Mining giant Glencore’s shares jumped nearly 10% on news it has increased its debt reduction target and cut spending plans in the face of a highly uncertain outlook for commodity prices. Its debt reduction target is now $13bn from the previous target of $10.2bn. As a result, Glencore aims to cut its total debts to $18bn-$19bn (£11.8bn-£12.5bn) by the end of 2016, down from a target of “low $20s billion”.

• Yahoo’s Course Is Less Certain (WSJ) Yahoo Inc. on Wednesday signaled that its Internet business is up for sale, dealing a blow to Chief Executive Marissa Mayer and setting the stage for what may be the final act of a Web pioneer that failed to reinvent itself in the smartphone age. The company said it would shelve its yearlong plan to spin off its stake in Alibaba Group Holding Ltd. into a holding company because investors feared tax regulators could challenge the spinoff and hit the company with a multibillion-dollar bill.

Overnight markets

• Overview: IG24 5Y 82.529/83.278 (+0.459), US 10yr note futures are flat at 126-21+, S&P 500 futures are up +0.22% at 2038.25, Crude oil futures are down -1.02% at 36.78$, Gold futures are down -0.37% at $1072.5, DXY is up +0.40% at 97.736.

US Economic Data

• Initial jobless claims came in at 282K  for the week ending December 5th, higher than expectations (270K) and higher than prior week (269K).
• Continuing claims increased to 2243K from 2161K and was higher than expected (2155K).
• Import price index came in at -0.4% MoM (-9.4% YoY) in November versus October -0.3% MoM (-10.7% YoY).
• Monthly budget statement is forecast at -$66.0B in November versus -$136.52B in October.

Canadian Economic Data

• Capacity utilization came in at 82.0% in 3Q 2015, higher than previous quarter (81.4%) and equal to expectations.
• New housing price index increased 0.3% MoM (+1.5% YoY) in October compared to September 0.1% MoM (1.3% YoY).

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 lower, curve steeper, 10Y 2.247 (+2.8bps). Core Euro bonds lower despite weaker stocks. Little news o/n – potential merger of Dupont with Dow Chemical the highlight. China stocks higher, PBOC said to be weighing further stimulus as the Yuan fell to a four year low (see above). GOCs are lower, in line with tsys – 10Y ~1bp wider on the curve. US auctions $21bln in reopened 10Y notes later this aft with 10Y ~5bps lower than the Nov auction. Provis opening unch after closing ~2bs wider on no supply.

News headlines

• Dow Chemical and DuPont Are in Advanced Talks to Merge (WSJ) Dow Chemical Co. and DuPont Co. are in advanced talks to merge, in what would be a combination of two of America’s oldest companies that together are worth nearly $120 billion.

• China Sets Yuan at Four-Year Low in ‘Stress Test’ (WSJ) China guided the yuan to its weakest level in more than four years as the country deals with currency outflows and a slowing economy while trying to loosen its grip on the exchange rate.

• China November inflation edges up, but deflation risks dog economy (Reuters) China’s consumer inflation picked up slightly in November but remained well under the government’s 2015 price target of 3 percent, raising concerns that the world’s No. 2 economy could be sucked into a Japan-style deflationary trap.

• Yahoo to Spin Off Core Businesses, Including Yahoo Japan (NYTimes) Yahoo said on Wednesday that it had dropped a plan to spin off its $31 billion stake in Alibaba, the Chinese e-commerce company. Instead, the company will spin off all of its other assets, including its stake in Yahoo Japan, into a new company.

• Kinder Morgan Cuts Dividend by 74 Percent to Conserve Cash (Bloomberg) Kinder Morgan Inc. slashed its full-year dividend by 74 percent as the freefall in oil prices reduced cash flow that the biggest North American pipeline owner needs to cover payments on $41 billion of debt.

• Lululemon Cuts Earnings Forecast as Quarterly Profit Slips (Bloomberg) Lululemon Athletica Inc. on Wednesday posted a 12% decline in its third-quarter profit, trimmed its earnings forecast for the year and gave downbeat guidance for the current quarter.

