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Market update

US tsys trading slightly lower, curve 1bps steeper, US 10Y 2.282 (+1bp). Core Euro bonds higher, curves flatter. German 10Y bunds ~5bps lower, with longs outperforming, 2/30 ~7bps flatter on weaker than exp German IP, lower oil & a rebounding USD. Importantly net supply in the Eurozone turns sharply negative this week according to MNI – Germany is the sole issuer reopening its 2Y this Wed for E3bln, while redemption flows are E14bln. By contrast the US issues $56bln in 3, 10 & 30Y bonds this week starting Tuesday. In Canada, GOCs are higher spds vs tsys unch – Friday saw Can/US tighten to four month lows in the belly on huge divergence in relative employment. We expect provi supply to materialize this week after last week was dominated by banks & Telus.

News headlines

• As Oil Keeps Falling, Nobody Is Blinking (WSJ) The standoff between major global energy producers that has created an oil glut is set to continue next year in full force, as much because of the U.S. as of OPEC.

• Bank of Japan Kuroda says no need to adopt negative deposit rates in Japan (Reuters) Bank of Japan Governor Haruhiko Kuroda said on Monday he saw no need to implement negative deposit rates in Japan as borrowing costs were already very low due to the central bank’s aggressive asset purchases.

• Rate rise belies frailties in US economy (FT) Expectations are carved in stone that the US Federal Reserve will shift borrowing costs higher next week with the central bank’s policy shift seen in some quarters as justifying optimism over the economy.

• China’s forex reserves suffer third-largest monthly decline (FT) China’s foreign exchange reserves posted their third-largest monthly decline on record last month, central bank data showed on Monday, renewing worries about capital outflows after reserves had appeared to stabilise.

• The Stock Market Is Missing the Warning From Junk (WSJ) Junk bonds are headed for their first annual loss since the credit crisis, reflecting concerns among investors that a six-year U.S. economic expansion and accompanying stock-market boom are on borrowed time.

Overnight markets

• Overview: IG24 5Y 78.813/79.683 (+0.834), US 10yr note futures are down -0.04% at 125-28, S&P 500 futures are down -0.17% at 2085.0, Crude oil futures are down -2.85% at 38.83$, Gold futures are down -0.42% at $1079.5, DXY is up +0.44% at 98.783.

US Economic Data

• Labor market conditions for November will be release at 10:00 and is forecasted at 1.6 after a 1.6 level in October.
• Consumer credit is forecast at $19.0B  in October versus September $28.9187B.

Canadian Economic Data

• 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 trading sharply lower after ECB decision, Draghi press conference, US 10Y 2.223 (+4.4bps), curve ~3bps steeper. Core European bonds sharply lower as well, 10Y bunds +10bps @ 0.57%. ECB decision to cut deposit rates by 10bps less than some had expected, Draghi sounding bullish in press conference saying policy has been effective, recovery is ongoing, oil prices supportive for household income. GOCs lower, spds ~1bp narrower vs tsys on the pullback, 10s ~4bps cheaper on the curve, 10s/30s another 1.5bp flatter seems like left over buying from Dec 1st started yest. Telus in the mkt with 10 & 30Y @ ~220/275 – looks like at least a 15bp concession on 10s.

News headlines

• ECB slices key interest rate to new historic low (FT) The European Central Bank has taken interest rates in the eurozone to a new historic low, pushing its deposit rate deeper into negative territory in an attempt to bolster the region’s tepid recovery.

• ECB pushes deposit rate deeper into negative territory (CNBC) The European Central Bank cut a key interest rate in a much-anticipated move at its monthly policy meeting, with further sweeping changes expected to be announced at its press conference later on Thursday.

• Oil speculators risk ‘short squeeze’ if impulsive Saudi Prince throws OPEC surprise (Telegraph) Hedge funds have taken their bets. The market is convinced that Saudi Arabia will ignore the revolt within OPEC at a potentially explosive meeting on Friday, continuing to flood the global markets with excess oil.

• S&P downgrades raft of US banks (FT) Eight of the biggest US banks have been downgraded by Standard & Poor’s, as the credit rating agency judged that the likelihood of federal government support in a future crisis had dimmed.

• Restructuring charges drag down CIBC’s profit; boosts dividend (G&M) CIBC reports its net income for the fourth quarter was $778-million, a 2.8 per cent decline from the same time last year due to higher restructuring costs at the corporate level.

