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Market update

US tsys weaker curve flatter led by 5Y, US 10Y 2.30 (+3.4bps), 2Y @0.946 – a high since April 2010. Core euro bonds weaker led by 10Y bunds (+6.5bps) @ 0.54% pressured by stronger PMIs (See above) & supply. Belgium sold 10Y &12Y debt while Germany, Spain & Netherlands all have supply this week with no reinvestment flows (MNI). Meanwhile 2Y bund dropped to record low yield -0.39%. GOCs are lower, curve steeper modestly underperforming tsys in the back end. Provis unch to start with Ont in blackout, QC issuing last week – BC, Newf, Alta all rumoured.

News headlines

• Oil Recovers With Energy Producers on Saudi Comments; Bonds Sink (Bloomberg) Oil rallied and shares of energy companies erased losses as Saudi Arabia repeated it’s ready to work with other producers to stabilize global markets. Other commodities markets stayed lower, while stocks and bonds both declined.

• Metals hit multiyear lows as dollar gains (FT) Metal prices are near multiyear lows as a strong dollar exacerbates oversupply fears amid concerns about weak demand from China. However, a rebound in oil prices on hopes Saudi Arabia would make moves to stabilise the market is paring losses across the commodity complex, helping resources stocks recover from an early sell-off.

• Euro zone business growth at four-year high (Reuters) Business activity in the euro zone picked up at its fastest pace since mid-2011 this month, and far quicker than expected, as slowing growth in France following the Nov. 13 attacks was offset by a buoyant Germany.

• Bond issuance in euros hits six-year high (FT) Corporate investment grade bond issuance in euros is heading for the highest annual level since 2009 as companies scramble to sell debt ahead of the expected launch of a second round of quantitative easing by the European Central Bank.

• Why the Housing Rebound Hasn’t Lifted the U.S. Economy Much (WSJ) American homeowners are finally digging out of the hole created by the housing crisis. But their housing wealth is playing a much smaller role in the overall economy than it did before the downturn.

• Canada’s economy and fiscal health ‘has deteriorated’ since April, Liberals reveal in first For those Canadians looking for the way forward on the federal government’s deficit-spending program, stay tuned. The Liberals, in office for just two weeks, are facing drastically lower economic growth in the coming years and a series of budget deficits as they push ahead with plans to plough billions of dollars into infrastructure stimulus projects across the country.

 Overnight markets

• Overview: US 10yr note futures are lower -0.06% at 126-19, S&P 500 futures are down -0.12% at 2086.25, Crude oil futures are down -1.26% at 41.36$, Gold futures are down -0.36% at $1072.40, DXY is up +0.10 % at 99.65.

 US Economic Data

• Chicago Fed National Activity Index missed expectations during October, coming in at -0.04 vs. 0.08 expected and down from September’s -0.29.
• Existing home sales for September will be release at 9:00. US existing home sales or home resales is expected to modestly slid from previous recording of 5.55M for the month of September. Market expects US October’s home resales to stand at 5.39M.

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 little changed, US 10Y 2.25%, curve ~1bp flatter, 30Y bond just above 2.0%. Bunds rallying on dovish Draghi comments (see above). GOCs unch, 1bp wider vs tsys after weaker Sep retail sales, higher than exp core CPI. Provi spds opening tighter, ont 46 103/102, PQ 48 109/108.

News headlines

• Dovish Draghi rhetoric keeps pressure on euro (FT) The euro moved further towards month lows on Friday, and German two-year debt hit record lows, after Mario Draghi repeated his willingness to use “all the instruments available” to help reach his 2 per cent inflation target.

• Wage pressures coming? U.S. companies start to sound the alarm (Reuters) Early indications of wage pressures in pockets of corporate America have begun emerging in recent weeks, suggesting labor costs could be a bigger headwind for U.S. companies in 2016.

• Goldman Says the Years of Emerging-Markets Doldrums Are Over (Bloomberg) After three years of disappointment, emerging markets are about to turn the corner, Goldman Sachs Group Inc. predicts. As growth picks up and weaker currencies help alleviate economic imbalances, “2016 could be the year EM assets put in a bottom and start to find their feet,” strategists led by Kamakshya Trivedi wrote in a note Thursday.

• What junk bond credit spreads reveal (FT) The yield premium on US high-yield bonds has been moving up steadily this year ahead of a possible Federal Reserve interest rate rise, and as falling commodity prices put pressure on miners and oil companies.

