Market Update

Tsys bid in NA trading, yields 1-2bps lower with the 10Y 2.465 (-1.5bps) as S&P futures move lower, crude -0.56%, gold futures +6. Core Euro bonds mixed – 10Y bund yields ~3bps lower @ 0.32% despite better Construction & retail PMIs, while gilt 10Y yield 1bp higher @ 1.192%. FTQ bid in tsys as congress will investigate Trump’s wiretap claims. Weakness in gilts on more uncertainty over French election – Alain Juppe will not run for pres, raising likelihood of Le Pen win, thou l.t. French yields are barely 1-2bps higher mostly in the long end.  The latest CFTC COT report showed the largest divergence on the outlook for 10Y rates since 2012 with large specs extending record net short positions (327k) while asset manager net long rose to the highest in a year based on data for Feb 28th.  GOCs higher, outperforming tsys across the curve. Monetary policy divergence a big factor in last week’s 12 bp narrowing in 5s (84bps thru tsys) with Yellen signalling a March hike is in the cards while the BOC statement was decidedly dovish looking past the uptick in inflation. The BOC auctions $3.3bln in 3Y bonds (March 20s) with the Mar20/2Y roll trading up @ 14.4 this morning.  Provis  0.5bps wider ,  domestic bank supply rumoured, Molson Coors in the US mkt with $1bln in 2Y & 3Y notes IPT t+ 75/80, 85/90 which translates into GOC +60, GOC + 83. The CAD TAP 2.75 20 are G-103 or 20 back of US issue.

News headlines 

Yellen Says March Hike ‘Likely Appropriate’ If Progress Persists (Bloomberg) Federal Reserve Chair Janet Yellen capped a week of rising expectations about an imminent interest-rate increase by explicitly supporting a hike in mid-March if U.S. economic progress persists. “At our meeting later this month, the Committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate,” Yellen said in the text of a speech Friday at the Executives’ Club of Chicago.

Dollar Bulls Despair as March Fed Hike Looks Like It’s Baked In (Bloomberg) The heightened confidence about March may actually spell trouble for dollar bulls in coming days — there’s little in the way of fresh incentives to buy more of the U.S. currency right away, after it surged to an almost six-week high last week. Fed speakers are now in a blackout period until their March 14-15 meeting, and for major economic data, traders have to wait for February jobs figures to be released March 10.

China Eases Fiscal Stance to Meet Slower 2016 Growth Target (Bloomberg) China unveiled a record fiscal deficit and pledged to accelerate the restructuring of its bloated state-owned industries while still setting a weaker growth target for this year. Premier Li Keqiang announced a 6.5 percent to 7 percent expansion goal Saturday, down from an objective of about 7 percent last year and the first range the government has offered since 1995. The government also abandoned its trade target, underscoring the degree of uncertainty about prospects for global growth. The details were given in Li’s work report at the annual meeting of the ceremonial legislature in Beijing. The plan reflected the government’s determination to maintain growth and put off confronting its debt — now nearly 250 percent of gross domestic product. The report also cited downward pressure on the economy against a backdrop of weaker global growth.

Deutsche Bank shares drop on capital hike plan (GlobeandMail) Shares in Deutsche Bank fell almost 7 per cent in early trading on Monday after the lender announced an €8-billion ($8.48-billion) capital increase that Chief Executive John Cryan had previously declared a last resort. The capital hike is its fourth since 2010. Together with a partial listing of the asset-management unit and a sale of other assets, the move should take its core capital ratio – a key measure for regulators – above 13 per cent from 11.9 per cent at end-2016. Germany’s biggest lender, weighed down by litigation costs and writedowns, has fallen behind Wall Street rivals. It has spent the last 18 months trimming its portfolio, throwing out bad clients and trying to get its technology into shape.

PSA targets Opel turnaround as GM exits Europe (Reuters) France’s PSA Group has agreed to buy Opel from General Motors in a deal valuing the business at 2.2 billion euros ($2.3 billion), creating a new European car giant to challenge market leader Volkswagen. The maker of Peugeot and Citroen cars vowed to return Opel and its British Vauxhall brand to profit, targeting an operating margin of 2 percent within three years and 6 percent by 2026 underpinned by 1.7 billion euros in joint cost savings.

Standard Life, Aberdeen agree to $13.5-billion merger (GlobeandMail) Standard Life is to buy Aberdeen Asset Management in an £11-billion ($13.5-billion) all-share deal that should save £200-million a year in costs, pushing rivals to follow suit as fund managers’ margins sag. The merger, creating Britain’s biggest money manager with £660-billion in assets, values Aberdeen around £3.8-billion based on its closing share price on Friday. The tie-up follows an industry shift towards rivals providing low-cost index-tracking products and away from so-called active investment management, which charges customers higher fees.

Greece desperate for growth strategy as public mood darkens (TheGuardian) In the long and winding road of Greek debt drama, disappointment and hope have been the alternating emotions that every government has faced. With the nation’s crisis no nearer to being resolved than when it erupted seven years ago, negotiations with creditors at another critical juncture and Europe engulfed in uncertainty, the need for hope has never been greater.

Funds expect Saudi Aramco to be valued around $1-1.5 trillion (Reuters) Fund managers and institutional investors expect oil giant Saudi Aramco to have a market capitalization of $1 trillion to $1.5 trillion when it sells shares to the public next year, a survey by regional investment bank EFG Hermes showed on Monday. The valuation of Aramco IPO-ARMO.SE, the world’s biggest oil firm, has been the focus of intense speculation since the Saudi government last year announced plans to sell up to 5 percent of it and list the shares in Riyadh and at least one foreign stock exchange.

Overnight markets 

Overview: US 10yr note futures are up 0.089% at 123-22, S&P 500 futures are down -0.31% at 2373.75, Crude oil futures are down -0.23% at $53.21, Gold futures are up 0.57% at $1233.5, DXY is down -0.06% at 101.48, CAD/USD is up 0.08% at 0.747.

US Economic Data

10:00 AM Factory Orders, Jan, est. 1.0% (prior 1.3%)
Factory Orders Ex Trans, Jan, (prior 2.1%)
Durable Goods Orders, Jan F, est. -0.4% (prior -0.4%)
Durables Ex Transportation, Jan F, (prior -0.2%)
Cap Goods Orders Nondef Ex Air, Jan F, (prior -0.4%)
Cap Goods Ship  Nondef Ex Air, Jan F, (prior -0.6%)

Canadian Economic Data

10:00 AM Bloomberg Nanos Confidence Index, Mar 3rd, (prior 58.1)


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