Market update
US tsys opening lower, steeper, US 10Y 1.70 (+4bps) after Jan Retail Sales came in above exp, import prices fell less than exp. European equities higher, crude up 5% above $27.50. Tsys pressured overnite with only a brief bounce on Nikkei decline (-5%), yet European stocks are higher led by financials as Commerzbank rose 15% on Q4 earnings beat, Deutsche Bank announcing plans to buy back $5.4bln in bonds. Core Euro bonds lower on bounce in stocks, with Euro & German GDP coming in as expected. Peripheral spreads tighter, Portugal 10Y -15bps below 4% despite weaker Q4 GDP. With momentum indicators on longs USTs way above overbought levels (daily RSI on US1 ~82, Pandemonium Index sentiment highest since Apr 2015) we have been looking for opportunities to go short but have been stymied by intraday volatility. In Canada, GOCs are lower, spds ~2bps wider vs tsys which would normally be considered unusual as GOCs tend to lag tsys either way in large moves… But considering at one point yest the 10Y Cda/Tsy spd was ~8bps tighter in the rally (-68 bps thru), 10s look vulnerable here. Provi spds opening better bid after another wild day yest which saw spds close ~2bps tighter after opening 3bps wider.
News headlines
- S. Benchmark Yield Will Be at Record Low in March at This Rate (Bloomberg) Treasury benchmark yields are on course to set a new all-time low in March if they keep rallying at the current pace. Ten-year yields dropped almost 40 basis points during the past three weeks to 1.66 percent. The record low of 1.379 percent was set in July 2012.
- Yellen’s dilemma: A downturn with no easy response (Reuters) The U.S. Federal Reserve’s carefully scripted decision to raise interest rates last December, and begin a return to “normal” policy, may now become a nightmare for the central bank if an economic downturn forces a return to unconventional methods.
- Germany Keeps Momentum Showing Resilience to Global Turmoil (Bloomberg) Germany’s economy sustained its momentum at the end of 2015, showing resilience amid an emerging-market slowdown that’s heightened concerns about global growth and sent equities plunging this year.
- Here Is Trudeau’s Six-Point Checklist for Bombardier’s Bailout (Bloomberg) Prime Minister Justin Trudeau will have a hard time saying no to Bombardier Inc.’s request for aid to complete the troubled C Series aircraft because of the company’s deep political and economic roots in Canada.
- PM says may be hard to keep balanced budget promise (Reuters) The Canadian government could find it hard to balance the budget by 2019/20 as promised if the economy continues to struggle, Prime Minister Justin Trudeau said in an interview published on Thursday.
- Economists Are Ditching Their Calls for a Fed Rate Hike in March (Bloomberg) Economists are pushing back their calls for the next Federal Reserve interest-rate hike in droves. Trouble overseas and uncertain economic conditions at home have helped move the median forecast to June from March.
- Eurozone Economy Grows, but Total Output Still Lags Behind 2008 (NY Times) Europe is still trying to crawl back to where it was in 2008. That was the underlying message of the economic data for the eurozone published on Friday.
- Oil prices jump on talk OPEC is ready to deal, but traders are wary of ‘jawboning’ (Financial Post) Still, analysts said such a move remained unlikely and prices for Brent and U.S. West Texas Intermediate (WTI) crude were on track for weekly losses of more than 7 per cent and 11 per cent, respectively, as oversupply weighed.
Overnight markets
- Overview: US 10yr note futures are down -0.36% at 131-18, S&P 500 futures are up 1.11% at 1844.75, Crude oil futures are up 6.26% at $27.85, Gold futures are down -0.99% at $1235.4, DXY is up0.5% at 96.036.
US Economic Data
- The Import Price Index MoM number came in at a level -1.1%, better than expected and up 0.1 % from last month
- The Retail Sales Advance MoM growth was 0.1%, beating the analysts estimate by 0.1%, up 0.3% from prior month
- The Retail Sales Auto MoM growth was 0.1%, better than expected and up 0.2% from the previous month
- The Retail Sales Ex Auto and Gas growth was 0.4%, beating the analysts estimate by 0.1%, up 0.1% from the previous month
- The University of Michigan Sentiment index will be released at 10:00 AM
Canadian Economic Data
- There is no major economic data release for 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