• Bond ETF Withdrawals Surge as Investors Brace for Higher Rates (Bloomberg) Investors in U.S. exchange-traded funds are selling bonds this month for the first time since June as they prepare for the Federal Reserve to raise interest rates. They’ve pulled $1.12 billion from U.S. fixed-income funds in November. While the Fed has emphasized it plans to move at a gradual pace, the figures highlight the extent to which bond investors are seeking protection as they prepare for the first increase to borrowing costs in almost a decade.

 Overnight markets

• Overview: IG24 5Y 79.047/79.763 (-1.995), US 10yr note futures are up +0.05% at 126-27, S&P 500 futures are up +0.32% at 2086.0, Crude oil futures are down -1.26% at 40.03$, Gold futures are up +0.25% at $1081.7, DXY is up +0.26% at 99.248.

US Economic Data

• Kansas City Fed manufacturing index is forecast at 0 in November higher than October level (-1).

Canadian Economic Data

• Retail sales went up -0.5% MoM in September, worse than expectations of a 0.1% increase, after increasing 0.5% the previous month.
• CPI is down 0.1% MoM (+1.0% YoY) in October (0.1% MoM and 1.0% YoY Expec) versus September -0.2% MoM (1.0% YoY).
• CPI core came in at 0.3% MoM (2.1% YoY) in October (0.2% MoM and 2.0% YoY Expec) compared to previous month 0.2% MoM (2.1% 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 trading higher, US 10Y 2.257 (-1.7bps), curve 4bps flatter after FOMC minutes yest raised expectation for Dec rate hike. Core Euro bonds higher led by 10Y gilts (-2.5bps) after weaker Oct retail sales. Bund futures up for a ninth day, 10Y bund yield below 0.50%. Dovish comments from ECB Praet (see above) & minutes from Oct meeting revealing ongoing concerns with deflation risk. 10Y TIPs auction at 1:00PM with breakeven close to the lowest lvl since 2009 while the last 3 TIPS auctions have tailed. GOCs are higher , curve flatter yet lagging the sharp flattening move in the US by ~3bps. Provi spds tighter again this morning, after narrowing 1.5bps yest despite more than $2.5bln in supply (CHT, QC, muni…).

News headlines

• ECB Minutes Signal More Stimulus Possible in December (WSJ) European Central Bank officials were concerned at last month’s policy meeting that their stimulus measures hadn’t gained enough of a foothold in the European economy, according to the minutes of that meeting, prompting them to signal that more easy money steps were possible.

• ECB’s Solution to Oil Puzzle May Decide December QE Debate (Bloomberg) The European Central Bank’s decision on whether to inject fresh stimulus into the euro area next month may swing on a judgment over what’s causing a slide in oil prices. Both ECB President Mario Draghi and Executive Board member Peter Praet, the institution’s chief economist, have signaled concern that cheaper energy is a warning sign.

• Rate-Rise Bets Heat Up After Fed Minutes (WSJ) A key measure of bets that U.S. short-term interest rates will rise hit their highest level in nearly a year, as investors prepared for the first Federal Reserve rate increase since 2006.

• Retail Sales Fall as Britons Driving Growth Take Breather (Bloomberg) U.K. retail sales fell more than economists forecast last month as consumers took a breather after going on a spending spree in September.

• US oil back below $40 threshold (FT) US crude oil fell below $40 a barrel for the first time since August on Wednesday as rising inventories in the world’s largest oil consumers heightened concerns over the deepening global glut.

• BOJ keeps policy steady despite recession, sees capex rebound (Reuters) The Bank of Japan kept its monetary stimulus program unchanged on Thursday, with Governor Haruhiko Kuroda holding fast to his view that the corporate capital expenditure vital to economic growth will pick up – suggesting that no new monetary easing is imminent.

 Overnight markets

• Overview: IG24 5Y 79.232/79.936(+1.391), US 10yr note futures are up +0.04% at 126-22+, S&P 500 futures are up +0.18% at 2083.5, Crude oil futures are down -1.77% at 40.03$, Gold futures are up +0.11% at $1069.9, DXY is down -0.27% at 99.384.

US Economic Data

• Initial jobless claims came in at 271K  for the week ending November 14th, higher than expected (270K) and lower than prior week (276K).
• Continuing claims increased to 2175K from 2177K and was higher than expected (2167K).
• Philadelphia Fed came in at 1.9 in November above October level of -4.5.
• Leading index is forecast at 0.5% in October higher than September -0.2% decrease.

Canadian Economic Data

• Wholesale trade sales came in at -0.1% MoM in August equal to July -0.1% decrease and lower than expected (0.2%).

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