• Reported Bitcoin Founder’s Sydney Home Raided by Police (WSJ) A report from Wired suggests Craig Steven Wright, an Australian finance geek, and possibly his close friend, Dave Kleiman, who died in 2013, could be the creators of the digital currency bitcoin. Evidence includes Wright’s blogging about writing papers about a cryptocurrency, his ownership of two supercomputers, and the fact Kleiman had a trust holding exactly the same number of bitcoins the rumored creator owned.

Overnight markets

• Overview: IG24 5Y 82.239/82.989 (+0.320), US 10yr note futures are up +0.04% at 126-12, S&P 500 futures are down -0.11% at 2056.50, Crude oil futures are up +0.83% at 37.82$, Gold futures are up +0.29% at $1078.4, DXY is down -0.49% at 97.990.

US Economic Data

• MBA mortgage applications came in this morning at 1.2% for the week ending December 4th, versus prior week -0.2% decrease.
• Wholesale Inventories are forecast at 0.2% MoM in October versus 0.5% MoM for previous month.
• Wholesale trade sales are expected at 0.2% MoM in October lower than September 0.5% increase.

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

Market update

US tsys trading higher, flatter US 10Y 2.206 (-2.2bps). Weakness in crude for a second day weighing on global equities, Euro stocks -1.4%. Core Euro bonds higher led by 10Y bunds. GOCs trading higher, outperforming tsys in the short end as the Cda curve bull steepens ~3bps led by 5s. The US auctions $24bln in 3Y notes at 1:00PM with the 3Y close to multi year highs, while the latest primary dealer pos data showed dealers net short $3.0bln in the 2-3Y sector. Provis opening wider in risk off environment, Ont 46 107/106 (+1.5bps), Alb/Ont 46 3/0 as oil continued to slide. Supply also a factor as Ont, Alb, NB all rumoured.

News headlines

• Brent Oil Falls Below $40 a Barrel (WSJ) Oil prices continued sliding Tuesday, with Brent, the global benchmark, falling below $40 a barrel for the first time since March 2009.

• Japan’s G.D.P. Grows, Avoiding a Recession (NYT) Japan’s latest recession turns out not to have been a recession at all. The government said on Tuesday that the economy grew at a relatively robust pace last quarter, reversing a more pessimistic estimate it published three weeks ago.

• Moody’s sticks with ‘negative’ outlook for Canadian banks in 2016 (G&M) Moody’s Investors Service is sticking with its “negative” outlook for Canadian banks in 2016, pointing to challenges emanating from the struggling Canadian economy and a changing regulatory framework in the financial sector – even as the big banks continue to diversify abroad.

• China import decline reflects manufacturing weakness (FT) Weak demand at home and overseas dented Chinese imports and exports alike last month, reflecting ongoing weakness in the economy. Imports fell 8.7 per cent in US dollar terms in November compared with a year earlier, trimming losses after a 12.6 per cent drop in October, customs data showed on Tuesday. Exports for November fell 6.8 per cent year-on-year, steeper than the 5 per cent fall in October.

• Bond investors look for greener pastures (FT) How do I know what you see as green is the same as what I see as green? The question is of limited interest to philosophers but has a new relevance for investors as debt issuers attempt to shape the nascent market for green bonds — debt instruments aimed at socially conscious investors who want their money to fund environmentally friendly projects.

 Overnight markets

• Overview: IG24 5Y 82.016/82.783 (+2.655), US 10yr note futures are up +0.12% at 126-16, S&P 500 futures are down -1.03% at 2059.0, Crude oil futures are down -2.26% at 36.80$, Gold futures are down -0.55% at $1069.3, DXY is down -0.17% at 98.486.

 US Economic Data

• NFIB Small Business Optimism Index for November came in at 94.8 compared to the consensus of 96.4 and prior month (96.1).
• JOLTs job openings are forecast at 5500 in October compared to September 5526.
• IBD/TIPP economic optimism is forecast at 45.1 in December 0.4 point lower than November (45.5).

Canadian Economic Data

• Housing starts came in at 211.9K in November versus October revised 197.7K.
• Building permits came in at 9.1% MoM in October versus -6.6% in September (revised from -6.7%).

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