cti2015header-morning comments web

Market update

Tsys lower, curve 2bps steeper, US 10Y 1.875 (+4.6bps) prices almost completely reversing yesterday’s gains. German govt bonds lower led by 10Y with profit taking ahead of ECB meeting according to MNI, spike higher in Euro/Swiss pointed to as evidence as well. Long term JGB yields 20bps higher also reversing Tuesday’s auction inspired rally. GOCs lower before BOC where we expect no change in rates – there is no press conference so mkts will wait for Poloz speech tomorrow in Ottawa for further clues. It’s a mixed picture for sure since the Jan decision yet with CPI having reached 2% target much earlier than forecast (early 2017) while prices for oil and other commodities have rebounded. Provis opening better bid , Ont 46 113/112.5, Qc/Ont 26 roll 3/2.5 (traded up at 2 yest). Wells fargo issued CAD $1bln in 5Y maple yest @ GOC + 155 (157.6) which looked fialry priced considering the outstanding WFC 3.04 Jan 21 were either side of 150 yest, so a small concession given maple liquidity when overall liquidity is fialry nonexistent to begin with.

News headlines

  • European Stocks Advance With Commodities as Euro, Gold Weaken (Bloomberg) Stocks traders put declines in Asia behind them as European markets rose with U.S. index futures and commodities. Government bonds fell, gold slid and the euro weakened. European shares advanced for the first time in three days on speculation the region’s central bank will ramp up monetary stimulus on Thursday.
  • Treasuries Fall With Japanese Bonds as Low Yields Erode Demand (Bloomberg) U.S. and Japanese government bonds fell as record-low yields in the Asian nation curbed demand for sovereign debt before a sale of 10-year Treasury notes. The move is a reversal from Tuesday, when Japan ignited a global bond surge as its benchmark 10-year yield slid to an unprecedented minus 0.1 percent. A technical indicator showed the rally reached overbought levels. The 14-day relative-strength index for Japan’s 10-year yields dropped to 29, below the threshold of 30 some traders see as a sign a security has moved too fast.
  • Iron Ore Drops Back After `Surprising Blip’ That Notched Record (Bloomberg) Iron ore dropped on Wednesday, eroding Monday’s record surge, amid a revival in concern that global supply is outpacing demand. Ore with 62 percent content delivered to Qingdao fell 8.8 percent to $58.02 a dry metric ton, according to e-mailed data from Metal Bulletin Ltd. The price dipped 0.2 percent on Tuesday after Monday’s 19 percent rally to the highest since June. The retreat was preceded by losses on futures in Singapore and China.
  • Euro dragged down before ECB meeting, hits one-week low vs. yen (Reuters) The euro fell to a one-week low against the yen and dropped below $1.10 on Wednesday, before a meeting of the European Central Bank, which is expected to take interest rates deeper into negative territory and ease monetary policy yet more. The ECB is expected to cut the deposit rate by 10 basis points to -0.40 percent, announce more asset purchases and possibly introduce tiered interest rates like the Bank of Japan in a bid to boost inflation.
  • Futures rise as crude prices rebound (Reuters) U.S. stock index futures were higher on Wednesday, tracking a rise in oil prices, even as investors remained wary of weakness in the global economy, led by China. Benchmark Brent rose above $40 a barrel in anticipation that the world’s largest exporters would agree to freeze production and help reduce a massive oversupply. Crude prices, which have been a major influence on stocks this year, have rallied sharply in recent days. However, industry watchers remain skeptical of a sustained recovery due to the glut.
  • Canada Dollar Near 4-Month High Before Bank of Canada Statement (Bloomberg) The Canadian dollar was near a four-month high before the Bank of Canada announces its policy decision. All 26 economists in a Bloomberg survey expect the central bank to leave its rate at 0.5 percent after cutting it twice last year to help the economy weather a collapse in oil prices. With crude prices still less than half their average during the past decade, the central bank has said it’s counting on non-commodity exports to pick up the slack and noted the help a weaker currency provides by making the country’s goods more competitive abroad.
  • Imperial Oil sells Esso gas stations for $2.8-billion (TheGlobeAndMail) Imperial Oil Ltd. has reached a deal to sell 497 Esso-brand retail gas stations to five fuel distributors for $2.8-billion, as the company seeks to focus on its expanding oil sands and refining businesses. Quebec-based Alimentation Couche-Tard Inc. will purchase 279 retail stations from Imperial in Ontario and Quebec for roughly $1.7-billion, the company said late on Tuesday. 7-Eleven Canada Inc. will pick up sites in Alberta and British Columbia. The other distributors involved in the deal include Parkland Fuel Corp., Harnois Groupe pétrolier and Wilson Fuel Co. Ltd.
  • Exclusive: Saudi Arabia seeks $6-8 billion bank loan to shore up state coffers (Reuters) Saudi Arabia is seeking a bank loan of between $6 billion and $8 billion, sources familiar with the matter told Reuters, in what would be the first significant foreign borrowing by the kingdom’s government for over a decade. Riyadh has asked lenders to submit proposals to extend it a five-year U.S. dollar loan of that size, with an option to increase it, the sources said, to help plug a record budget deficit caused by low oil prices.

Overnight markets

  • Overview: US 10yr note futures are down -0.3016% at 129-4, S&P 500 futures are up 0.43% at 1989.5, Crude oil futures are up 1.34% at $36.99, Gold futures are down -0.7% at $1254, DXY is up 0.33% at 97.526.

US Economic Data 

  • MBA Mortgage Applications growth was 0.2%, and up from prior month.
  • Wholesale Inventories MoM growth will be released at 10:00 AM.
  • Wholesale Trades Sales MoM growth will be released at 10:00 AM.

Canadian Economic Data 

  • Bank of Canada Rate Decision will be released at 10:00 AM



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