12/04/2017

Market Update

Tsys open weaker, 10Y 2.30% , narrow overnite range on decent volume(320k TY futures), S&P futures off 0.16%, crude +0.43% 53.63 on API data which showed crude supplies fell another 1.3mln bbs last week. German bunds mixed, longs outperforming as EGB curves flatten driven by muted inflation pressures, falling breakevens.  Italian debt wider, bund-BTP 10Y spd at new highs 210 bps after weak auctions ( 2030 BTP b/c 1.39 vs 1.6). GOCs slightly higher led by 10s – 2s10s flattest since mid Nov before BOC decision/MPR alter this morn. No change in rates exp but mkt positioned for shift to neutral based on uptick in rate hike expectations priced in before y/e.

 News headlines 

WTO: Global trade seen growing 2.4% in 2017, but uncertainty weighs. ( TheGlobeandMail) The World Trade Organization says world trade will grow 2.4% in 2017, but that ‘deep uncertainty” coming mostly from the political front, will reign.

China March producer inflation cools, consumer inflation below forecast. (Reuters) Consumer prices in China rose 0.9% year-over-year in March, missing the 1% gain that economists were anticipating. Food prices climbed 4.4% versus a year ago while non-food inflation fell by 2.3%, data from the National Bureau of Statistics showed.

UK wage growth slows as higher inflation starts to bite (BBC) Average weekly earnings, excluding bonuses, rose 2.2% in the three months to February, the lowest number since the immediate aftermath of the referendum last June, according to data released by the Office for National Statistics.

Poloz Faces Core Inflation Conundrum as Standing Pat Gets Harder (Bloomberg) The Bank of Canada will almost certainly keep its benchmark interest rate unchanged at 0.5 percent in its decision Wednesday, but with recent data suggesting the economy is on fire, explaining why is getting trickier. Analysts expect policy makers will highlight the softness in underlying price pressures as evidence of the kind of lingering slack that would justify the current degree of monetary accommodation. Be warned: in the past, they’ve shown a willingness to look through these numbers before moving on rates.

Oil Set for Longest Gain Since 2012 as Saudis Seen Extending Cut (Bloomberg) A barrel of West Texas Intermediate for May delivery was trading at $53.69 as of 5:23 a.m Eastern Time, the highest level in over a month. This marks seven straight days of rising prices. Saudi Arabia, the world’s biggest producer, pared its oil output last month to its lowest level since January and is likely to support extending OPEC production cuts into the second half of the year, according to a person familiar with the kingdom’s internal discussions. WTI call options volumes have been rising, signalling that traders see more to come in this rally.

How the Currency Market Learned to Get Over Its ‘Yuan’ Big Fear (Bloomberg) 2017 is shaping up to be a period of detente between the yuan and dollar underscored by the recent meet-and-greet between the countries’ two leaders. Measures of implied and realized volatility between the U.S. dollar and offshore Chinese yuan have retreated over the past year as China’s policy makers sought to stem capital outflows and prioritized financial stability. Combined with a recovery in commodity prices and a Trump administration that has so far failed to follow through on some of its aggressive policy proposals toward China or its promised fiscal stimulus, and the stage was set for stability.

U.S. Unlikely to Tag China Currency Manipulator, Schwarzman Says (Bloomberg) A top outside adviser to President Donald Trump said the U.S. probably won’t name China a currency manipulator in a report due this month, a move that would break a key campaign promise and another sign of capitulation on the administration’s tough trade talk.

Overnight markets 

Overview: US 10yr note futures are up 0.075% at 125-19, S&P 500 futures are down -0.19% at 2346.5, Crude oil futures are up 0.45% at $53.64, Gold futures are up 0.22% at $1277, DXY is down 0% at 100.71, CAD/USD is down -0.05% at 0.7509.

US Economic Data

7:00 AM MBA Mortgage Applications, Apr 7, 1.5% (prior -1.6%)
8:30 AM Import Price Index, m/m, Mar, -0.2%, est. -0.2% (prior 0.2%, revised 0.4%)
  Import Price Index, y/y, Mar, 4.2%, est. 4.0% (prior 4.6%, revised 4.8%)
2:00 PM Monthly Budget Statement, Jan,  est. $-169.0b (prior -$-108.0b)

Canadian Economic Data

8:30 AM Teranet/National Bank House Price Index, m/m, 0.9%, (prior 1.0%)
  Teranet/National Bank House Price Index, y/y, 13.5%,  (prior 13.4 %)

 

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