Market Update

Tsys trading higher, yields 1.5-2.5bps lower, 10Y 2.78% (-2bps), S&P futures -10, gold firmer, crude down for a third day 63.20.  German bunds lower, trading close to the lows of the session with the 10Y bund 0.72% (+3.5bps) and the tsy/bund spd 6bps wider. Bunds reacting more to strength in European stocks, German 10Y bund auction which allotted E2.492bln vs. E3bln on sale.  The US will auction $24bln in 10Y notes at 1:00PM vs $20bln sold in Jan. GOCs higher, underperforming tsys in the short end with the 10Y 2.34 (-2.3bps). The BOC auctions $3.6bln in new 2Y notes at noon – May 1 2020s with the WI roll 4.6/4.4 (vs Feb 20s) – which looks 0.5-1bp cheap considering the 2Y roll (Feb20/Nov19) is closer to 4bps. 

News headlines 

Stocks Recover From Rout With Best Day Since 2016: Markets Wrap (Bloomberg) U.S. stocks rebounded from a violent selloff to post the biggest rally in 15 months as investors poured back into some of the most beaten-down sectors. Technology, materials and consumer shares paced a 1.7 percent gain in the S&P 500 Index, while DowDuPont and Home Depot led a 567 point surge in the Dow Jones Industrial Average, the biggest gain in two years. The ride wasn’t straight up, though. The Dow plunged more than 500 points at the open, adding to anxiety after Monday’s rout — the worst in almost seven years. Stocks swung between gains and losses no fewer than a dozen times before a late-session rally.

Merkel Ends Deadlock in Coalition Deal With Social Democrats (Bloomberg) German Chancellor Angela Merkel’s bloc has concluded a coalition agreement that hands a half-dozen ministries — including the key foreign and finance portfolios — to her Social Democratic allies, a move that will likely bolster the country’s commitment to greater European integration.

Congress Trying for Bigger Budget Deal While Avoiding Shutdown (Bloomberg) The short-term spending bill passed by the House to avoid a government shutdown this Friday may get replaced with a longer-term budget plan that raises spending caps for defense and domestic programs if congressional leaders can wrap up a deal in the next two days.

How Two Tiny Vol Products Helped Fuel Sudden Stock Slump (Bloomberg) Two days after a sudden spike in volatility sparked a stock-market crash, market participants are left to ponder the wreckage of the sell-off and the mysterious dynamics that caused it. One theory that’s emerging: the curious case of the tail wagging the dog.

Musk Sends a Tesla Into Space Atop World’s Most Powerful Rocket (Bloomberg) An elated Elon Musk pulled off another seemingly impossible feat Tuesday when SpaceX launched the world’s most powerful rocket in 45 years, then flew two of its spent boosters back to the Florida coast for a spectacular, simultaneous recovery on land.

TSX futures point to a lower start (Reuters) Stock futures suggested Canada’s main stock index could shed gains on Wednesday after rebounding in the previous session, as the recovery in share markets lost steam. March futures on the S&P TSX index were down 0.41 percent at 7:15 a.m. ET. Canadian building permits data for December is due at 8:30 a.m. ET Canada’s main stock index closed higher on Tuesday, reversing earlier falls as it followed a similar turnaround on Wall Street and benefited from gains among energy and industrial stocks.

Oil, water and wine: Escalating Alberta-B.C. feud threatens future of Trans Mountain pipeline (CBC) A clash between British Columbia and Alberta over the Trans Mountain pipeline expansion was probably inevitable, but the surprisingly emotional nature of the conflict and its recent escalation makes a compromise less likely. In the week or so since B.C. proposed new restrictions on bitumen shipments that would flow through the expanded pipeline from Alberta to the West Coast, there have been threats of lawsuits and economic retaliation — and on Tuesday, a move by Alberta to block imports of B.C. wine.

Overnight markets

Overview: US 10yr note futures are down -0.039% at 121-14, S&P 500 futures are down -0.49% at 2681, Crude oil futures are down -0.33% at $63.18, Gold futures are down -0.24% at $1326.3, DXY is up 0.3% at 89.851, CAD/USD is up 0.26% at 0.7983.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.837% 2 Year 2.089%
5 Year 2.107% 5 Year 2.514%
10 Year 2.348% 10 Year 2.777%
30 Year 2.441% 30 Year 3.044%

US Economic Data

7:00 AM MBA Mortgage Applications, Feb 2nd 0.7% (-2.6% prior)
15:00 PM Consumer Credit, Dec est 20.000b (27.951b prior)
02/07 Revision : Consumer Price Index

Canadian Economic Data

8:30 AM Building Permits MoM, Dec 4.8% est 2.0% (-7.7% prior)


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, Hugues Savard

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230