Market update
US tsys are lower, US 10Y 1.89 (+3bps), curve unch after ADP came in above exp (205k vs 195k) despite another weak Asian equity session . ADP may have been overstated according to SMRA as it included ‘real activity measures that improved as well as a lagged payroll input’ – so it is keeping its non farm est at 170k vs 195k median est. Brief rally in longer tsys after the US Treasury announced cuts to coupon sizes at this month’s refunding: 10Y $23bln (-1bln), 30Y $15bln (-1bln) while nominal issuance will be cut by $12bln this qtr. GOCs lower after yesterday’s huge rally led by 10Y (11bps), with 10s on the curve the most expensive since 1998! Vs 2s/30s. Provis opening unch after 2-3bp widening yest.
News headlines
- ‘No limit’ to Japan easing, says Kuroda (FT) Haruhiko Kuroda said there was “no limit” to monetary easing as he vowed to slash Japanese interest rates deeper into negative territory if necessary.
- Oil rises after Russia says open to OPEC meeting (TherGlobeandMail) Oil rose on Wednesday, paring earlier losses after Russia reiterated its openness to talking with OPEC about output cuts, which helped revive hope among investors that the world’s largest producers could act to boost prices.
- Fed’s Dudley: Conditions tighter than Dec, would weigh on FOMC (CNBC) Financial conditions have tightened since the Fed raised interest rates in December, New York Fed president Bill Dudley said on Wednesday, according to a report from news service MNSI.
- Fed vs. the Dollar: Why Yellen Can’t Win (WSJ) The U.S. dollar sits at the center of a tangle of negative feedback loops that are roiling financial markets and economies around the world. It is coming to the point where the Federal Reserve may have to try to cut through the snarl.
- China Sets 6.5% to 7% Growth Target, First Range Since 1990s (Bloomberg) China set a range for its economic growth target for the first time in two decades, saying the world’s second-largest economy would expand 6.5 percent to 7 percent this year, slower than last year’s goal of about 7 percent.
- Euro-Area Price Cuts Intensify Pressure on Draghi to Act (Bloomberg) The euro area’s manufacturing and services industries cut prices at the fastest pace in almost a year in January, underlining concerns about weak inflation in the region.
- China seeks food security with $43 billion bid for Syngenta (Reuters) China made its boldest overseas takeover move when state-owned ChemChina agreed a $43 billion bid for Swiss seeds and pesticides group Syngenta on Wednesday, aiming to improve domestic food production.
- Yahoo Signals It’s Open to a Sale (WSJ) Yahoo has been brushing off sale talk for a while despite mounting pressure from investors, claiming the embattled portal would go ahead with its ‘reverse spin’ plans. But now Yahoo has announced plans to seek “strategic alternatives,” reports The Wall Street Journal.
- Down payments cut to boost China’s housing market (SD) Now, after the government lowered the minimum deposit for home purchases in most cities, including Zhengzhou, Zhang can pay 120,000 yuan less, allowing him to afford a house with a little help from his family.
- GM’s Earnings Surge on Strength in China, U.S. (WSJ) General Motors Co.’s fourth-quarter profit surged amid growth in China and booming sales of pickup trucks and sport-utility vehicles in the U.S.
Overnight markets
- Overview: US 10yr note futures are down -0.1% at 129-31, S&P 500 futures are up 0.59% at 1908.75, Crude oil futures are up 3.28% at $30.86, Gold futures are down -0.01% at $1127.1, DXY is down-0.61% at 98.265.
US Economic Data
- Mortgage applications fell 2.6% from one week earlier after three weeks of steady increases
- ADP report published today noted private-sector employment increased by 205,000 from December to January, on a seasonally adjusted basis.
- Markit’s US services PMI will be released at 9h45am
- US ISM non-manufacturing index is scheduled to be released at 10ham and expectations are for the index to have edged slightly lower to 55.1 from a reading of 55.3 in the 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, David Leclair-Legault
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230