US tsys yields higher on almost double the avg. volume in TY futures, US 10Y 1.73 (-2bps), after trading in a 9bp range o/n and hitting a low 1.68% in Asia trading. Tsys were bid in Tokyo with the Nikkei down 5.4%, 10Y JGBs trading below zero for the first time. But oil & stocks recovered somewhat in European trading, which saw heavy sales in front end Euro dollar contracts and German bunds. Nothing on the eco calendar today of significance, the US auctions $24bln in 3Y notes at 1:00PM. GOCs higher, 10Y closing in on 1.0%Provi spds opening unch after closing 2-2.5bps wider yest. Ont 46 123/122, Ont 25 112.5/122.
- Nikkei posts biggest drop in three years as global growth fears hit banks (Reuters) Japan’s Nikkei share average posted its biggest daily drop in nearly three years on Tuesday, with banks taking the brunt of the sell-off, while a stronger yen dragged down stocks across the board. The Nikkei .N225 ended 5.4 percent lower at 16,085.44 points, its lowest closing level since Jan. 21 and its heftiest percentage drop since mid-2013.
- IEA sees global oil glut worsening, OPEC deal unlikely (TheGlobeandMail) The world will store unwanted oil for most of 2016 as declines in U.S. output take time and OPEC is unlikely to cut a deal with other producers to reduce ballooning output, the International Energy Agency said. The agency, which co-ordinates energy policies of industrialized countries, said that while it did not believe oil prices could follow some of the most extreme forecasts and fall to as low as $10 per barrel, it was equally hard to see how they could rise significantly from current levels.
- Oil Seen `Lower for Longer’ by Morgan Stanley as Forecasts Cut (Bloomberg) Low oil prices will persist for longer than previously expected, according to Morgan Stanley, which reduced its quarterly crude forecasts for this year by as much as 51 percent. Morgan Stanley now sees oil mostly falling through 2016, compared with a previous outlook for prices to rise each quarter, analysts including Adam Longson said in a report Thursday. Brent crude is expected to average $29 a barrel in the three months to December, compared with an estimate for $59 in a Jan. 18 note.
- Fed May Lack Legal Authority for Negative Rates: 2010 Memo (Bloomberg) The Federal Reserve may not have the legal authority to set negative interest rates in the U.S., according to a 2010 staff memo that was posted late last month on the central bank’s website.
- IEA Raises Estimate of Surplus Oil Supply on Higher OPEC Output (Bloomberg) The global oil surplus will be bigger than previously estimated in the first half, increasing the risk of further price losses, as OPEC members Iran and Iraq bolster production while demand growth slows, according to the International Energy Agency.
- Global Bond Rally Near ‘Panic’ Level With Japan Yield Below Zero (Bloomberg) Sovereign bonds surged, sending the Japanese benchmark 10-year yield below zero for the first time, as investors seeking the safest assets gorged on government debt.
- Bonds Follow Bank of Japan Into Negative Territory (NY times) Given Japan’s outsize public debt, holding an i.o.u. from its government might seem like a risky proposition that would require the promise of a substantial reward.
- Global economic woes will delay a UK interest rate rise until 2020, say analysts (TheGuardian) Anxiety in global markets and a weakening US economy will force the Bank of England to delay UK interest rate rises until at least 2020, according to a leading firm of analysts.
- Futures lower as investors shy away from risk (Reuters) U.S. stock index futures were lower on Tuesday, as cautious investors doubled down on safer assets amid increasing concerns of a sustained slowdown in global economic growth.
- Global stocks hit the rocks after Asian markets slump (Reuters) A drop in bank shares kept European shares under pressure on Tuesday, after losses in Asian markets sent investors scurrying for safe havens.
- Greece, lenders should conclude first bailout review the soonest: government (Reuters) Greece and its official lenders must conclude a first assessment of the country’s compliance with agreed reforms as fast as possible, the government’s spokeswoman said on Tuesday.
- North American oil producers face more pressure to cut spending (TheGlobeandMail) The slumping crude price is putting new pressure on North American oil producers to further slash capital spending to reflect depressed revenues, as analysts paint a bleak picture of coming distressed asset sales and looming bankruptcies.
- Overview: US 10yr note futures are up 0.21% at 131-19, S&P 500 futures are down -1.2% at 1829.75, Crude oil futures are down -0.91% at $29.42, Gold futures are down -0.03% at $1197.5, DXY is down-0.47% at 96.112.
US Economic Data
- The NFIB Small Business Optimism number was released at a level of 93.9 missing the estimate by 0.6 point and down 1.3 points from the prior month
- The Wholesale Invetories MoM will be released at 10:00 AM
Canadian Economic Data
- There is no major economic data today
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