Overnight markets

• Overview: IG24 5Y 79.021/79.774 (+0.698), US 10yr note futures are down -0.31% at 126-10+, S&P 500 futures are down -0.22% at 2077.0, Crude oil futures are up +1.80% at 40.66$, Gold futures are down -0.02% at $1053.6, DXY is down -0.40% at 99.598.

US Economic Data

• Challenger job cuts came in at -13.9% YoY in November, compared to prior month -1.3% increase.
• Initial jobless claims came in at 269K  for the week ending November 28th, equal to expectations (269K) and higher than prior week (260K).
• Continuing claims increased to 2161K from 2155K and was lower than expected (2190K).
• Markit US Services PMI for November (Final) is forecast at 56.5, equal to preliminary report.
• ISM non-manufacturing is forecast at 58.0 in November lower than October 59.1.
• Factory orders are expected at 1.4% MoM in October fallowing a -1.0% decrease in September.
• Final revisions to Durable goods orders and Nondefense capital goods for October will be release at 10:00.

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 opening lower, US 10Y 2.17 (+3.7bps), curve 1bp steeper after stronger ADP & Q3 Productivity. Fed chair Yellen to testify before congress later this morn. Odds of a rate hike have risen to 72% for next week’s FOMC meeting from ~65% prior to last month’s payrolls. Intervening data has been mixed with the CITI economic surprise index at a two month low. Overnite tsys were lower as China stocks rose 2.3% but found support as bunds/gilts rallied on weak UK construction PMI. GOCs are lower ahead of BOC, curve ~1.5bps steeper. After yest BMO/BNS NVCC deals, RY is possible candidate to issue today after results were announced this morn. Westcoast (Al/BBB) is in the mkt with a 10 & 30Y reopening @ ~223/260. Union Gas last issued 10Y bonds @172 on Sep 17th.

News headlines

• Euro zone inflation sticks at 0.1%, all eyes on ECB (CNBC) Euro zone inflation is expected to hold steady in November, unchanged from the previous month. But with little to no growth, pressure remains on the European Central Bank to increase its massive bond-buying program to boost prices at its monthly meeting on Thursday.

• Global company debt sales eclipse $2tn (FT) Sales of global corporate bonds have eclipsed $2tn for the fourth consecutive year, with a further easing of European Central Bank policy seen encouraging companies to take advantage of lower interest rates.

• Watch for U.S. recession, zero interest rates in China next year, Citi says (Reuters) The outlook for the global economy next year is darkening, with a U.S. recession and China becoming the first major emerging market to slash interest rates to zero both potential scenarios, according to Citi.

• Treasury Curve Flattest in 10 Months Shows Trust in Fed’s Yellen (Bloomberg) The Treasury market is taking Janet Yellen at her word on the path for monetary policy. The yield premium offered by 10-year notes over two-year securities narrowed to the least in 10 months as the Federal Reserve chair has stressed the potential for liftoff this month, while reiterating that tightening will proceed at a measured pace.

• The return of inflation could define capital markets in 2016 (FT) Betting on a cautious but notable inflation upswing could be the winning trade of 2016, according to a slew of investment bank analysts who have polished off their flagship predictions for the coming year.

Overnight markets

• Overview: IG24 5Y 77.609/78.379 (+1.021), US 10yr note futures are down -0.18% at 126-23, S&P 500 futures are down -0.06% at 2098.75, Crude oil futures are down -1.72% at 41.13$, Gold futures are down -0.35% at $1059.8, DXY is up +0.40% at 100.190.

US Economic Data

• MBA mortgage applications came in this morning at -0.2% for the week ending November 27th, versus prior week -3.2% decrease.
• ADP employment change came in at 217K in November compared to 196K in October (Expected 190K).
• Nonfarm productivity (F) came in at 2.2% in 3Q 2015 versus 3.5% for previous quarter.
• Unit labor costs (F) increase 1.8% in 3Q 2015 compared to the 2.0% in 2Q 2015.
• ISM New York (November) will be release at 9:45 (last report: 65.8).
• Fed will release beige book at 14:00.

Canadian Economic Data

• Bank of Canada overnight lending rate decision will be release at 10:00 and is expected to remain at 0.50%.

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