Market update
US tsys are higher, US 10Y 1.74 (-2bps) on avg volume. Equities mixed – European stocks slightly lower, Japan higher, China down , EU peripheral bonds spds wider. Tsys rising in Europe with core Euro bonds on dovish comments from ECB officials including Draghi saying the bank wouldn’t ‘surrender’ to low inflation. ECB minutes from the March meeting showed concern over the decline in Feb core CPI while members discussed the possibility of a larger rate cut than 10bps. The euro currency is lower yet firmly above 1.1340 support. GOCs opening better bid led by 10s, but lagging the rally in tsys by ~1bp in longs. Of note (i) the Sep 21/5Y roll is under 10 (9.9/9.7) from 10.3 at auction yest with 5s10s unch and (ii) the bid to longs continues past month end – 10s30s 2 bps flatter yest aft. Provis 0.5bps weaker so far this morning, Ont 46s trading down at 109.
News headlines
- S&P 500 Futures Fall as Yen Climbs With Gold on Growth Concern (Bloomberg) U.S. equity futures fell with European stocks and the yen strengthened to a 17-month high amid concern over the outlook for global economic growth. Futures signaled the Standard & Poor’s 500 Index will fall after rallying the most in almost a month and European stocks declined, reversing earlier gains. Gold rose after minutes of a Federal Reserve meeting reaffirmed U.S. policy makers aren’t rushing to raise interest rates.
- Oil steady as Iraqi exports up, offsetting U.S. inventories drop (Reuters) Oil steadied at around $40 per barrel on Thursday as a surprise fall in U.S. inventories the previous day was offset by an increase in exports from Iraq, underlining global oversupply. Brent futures LCOc1 were at $39.60 at 1009 GMT (0609 EDT), down 15 cents from the last close. U.S. crude futures CLc1 were at $37.59 per barrel, down 16 cents from their last close.
- Yen Strengthens Toward 108 as Traders Deaf to Japan’s Jawboning (Bloomberg) The yen surged toward 108 per dollar to the strongest level in 1 1/2 years as the Bank of Japan’s apparent reluctance to intervene kept investors buying. Expressions of concern from Japanese officials failed to convince markets that yen sales or other measures to curb the gains were imminent, and the currency rose at least 0.9 percent against all 16 of its major peers. It advanced even as a Ministry of Finance official said recent moves have been one-sided and that the authorities will take what action is necessary.
- China’s FX reserves post surprise rise in March on more stable yuan (Reuters) China’s foreign exchange reserves surprisingly rose in March, the first monthly gain since November, as cooling expectations of U.S. interest rate hikes eased pressure on the yuan. Chinese authorities have taken a raft of measures to curb outflows sparked by concerns over the slowing economy and U.S. interest rate rises, and intervened in the currency market to support the yuan CNY=CFXS. China’s foreign exchange reserves – the world’s largest – climbed $10.26 billion in March to $3.21 trillion, central bank data showed on Thursday. The reserves beat a Reuters poll forecast of a drop to $3.18 trillion from $3.20 trillion in February, but are still down sharply from a peak of $3.99 trillion in June 2014.
- `Risk-On’ Rally Loses Luster When Viewed Against Haven Markets (Bloomberg) From stocks to developing-nation currencies, riskier assets around the world have been flashing the all-clear signal for over a month. But for investors in the world’s safest securities, nothing has changed, and that may spell trouble. Some of the world’s great haven destinations have proven resilient amid a rally that’s sent global equities surging more than 11 percent from their February lows. That’s a change from the start of the year, when there was a simple relationship between stocks and developed-economy government debt: When one went down, the other went up.
- TransCanada says Keystone pipeline restart will take longer than expected (TheGlobeAndMail) The widening price differential for Western Canadian crude due to a small leak and shutdown on TransCanada Corp.’s Keystone line is a sign of the vulnerability and limitations of Canada’s market access for oil, says RBC analyst Michael Tran. On Wednesday, TransCanada said it will take longer than originally thought to get the Keystone pipeline – which delivers crude from Alberta to Oklahoma, and to Illinois – running again after it was shut down over the weekend due to what the company describes as a small leak in South Dakota.
- Valeant gets extra breathing room from lenders to file annual report (TheGlobeAnd Mail) Lenders have approved troubled Valeant Pharmaceuticals International Inc.’s request for an extension to its deadline for filing its already delayed annual report. The Laval, Que.-based drug giant said on Thursday that creditors holding more than 50 per cent of the company’s loans in principal amount voted yes to a waiver and amendment to its credit facility. This provides breathing room as Valeant deals with several issues, including managing about $31-billion (U.S.) of debt.
- Brexit impact would partly depend on WTO negotiations: WTO chief (Reuters) The impact of a British vote to leave the European Union would depend in part on Britain’s negotiations with members of the World Trade Organization, the global trade body’s chief Roberto Azevedo told a news conference on Thursday. “Leaving the EU will have an important trade component, clearly,” Azevedo said.
- Venezuela decrees Fridays a holiday to ease energy crisis (Reuters) Venezuela’s President Nicolas Maduro has decreed that all Fridays for the next two months will be holidays, in a bid to save energy in the blackout-hit OPEC country. “We’ll have long weekends,” Maduro said in an hours-long appearance on state television on Wednesday night, announcing the measure as part of a 60-day plan to fight a power crunch.
- S. readies bank rule on shell companies amid ‘Panama Papers’ fury (Reuters) The U.S. Treasury Department intends to soon issue a long-delayed rule forcing banks to seek the identities of people behind shell-company account holders, after the “Panama Papers” leak provoked a global uproar over the hiding of wealth via offshore banking devices. A department spokesman said on Wednesday the rule would “soon” be turned over to the White House for review and issuance, but did not confirm any timetable for the initiative, which has taken years.
Overnight markets
- Overview: US 10yr note futures are up 0.1674% at 130-29, S&P 500 futures are down -0.49% at 2050.25, Crude oil futures are down -0.72% at $37.48, Gold futures are up 1.38% at $1240.7, DXY is up 0.04% at 94.466.
US Economic Data
- Initial Jobless Claims number came in at a level of 267k, weaker than expected and down from the previous period
- Continuing Claims number came in at a level of 2191k, higher than expected and up from the previous period
Canadian Economic Data
- Building Permits MoM growth was 15.5%, much stronger than expected and up from the previous period
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