cti2015header-morning comments web

Market update

US tsys opening lower, US 10Y 1.766 (+2bps) with curve slightly steeper, avg volume o/n in ten yr futs (428k vs 460k). Tsys rebounding on Fed Yellen comments that pace of rate hikes could be slowed, citing rising global risks. Tsys lower o/n with Euro govt bonds on recovery in European bank stocks with Deutsche Bank up 13%. Rumours that ECB may purchase bank stocks as part of its QE also supporting stocks. Mkt awaits Q&A from Fed Yellen later this morning and $23bln 10Y note auction at 1:00PM. GOCs rebounding higher with tsys on Yellen, spds 1-2bps narrower vs tsys. Provis opening 0.5bps better after better buying yest aft took spds ~2bps tighter at the close.

News headlines

  • Currency market is braced for Janet Yellen’s Congressional testimony (FT) A jittery currency market is braced for further volatility on Wednesday when Janet Yellen, the Federal Reserve chair, delivers her semi-annual testimony on the outlook for the economy and policy before Congress.The dollar has lately come under growing pressure against its main peers, led by the yen, euro and Swiss franc as the bond market has priced out the prospect of further increases in overnight borrowing costs set by the central bank.
  • Deutsche Bank Jumps as Lender Said to Consider Bond Buyback (Bloomberg) Deutsche Bank AG shares jumped the most in almost seven years and credit risk fell as Germany’s biggest bank considers a bond buyback to help ease investor concerns about its funds, according to a person with knowledge of the matter.
  • Yellen Signals Fed Rate Path Hinges on Whether Turmoil Persists (Bloomberg) Chair Janet Yellen said the Federal Reserve still expects to raise interest rates gradually while making it clear that continued market turmoil could throw the central bank off course from the multiple increases that policy makers have forecast for 2016.
  • Russia’s Biggest Oil Producer Skeptical on Output Deal With OPEC (Bloomberg) Russia’s largest oil producer Rosneft OJSC said it will defend traditional markets and expressed doubts over any coordinated action by crude-exporting nations to curb output.
  • S. 10-Year Sale’s Lowest Yield Since 2012 May Diminish Demand (Bloomberg) The U.S. Treasury is scheduled to auction $23 billion of 10-year debt Wednesday in a sale that looks set to draw the lowest yield since 2012 as turmoil in equity, credit and commodity markets boosts demand for the safest fixed-income assets.
  • Europe’s Crumbling Inflation Outlook Matches Record Low: Chart (Bloomberg) The outlook for consumer-price inflation in the euro area, as implied by one of European Central Bank’s preferred metrics, has matched the lowest on record.
  • Manufacturing’s rebound faces ‘significant’ structural hurdles: federal memo (TheGlobeandMail) Amid hopes that Canadian manufacturing will drive economic growth in a country reeling from low oil prices, internal federal documents warn the sector’s rebirth is staring at “significant” structural obstacles.
  • Strong demand for German two-year bonds at minus 0.50 pct yields (Reuters) Germany’s two-year bond sale drew strong demand on Wednesday, with safe haven flows and bets that the European Central Bank may cut its deposit rate by more than 10 basis points in March sugar-coating the minus 0.50 percent yield on offer.
  • IMF warns Ukraine it will halt $40bn bailout unless corruption stops (TheGuardian) The International Monetary Fund has warned it will halt its $40bn (£28bn) bailout programme to Ukraine unless the conflict-torn eastern European country takes immediate action to tackle corruption. The IMF’s managing director, Christine Lagarde, said on Wednesday that “without a substantial new effort” to improve governance, it was hard to see how the Washington-based organisation could continue to provide financial help.
  • Japan’s Asahi ‘to buy Peroni and Grolsch brands’ (TheGuardian) Asahi Group has reportedly reached a preliminary deal to buy SABMiller’s Peroni and Grolsch beer brands for over 400bn yen (£2.3bn). Asahi, known for its Super Dry beer, is Japan’s biggest brewer with a 38% market share. But the company has sought growth outside Japan where beer sales have fallen over the past two decades, as the population shrinks and wine becomes increasingly popular.
  • World’s Negative-Yielding Bond Pile Tops $7 Trillion: Chart (Bloomberg) More than $7 trillion of government bonds offered yields below zero globally as of Monday, making up about 29 percent of the Bloomberg Global Developed Sovereign Bond Index. The total is poised to swell further after Japan’s 10-year yield went below zero for the first time on record on Tuesday, as central-bank easing policies push borrowing costs to new depths. A negative yield means investors who buy the debt now and hold to maturity will receive less than they paid.

Overnight markets 

  • Overview: US 10yr note futures are down -0.24% at 131-0, S&P 500 futures are up 0.84% at 1863.75, Crude oil futures are up 0.29% at $28.02, Gold futures are down -0.91% at $1187.7, DXY is up0.29% at 96.347.

US Economic Data 

  • The MBA Mortgage Application growth was released at 9.3%, up 11.9% since prior month
  • The Monthly Budget Statement will be released at 2:00 PM

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
Fax: (514)-861-3230