Market Update

Tsys trading weaker, 10Y 2.88% (+3bps) – new four year high thou on low volume with Japan on holiday (320k TY futures).  Libor higher across the term structure – 3M @ 1.833% (+1.2bps). Risk on start with S&P futures +28, European equities +1.25%, crude up 2.0% rebounding from last week’s 10% decline.  Focus on Trump budget statement this afternoon and Wednesday’s Jan CPI (0.3% m/m vs 0.1% in Dec). UK gilts sharply lower, 10Y 1.62% (+5bps) – bearish comments from BOE Vlieghe that three rate hikes may not be enough to cool excess demand. In Canada, GOC yields higher , lagging the pullback in tsys by ~1bp across the curve. The GOC curve steepened 6bps last week led by the long end which rose above 2.50% Thurs the highest since May 2014 – despite  Cdn stocks being down for a second straight week 7.5%, the steepest two week decline since July 2011 and a weak jobs report Friday.

News headlines

Stocks Bounce Back With S&P Futures; Dollar Falls: Markets Wrap (Bloomberg) Equities advanced in Europe and Asia, giving investors a reprieve from the rout in stocks and the highest volatility spike since 2015. The dollar fell with Treasuries amid concern President Donald Trump’s budget proposal will drop his party’s goal to balance the budget in 10 years.

U.S. Budget Director Warns Interest Rates May ‘Spike’ on Deficit (Bloomberg) The U.S. will post a larger budget deficit this year and could see a “spike” in interest rates as a result, but lower deficits are possible over time based on sustained economic growth from Donald Trump’s tax cuts, said Budget Director Mick Mulvaney.

Kim Jong Un Invites South Korea’s Moon to Summit in Pyongyang (Bloomberg) North Korean leader Kim Jong Un has made a dramatic gesture that may raise prospects for easing tensions on the Korean Peninsula by inviting South Korean President Moon Jae-in to meet in Pyongyang.

Trump to Urge Wall, Opioid Spending While Congress Sets Its Own Course (Bloomberg) President Donald Trump will seek billions of dollars in new spending to build a border wall, improve veterans’ health care and combat opioid abuse in a budget proposal that’s likely to get little traction in a Republican Congress that has its own, very different spending priorities.

Zuma’s D-Day Nears as Ramaphosa Promises Power Transition (Bloomberg) South African President Jacob Zuma’s fate is set to be sealed when the top leadership of the ruling African National Congress meets to conclude the transition to a new administration. The National Executive Committee will assemble on Monday in the capital, Pretoria, as Zuma, 75, has defied growing pressure to resign since his deputy, Cyril Ramaphosa, replaced him as party leader in December. His nine-year tenure has been marred by scandal and eroded support for the ANC.

Restaurant Brands’ profit tops estimates on Burger King boost (Reuters) Restaurant Brands International Inc’s profit topped analysts’ forecasts in the fourth quarter as it lured more diners to its Burger King restaurants through new snacks and affordable burgers.

Canada sheds most jobs since 2009, leaving room for central bank to pause (Reuters) The Canadian economy lost the most jobs in nine years in January, pulling back after a robust 2017 and solidifying expectations the Bank of Canada will hold interest rates steady next month.

Aecon extends deadline to close $1.5B sale to Chinese conglomerate amid national security review (BNN) Aecon Group announced on Monday its proposed takeover by the overseas investment arm of China Communications Construction Company (CCCI) is being subjected to a national security review by the federal cabinet.

Overnight markets

Overview: US 10yr note futures are down -0.335% at 120-25, S&P 500 futures are up 1.15% at 2649, Crude oil futures are up 1.74% at $60.23, Gold futures are up 0.46% at $1321.7, DXY is down -0.18% at 90.276, CAD/USD is down -0.04% at 0.7951.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.798% 2 Year 2.09%
5 Year 2.088% 5 Year 2.571%
10 Year 2.363% 10 Year 2.877%
30 Year 2.506% 30 Year 3.164%

US Economic Data

14:00 PM Monthly Budget Statement, Jan est 51.0b (51.3b prior)

Canadian Economic Data

10:00 AM Bloomberg Nanos Confidence, Feb 9th (59.0 prior)


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, Hugues Savard

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230