cti2015header-morning comments web

Market update

Tsys opening lower/flatter, some p/t after Friday’s 8-11 bp rally, US 10Y 1.725 (+2.2bps). German govt bonds slightly lower, UK gilt curve steeper, GBP at three-week low after TNS UK poll showed majority wanting to leave the EU. EU periph spds wider, 10Y Italy +5bps after Brexit polls.  Yellen speaks at 2:00PM and it will be interesting to see if she still views a rate hike as appropriate “in the coming months” in the wake of Friday’s incredibly weak non-farm print.  Commodities higher, WTI up over 1% close to $50. GOCs lower in line with tsys, provi spds unch after widening 2.5bps Fri. Still 10Y Ont spds actually ended the week 1bp lower despite 15bp rally in GOCs & decent supply.

News headlines

  • Commodities Rise With Emerging Markets on Fed View; Pound Drops (Bloomberg) Miners and energy companies rallied with commodities after U.S. jobs data crushed speculation the Federal Reserve would raise interest rates this month. The pound slumped following polls that showed Britons favor exiting the European Union. Materials producers were the biggest gainers in both Europe and Asia as the Bloomberg Commodity Index headed for the highest close since October, with Brent crude above $50 a barrel and zinc extending its longest rally since 2013. Indonesia’s rupiah and Malaysia’s ringgit were the best performers among 31 major currencies after Friday’s U.S. payrolls report caused the Bloomberg Dollar Spot Index to tumble. The pound sank to a three-week low and Brexit concern also infected Spanish and Italian bonds and U.K. homebuilders, while boosting the Swiss franc.
  • Yellen faces fine balance on Fed rate hike after job growth tumbles (Reuters) Federal Reserve Chair Janet Yellen will likely keep the door open to an interest rate hike within the next few months when she speaks on Monday, while striking a balanced tone about recently disappointing jobs growth and mixed signals in the U.S. economy. Yellen’s speech to the World Affairs Council of Philadelphia at 12:30 p.m. ET (1630 GMT) will address the economy and monetary policy, and is the last public comment by U.S. central bankers before their June 14-15 meeting.
  • Oil Advances as Abu Dhabi Sees $60 Crude on Shrinking Surplus (Bloomberg) Oil advanced as Abu Dhabi forecast prices could climb as high as $60 a barrel amid a glut that’s dwindling more quickly than projected. Futures rose as much as 1.3 percent in New York. The global surplus is down to 1.2 million to 1.5 million barrels a day and has contracted faster than expected, Ali Majed Al Mansoori, chairman of the Abu Dhabi Department of Economic Development, said in a Bloomberg Television interview.
  • German Factory Orders Declined in April on Weak Export Demand (Bloomberg) German factory orders declined in April as demand for investment goods from outside the 19-nation currency region slumped. Orders, adjusted for seasonal swings and inflation, fell 2 percent from the prior month, when they rose a revised 2.6 percent, data from the Economy Ministry in Berlin showed on Monday. The reading, which is typically volatile, compares with economists’ forecast for a drop of 0.5 percent. Orders slid 0.5 percent from a year earlier.
  • China’s Debt Load Is (Much) Higher Than Previously Thought, Goldman Says (Bloomberg) Count total social financing (TSF) as another Chinese statistic of increasingly dubious value, according to analysts at Goldman Sachs Group Inc. With many investors grappling to understand the degree to which China’s economic growth has been fueled by debt, efforts to get a grip on measures of new credit creation have gained fresh urgency. To date many have relied on the TSF invented by the Chinese authorities in 2011 as a way of capturing a larger slice of the country’s shadow banking activity, but Goldman analysts led by MK Tang cast fresh doubt on the measure’s ability to gauge credit creation in a note published on Wednesday.
  • Britain’s EU Out campaign takes 4-5 percentage point lead: YouGov and ICM polls (Reuters) The campaign for Britain to leave the European Union has taken a 4-5 percentage point lead ahead of a June 23 referendum, according to online polls by ICM and YouGov, sending sterling toward three-week lows against the U.S. dollar. The swing toward « Out » with less than three weeks to go comes as both sides step up their campaigning to try to win over the large number of still undecided voters with warnings over the economy and immigration.
  • CPP should be expanded, but probably not for the reasons you think (Financial Post) June will be a critical month for public pensions with the finance ministers meeting to discuss expansion of the Canada Pension Plan. The battle lines have been drawn and a bigger CPP is either one of the biggest mistakes the country can make or a godsend that will rescue the middle class from a bleak existence in retirement. To gain some perspective on which of these competing visions is more plausible, it is useful to look back at the birth of the CPP in the mid-1960s.


Overnight markets 

  • Overview: US 10yr note futures are down -0.1312% at 130-26, S&P 500 futures are up 0.25% at 2103, Crude oil futures are up 2.12% at $49.65, Gold futures are up 0.26% at $1246.1, DXY is up 0.08% at 94.105.

 US Economic Data 

  • 10:00 AM: Labor Market Conditions Index Change, May,  est. -0.8% (prior -0.9%)

Canadian Economic Data 

  • 10:00 AM: Bloomberg Nanos Confidence, June 3,  (prior 57.5)


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
Fax: (514)-861-3230