US tsys surging higher overnite, US 10Y 7bps lower @ 1.61% as equity mkts tumble, yen surged to 16mnth high vs USD. Tsys coming under pressure since ~8:00EST with prices falling further after initial claims fell 11k to lowest level in seven weeks. Euro stoxx -3.4%, peripheral spds sharply wider led by Portugal (70bps) & Greece, crude -3.6% below $27. Core Euro bonds also higher, 10Y bunds 7bps lower @ 0.18% new low, 10Y gilt 12bps lower & 10/30 curve 4bps steeper after weak 2045 gilt auction (1bp tail 2.08 b/c). Soc Gen -12% as Q4 eps missed driven by 35% drop in investment bank earnings. GOCs pairing early gains, 10s trading below 1.0% for first time. With mega flattening since last BOC, the short end is now inverted out to four years. Indeed, using old 5s (Sep 20s) 2s/5s is barely 6bps, so 5s/10s @ 50 looks relatively attractive. Buying of longs yest aft flatten 10/30 back towards 80 bps. Provis opening 4bps wider Ont 46s traded down @ 125.5 , now 124 bid so fairly volatile to say the least.
- Gold Roars to One-Year High as Turmoil Drives Safe Haven Demand (Bloomberg) Gold climbed to the highest in a year as investors sought a haven from tumbling stock markets after Federal Reserve Chair Janet Yellen suggested the central bank may delay raising interest rates.
- Music stops for buyers of Bank Coco debt (FT) A lot of the recent worries with European banks have been centered on coco bonds, or contingent convertible bonds. These bonds automatically convert debt to equity when a bank’s cash reserves fall below a certain level. Thursday’s selling has run the yields on Deutsche Bank’s and Santander’s coco bonds to fresh highs (yields rise when prices fall), causing more concerns about Europe’s banks. Bank stocks across Europe are down at least 3%.
- Sweden Cuts Rates Deeper Into Negative Territory, Says May Go Further (Bloomberg) Sweden’s central bank lowered its key interest rate even further below zero and said it’s prepared to use its full toolbox of measures as it battles to revive inflation and keep the krona from appreciating.
- No Respite for S&P 500 as U.S. Stock Futures Join Global Selloff (Bloomberg) U.S. stock futures followed oil prices lower, extending an earlier slump as investors shunned risk worldwide to spark a global selloff in equities.
- Business Leaders Urge Zuma to Sell South Africa State Assets (Bloomberg) The heads of South Africa’s biggest companies urged President Jacob Zuma to sell state-owned assets, increase taxes and review the country’s labor laws as part of a raft of proposals to try and avoid a credit-rating downgrade to junk.
- Canadian dollar’s ‘petro-currency’ status may soon weaken, analysts say (TheGlobeandMail) Currency analysts at Bank of Nova Scotia believe the Canadian dollar’s “petro-currency” status may be about to weaken. Don’t get the wrong idea. The loonie’s ties to oil will remain, but possibly weaken, according to strategists Shaun Osborne and Eric Theoret.
- K. Bond Yield Drops to Record as Investors Seek Safer Assets (Bloomberg) U.K. government bonds advanced, sending the 10-year gilt yield to the lowest on record, as global stock markets resumed declines and boosted demand for the relative safety of sovereign debt.
- Yen Advances to 15-Month High as Korean Tensions Stoke Haven Bid (Bloomberg) The yen climbed against every major currency as a drop in global stocks and rising tensions between North and South Korea boosted demand for havens.
- Jobless Claims in U.S. Decline to Lowest Level in Seven Weeks (Bloomberg) Filings for unemployment benefits in the U.S. declined to a seven-week low as hiring managers demonstrated confidence in the outlook after temporary adjustments around the holidays.
- SocGen Slumps as Quarterly Profit Hurt by Securities Drop (Bloomberg) Societe Generale SA, France’s second-largest bank by market value, posted fourth-quarter profit that missed analysts’ estimates as earnings at the investment bank dropped 35 percent. The shares plunged the most since 2011.
- Oil falls on U.S. supply record, weak demand outlook (Reuters) Oil slid on Thursday, dented by record U.S. crude inventories, worries about the demand outlook and a Goldman Sachs forecast that prices would remain low and volatile until the second half of the year.
- Futures slump as global growth worries resurface (Reuters) U.S. stock index futures plunged on Thursday, with risk-averse investors piling into safe haven assets as another sharp fall in oil prices and cautious comments from Federal Reserve Chair Janet Yellen raised fresh doubts about the health of the economy.
- Overview: US 10yr note futures are up 0.71% at 132-14, S&P 500 futures are down -1.6% at 1817.25, Crude oil futures are down -2.73% at $26.7, Gold futures are up 3.48% at $1236.2, DXY is down-0.28% at 95.615.
US Economic Data
- The Initial Jobless Claims was released at a level of 269k better than expected by the analysts, and down 16k from the previous week
- The Continuing Claims number came in at a level of 2239k, better than expected and down 6k from prior period
Canadian Economic Data
- The New Hosing Price Index MoM growth was 0.1%, worse than expected and down 0.1% from the previous month
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