cti2015header-morning comments web

Market update

Tsys trading higher , US 10Y 1.77 (-1bp), curve unch. Euro stocks higher, oil back to unch after reaching to $46 in early trade. Light data calendar so mkt will focus on Tsys & corp supply. Core Euro bonds mixed, German 10Y bund maintaining gains despite better than exp Factory orders as well as heavy sov supply this week – ~E22bln from the Netherlands, Germany, Austria, Italy & Ireland. The US auctions $62bln in 3, 10 & 30Y bonds this week – Japanese FX intervention and the return from Golden week should be supportive. US corp supply could reach $50bln including HY deal from Dell & possibly Apple. US IG Credit index set new YTD tights early last week before drifting wider (BUSC <index>).  GOCs higher in line with tsys to start the week, 10Y 1.355%. GOCs rallied across the curve last week, led by the 8Y sector (CTD ), yields 12-20 bps lower on the week thou Friday’s weaker employment data was met with profit taking.  Ont spds slightly tighter (0.5bps) – Ont 26s/46s trading up this morn @ 91 & 102, spds widened ~5bps last week , Alta/Ont 46 @20bps 1.5bps wider on the week.

News headlines

  • European Stock Gains Defy China Data That Hurt Metals; Oil Rises (Bloomberg) European stocks rallied from a one-month low, shaking off a drag from Chinese trade data that pushed Shanghai shares lower along with industrial metals. Oil gained, buoyed by Canadian wildfires that are curbing production. Apart from mining companies, all of the 19 industry groups on the Stoxx Europe 600 Index advanced. Copper fell to its lowest in almost a month after imports into China slipped from a record, while iron ore tumbled following an increase in stockpiles at Chinese ports. Oil climbed above $45 a barrel in New York and gold retreated as a gauge of dollar strength rose for a fifth day. Corporate bond sales in euros may be “unusually busy” this week after some companies held off on offerings due to earnings blackouts and national holidays, according to Deutsche Bank AG.
  • Yen falls after Tokyo warning (Reuters) The dollar hit a 10-day high against the yen on Monday after Japan’s finance minister said outright that Tokyo was ready to intervene in the currency market if yen moves are volatile enough to hurt trade and the economy. In a mixed day for stock markets, the yen’s falls helped generate some limited gains for the Nikkei, while a strong batch of industrial orders numbers out of Germany helped European shares recover from their worst week since mid-February.
  • German Factory Orders Rebounded in March as Exports Gained (Bloomberg) German factory orders picked up in March as strong global trade helped offset a lull in domestic demand. Orders, adjusted for seasonal swings and inflation, advanced 1.9 percent from the prior month, when they fell a revised 0.8 percent, data from the Economy Ministry in Berlin showed on Monday. The reading, which is typically volatile, was the strongest since June last year and compares with economists’ forecast for a 0.6 percent increase. Orders climbed 1.7 percent from a year earlier.
  • China stocks plunge again as hopes for economic recovery fade (Reuters) China stocks fell sharply again on Monday, reaching eight-month lows, as investors saw hopes for a strong economic recovery fade and worried about fresh regulatory curbs on speculation. Following the market’s nearly 3 percent slump on Friday, China’s blue-chip CSI300 index .CSI300 fell 2.1 percent, to 3,065.62, while the Shanghai Composite Index .SSEC lost 2.8 percent, to 2,832.11 points. China April trade data, released on Sunday, doused investor hopes of a sustainable economic recovery, with both exports and imports falling more than expected.
  • Bank of Japan minutes reveal sharp split over negative rates (MarketWatch) Some Bank of Japan officials expressed worries over signs of “adverse effects” of negative interest rates at their March policy meeting, underlining a sharp split among central bankers over the policy measure. Some of the BOJ’s nine policy board members said the step to impose a charge on some deposits held by commercial banks had added to “anxiety among financial institutions and depositors” and made the central bank’s policy “difficult to understand,” according to the March 14-15 meeting minutes released Monday.
  • Even China’s Party Mouthpiece Is Warning About Debt (Bloomberg) China’s leading Communist Party mouthpiece acknowledged the risks of a build-up of debt that is worrying the world and said the nation needed to face up to its nonperforming loans. High leverage is the “original sin” that leads to risks in the foreign-exchange market, stocks, bonds, real estate and bank credit, the People’s Daily said in a full-page interview with an unnamed “authoritative person” starting on page one and filling the second page on Monday.
  • Dollar Jump Catches Traders Short in One More Currency Calamity (Bloomberg) Just when investors thought they’d finally made a good call in the currency market, the dollar’s advance messed it up. The U.S. currency on Friday capped its best week all year versus its major peers, shortly after hedge funds finally switched to betting on dollar declines, known as going short. That’s not the only wrong move foreign-exchange managers have made this year — an index tracking their returns shows they’ve failed to turn a profit in 2016.


Overnight markets 

  • Overview: US 10yr note futures are up 0.1676% at 130-24, S&P 500 futures are up 0.04% at 2053.5, Crude oil futures are up 0.22% at $44.76, Gold futures are down -1.45% at $1275.2, DXY is up 0.07% at 93.952.

US Economic Data 

  • There is no major economic data for today

Canadian Economic Data 

  • 8:15 AM: Housing Starts, April, 191.5k, est. 193k, (prior 204.3k, revised 202.4k)



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