Market Update
Tsys trading lower, near bottom of overnight range on moderate vol in TY futures, US 10Y 2.50%. Equities higher in Europe, S&P futures slightly neg (-0.2%), crude unch. Fed chair Yellen speaking at 1:00pm, Lacker & Evans before that. Core Euro bonds mixed, bund yields 1-4bps higher, 10Y 0.35% (+4bps). Gilts outperforming bunds & tsys on surprise decline in Feb UK service PMI to a six month low, 53.8 from 55.5. GOCs lower, spds unch vs tsys despite the pullback in the US – which may just be a pause after 12-15bps of outperformance just this week driven by the belly of the GOC curve with 5s @85bps thru the most expensive since Dec. Long end also doing well this week with 10s30s 2bps flatter. Provis better bid this morning, Ont 48s 84/83 after closing 1bp tighter yest. PQ issued longs yest @87 now 86/85 or 2/1 vs Onts.
News headlines
Futures dip ahead of Yellen’s speech (Reuters) U.S. stock index futures were down for the second straight day since January on Friday, ahead of Federal Reserve Chair Janet Yellen’s speech, which is expected to give further clarity on the possibility of an interest rate hike later this month. Yellen is set to speak at 1:00 p.m. ET (1800 GMT) at the Executives Club of Chicago. Her speech comes after several other Fed officials this week stoked market expectations for a March rate hike.
A Fit U.S. Shale Industry Challenges OPEC Once Again (Bloomberg) When the who’s who of the oil industry met a year ago in Houston, Saudi Arabia’s energy minister had harsh words for U.S. shale drillers struggling with the worst price crash in a generation. “Lower costs, borrow cash or liquidate,” said Ali Naimi, who managed the world’s largest oil-exporting business for more than two decades.
Euro zone private sector business growth near six-year high (Reuters) Euro zone private sector business activity rose at its quickest pace in nearly six years in February, accelerating across all major economies with job creation reaching its fastest in almost a decade, surveys showed on Friday. The data, which came alongside news on Thursday that euro zone inflation had just surpassed the European Central Bank’s target, could pose a challenge to policymakers in how to explain leaving monetary policy unchanged even as the economy picks up sharply.
U.K. Economy May Be Heading for a Slowdown as Services Weaken (Bloomberg) The U.K. may be heading for its weakest growth in a year, possibly heralding the start of a Brexit-induced slowdown. IHS Markit’s gauges for manufacturing and the dominant services sector fell in February, with both readings coming in below economists’ median forecasts. While the construction index rose, that wasn’t enough to stop the composite Purchasing Managers Index falling to a six-month low of 53.8 from 55.5.
Quebec Eyes More Foreign Bond Sales as Local Market Gets Crowded (Bloomberg) Quebec may issue more bonds in foreign currencies as the federal government and other provinces crowd the Canadian debt market. “It’s probably a share of our activity that’s bound to increase in coming years,’’ Finance Minister Carlos Leitao said in an interview in Montreal Thursday. “There’s going to be a lot of Canadian products in the market, so to see what’s going on abroad is never a bad idea.’’
Climate change will have ‘pervasive effects’ on economy, Bank of Canada deputy governor says (TheGlobeAndMail) Canada’s economy is already taking a hit from global warming, including more frequent droughts and forest fires plus a burst of carbon-tax-induced inflation, a top Bank of Canada official says. “Climate change and actions to address it will have material and pervasive effects on Canada’s economy and financial system,” deputy governor Timothy Lane said in a speech in Montreal Thursday.
Overnight markets
Overview: US 10yr note futures are down -0.038% at 123-15, S&P 500 futures are down -0.16% at 2378.25, Crude oil futures are up 0.44% at $52.84, Gold futures are down -0.32% at $1229, DXY is down -0.39% at 101.8, CAD/USD is up 0.01% at 0.7467.
US Economic Data
| 9:45 AM | Markit US Service PMI, Feb F, est. 54.0 (prior 53.9) |
| Markit US Composite PMI, Feb F, (prior 54.3) | |
| 10:00 AM | ISM Non-Manf. Composite, Feb, est. 56.5 (prior 56.5) |
Canadian Economic Data
There is no major economic news.
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