cti2015header-morning comments web

Market update

US tsys trading lower, curve steeper on avg volume in TY futs, US 10Y 1.755 (+3bps). DXY index lower except vs vs Yen on more talk from Jap officials warning of Yen overvaluation. Equities mixed – Nikkei higher, European stocks higher on financials on speculation of Italian bank rescue fund. Core euro bonds lower, steeper , 10Y bunds lower for a 3rd day – 1Y bund down ~$1.00 after reaching new high yest 164.60 in European trading. Bunds also pressured from European sov supply from Neth, France & Ger. GOCs lower, spds slightly wider vs tsys  – crude higher again $40.80. Provis unch after closing 1bp tighter yest – BC/Alberta under pressure Alb/Ont46 12/11 from 11/10 on Fri.

News headlines

  • Stocks Rise Around World as Commodities Advance; Bonds, Yen Drop (Bloomberg) Stocks rose with commodities, while the yen slipped and government bonds fell as crude oil’s advance above $40 a barrel boosted economic optimism. The MSCI All-Country World Index advanced for a third-straight day and Russia’s ruble joined the Australian dollar among the best-performing currencies. Metals prices jumped, helping push the Bloomberg Commodity Index to the highest this month. The yen fell versus all its major peers and German bund yields climbed the most in a month as demand for haven assets ebbed. Faster inflation boosted the pound and Sweden’s krona.
  • Bond Traders Show Skepticism of Goldman’s Forecast for Fed Hikes (Bloomberg) Bond traders are betting the odds of a Federal Reserve interest-rate increase this year are less than a coin toss, clashing with Goldman Sachs Group Inc.’s call for three moves. Futures contracts indicate there’s about a 48 percent chance the Fed will follow its December rate increase with one more in 2016. The figure has plunged from more than 90 percent at the end of 2015 as Fed Chair Janet Yellen and other officials warned that heightened risks in the global economy are reason for the U.S. central bank to delay tightening policy.
  • UK inflation rises to 0.5% on early Easter travel costs (TheGuardian) Inflation jumped to 0.5% in the year to March after a rise in the cost of air fares over Easter and more expensive spring and summer clothing ranges hitting stores. The higher cost of booking a hotel and restaurant table also pushed inflation beyond the 0.3% seen in February, according to official figures. The higher cost of booking a hotel and restaurant table also pushed inflation beyond the 0.3% seen in February, according to official figures.
  • China No Longer Epicenter of Volatility to Brokers’ Dismay (Bloomberg) China’s investors are finally getting a chance to catch their breath. After turmoil in the past year rattled global money managers and undermined confidence in the Communist Party’s grip on the nation’s financial markets, gauges of volatility in the benchmark equity index and the yuan have fallen to the lowest levels since at least November. While increasing stability can be seen as a victory for the authorities, and a relief for international investors now fixated on turbulence in Japanese markets and the upcoming U.S. earnings season, muted price swings aren’t translating into better trading conditions for local brokers amid suspected intervention by state-backed funds.
  • China says tax reform will boost economy, structural changes (Reuters) China’s value-added tax reforms will help support the economy and speed up structural adjustments, Vice Finance Minister Shi Yaobin said on Tuesday, playing down concerns such reforms could fan property speculation. China will replace a business tax with a value-added tax in its construction, real estate, financial and consumer services sectors, effective from May 1, and the government hopes to cut taxes by more than 500 billion yuan ($77.32 billion) in 2016.
  • Russia 2016 budget gap may hit 4 percent GDP if oil at current prices (Reuters) Russian Finance Minister Anton Siluanov said on Tuesday that the budget deficit could reach 4 percent of gross domestic product this year if oil prices stayed at current levels. « The task we are setting for ourselves is to have a budget deficit at 3 percent of GDP under (an oil price of) $40 (per barrel), » he told an economic conference. « If the oil price is as it’s shaping up now – $32-33 – accordingly, it (budget deficit) will be up to 4 percent of GDP, » Siluanov said.
  • Gloomy start to results season hits shares (Reuters) A downbeat first batch of corporate results prodded European stock markets lower on Tuesday while oil prices held above $40 ahead of a meeting of major producers to discuss freezing output. The mood among investors in Europe and the United States has been subdued in the run-up to the second quarter earnings season, and sales numbers from France-based luxury goods producer LVMH were poor, helping push European markets 0.3 percent lower in early trade.
  • Goldman Sachs to pay $5 billion in U.S. Justice Department mortgage bond pact (Reuters) Goldman Sachs Group Inc (GS.N) has agreed to pay $5.06 billion to settle claims that it misled mortgage bond investors during the financial crisis, the U.S. Department of Justice said on Monday. The settlement, which Goldman disclosed in January, stems from the firm’s conduct in packaging, securitization, marketing and sale of residential mortgage-backed securities between 2005 and 2007, the Justice Department said.
  • Scotiabank boosts target on National Bank as capital position concerns diminish (Financial Post) Scotiabank has raised its target on National Bank shares to $44 from $42 because of diminished concern over the bank’s capital position. In a note to clients Monday, analyst Sumit Malhotra said “favourable macro movements” so far in fiscal 2016 should help Canada’s National Bank, which has consistently operated with capital ratios at the low end of the Big Six. In particular, the report said a combination of narrowing provincial bond spreads and a six per cent surge in the Canadian dollar should help the bank post a key CET1 ratio approaching 10 per cent in the second quarter.
  • S. small business confidence hits new two-year low (Reuters) U.S. small business confidence fell to a fresh two-year low in March amid persistent worries about sales and profits, the latest indication that economic growth braked sharply in the first quarter. The National Federation of Independent Business (NFIB) said on Tuesday its small business optimism index dipped 0.3 point to a reading of 92.6 last month, the lowest since February 2014.
  • Oil bust leaves energy industry, real-estate sector locked in battle over empty oilfield worker camps (Financial Post) A no trespassing sign collects dust next to an empty, chained-off parking lot for an equally empty work camp in the heart of North Dakota oil country. The sign and limp chain haven’t kept curious locals from trying to get a closer look at the Black Gold camp – a few brave ones have confessed on condition of anonymity to looking in the windows and scurrying through the vacant halls.
  • Wells Fargo Misjudged the Risks of Energy Financing (Bloomberg) At its annual investor conference in San Francisco in May 2014, with oil trading at $102 a barrel, Wells Fargo & Co. boasted that in just two years it had almost doubled its energy exposure and seized the title of Wall Street’s top oil and gas banker. The timing couldn’t have been worse. Crude prices peaked a month later and have since plummeted to $40. Wells Fargo has downgraded 38 percent of its energy loans and set aside $1.2 billion to cover potential losses, according to company filings. The loans are coming under increasing scrutiny from regulators and investors, even though they make up only 2 percent of the bank’s portfolio.


Overnight markets

  • Overview: US 10yr note futures are down -0.1789% at 130-26, S&P 500 futures are up 0.15% at 2037.5, Crude oil futures are up 0.97% at $40.75, Gold futures are up 0.44% at $1263.5, DXY is up 0.05% at 94.

US Economic Data

  • NFIB Small Business Optimism number came in at a level of 92.6, weaker than expected.
  • Import Price Index MoM growth was 0.2%, weaker than expected and up from prior month.
  • Monthly Budget Statement will be released at 2:00 PM. 

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