US tsys opening higher, curve flatter on very low volume, US 10Y 1/815 (-1.3bps). Nikkei down another 3.1%, JGB yields fell 4bps to-0.13%, while the Yen rose to the highest since Oct 14. Japan mfg PMI came in at 48.2 in April, new orders lower for the 4th consecutive month. Core Euro bonds higher, curves flatter, EUR above 1.15 for the first time since August. Italian bank stocks lower led by banks after poorly received IPO from Banca di Vicenza, with one of its main sponsors Unicredit down 7.1%. In Canada GOCs higher in line with tsys, provis opening unch from Friday. BCE announced it would buy Manitoba telecom for $40/share a 22% premium over its closing price.
- Yen Holds Near 18-Month High as Gold Jumps; Euro, Bonds Advance (Bloomberg) With many markets across the world closed, investors pared back higher-risk holdings, keeping the Japanese yen near its strongest level in 18 months. Gold advanced with sovereign bonds, oil declined and European equities held onto their biggest loss in two months. Japan led a selloff in Asian equities, with the Topix index sliding for a fifth day as trading resumed after a break on Friday. The yen held its steepest back-to-back gains since the global financial crisis and the Stoxx Europe 600 Index reached a two-week low. Oil retreated, following a 20 percent surge in April, as near-record Iraqi output added to anxiety over a global glut. U.S. Treasuries advanced and Japan’s 20-year bond yield sank to a record.
- Gold Rallies Above $1,300 as Investors Like Low Interest Rates (Bloomberg) Gold advanced above $1,300 an ounce for the first time since January 2015 on speculation central banks in the U.S. to Europe will maintain low interest rates, spurring demand for the metal. Gold futures for June delivery climbed as much as 1.1 percent to $1,304.30 an ounce on the Comex in New York, the highest level since Jan. 22, 2015, and were at $1,301 at 7:06 a.m. The precious metal has climbed 23 percent this year.
- Puerto Rico Will Default on Government Development Bank Debt (Bloomberg) Puerto Rico will default on a $422 million bond payment for its Government Development Bank, escalating what is turning into the biggest crisis ever in the $3.7 trillion market that U.S. state and local entities use to access financing. Governor Alejandro Garcia Padilla invoked a debt moratorium law approved last month, saying during a televised address Sunday that the commonwealth needs to focus on providing essential services.
- Negative Yields No Bar to Best Bond Market Conditions Since 2009 (Bloomberg) In a world awash with debt, it’s hard to imagine that there may not be enough to go around. Yet that’s exactly what JPMorgan Chase & Co. says is happening. The world’s biggest bond underwriter predicts record-low global yields ahead, based on forecasts of $1.86 trillion of net worldwide issuance this year versus $1.74 trillion of estimated net purchases. While those figures signal that supply will outstrip demand for the fifth straight year, the key for the bank is that the gap — the amount of excess issuance — is set to shrink the most since 2009.
- Euro-Area Manufacturing Growing at `Anemic’ Pace, Markit Says (Bloomberg) Euro-area manufacturing growth was little changed last month as stronger readings in Germany, Italy and Spain were offset by contraction in France. Markit Economics in London said its monthly Purchasing Managers Index points to “anemic” factory growth in the region. The gauge rose to 51.7 from 51.6 in March, above the 50 level that divides expansion from contraction and a provisional reading of 51.5. The economy of the 19-nation euro area is in what European Central Bank President Mario Draghi says is a “moderate” recovery. Data last week showed expansion accelerated to 0.6 percent in the first quarter, the fastest in a year. The manufacturing report showed that price declines eased in April.
- AIG raises $1.25 billion by selling Chinese insurer PICC P&C shares: IFR (Reuters) American International Group (AIG.N) has raised HK$9.68 billion ($1.25 billion) by selling a large chunk of its stake in China’s PICC Property and Casualty Co Ltd (PICC P&C) (2328.HK) in a block deal, IFR reported on Sunday. AIG sold about 740 million shares at HK$13.08 each, or near the bottom end of a marketing range, IFR said, citing sources close to the deal. Most of the shares were bought by institutional investors, it added.
- Ultra Petroleum files for bankruptcy (Reuters) May 2 Oil and natural gas producer Ultra Petroleum Corp, a major victim of depressed oil and gas prices, filed for Chapter 11 bankruptcy on Friday in Houston. The Texas-based company, which has operations in Wyoming, Utah and Pennsylvania, listed assets in the range of $1 billion to $10 billion, and liabilities of $1 billion to $10 billion, according to a court filing.
- Big bargains entice Warren Buffett fans on Berkshire weekend (Reuters) Warren Buffett, the CEO of Berkshire Hathaway Inc, is known for his keen eye for a bargain. And there were plenty on offer for shareholders attending Berkshire’s annual meeting over the weekend, where goods from some 50 Berkshire businesses were on show, often at big discounts.
- Overview: US 10yr note futures are down -0.0721% at 129-31, S&P 500 futures are up 0.25% at 2064.25, Crude oil futures are down -0.44% at $45.72, Gold futures are up 0.82% at $1301.1, DXY is down -0.31% at 92.796.
US Economic Data
- 9:45 AM : Markit Us Manufacturing PMI. April F, est. 50.8 (prior 50.8)
- 10:00 AM : ISM Manufacturing, April, est. 51.4 (prior 51.8)
- ISM Prices Paid, April, est. 52.0 (prior 51.5)
- ISM New Orders, April, (prior 58.3)
- 10:00 AM : Construction Spending, m/m, est. 0.5% (prior -0.5%)
Canadian Economic Data
- 9:30 AM : RBC Canadian Manufacturing Index, April, (prior 51.5)
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