Market update
US tsys lower, curve steeper , 10Y 1.746 (+2.1bps), heavy volume in TY futures (350K). Tsys pressured lower since Europe after the 10Y reached a new low yield 1.715 ~3:00AM. Little reaction to jump in claims, lower import prices. European stocks higher, crude 1.0% higher close to $47.00. Core Euro bonds lower weighed by risk on rally in stocks & higher crude. GOCs lower with tsys, lagging the bounce in tsys after home prices came in better than exp for March (0.2% vs 0.1%). Provi spds unch, Alta46/Ont46 20.5/19.5 – no reaction to higher crude. We have seen more interest in Bas & Ont/CMB FRNs from clients wishing to put away s.t. cash, instead of buying short GOCs. This makes a lot of sense – Ont 2Y bonds basically trade flat on ASW while ONT FRNs ~10-15bps cheaper.
News headlines
- Stocks Advance With Crude on Oil Demand Forecast; Krone Surges (Bloomberg) European stocks rose with U.S. equity-index futures, buoyed by an increase in oil prices after the International Energy Agency softened its forecast for a global supply surplus. Norway’s krone jumped and South Africa’s rand also strengthened. The Stoxx Europe 600 Index reversed a drop of as much as 1 percent, overcoming a drag from companies including LafargeHolcim Ltd. that posted lower earnings. Crude gained for a third straight day as the IEA said robust demand in India and other emerging nations would support demand for oil
- Oil rises toward six-month high after IEA sees tighter supply (Reuters) Oil prices rose toward six-month highs on Thursday, supported by data from the International Energy Agency (IEA) showing tightening supply in addition to a surprise drop in U.S. crude inventories. Brent crude futures LCOc1 were trading at $47.87 per barrel at 1101 GMT, up 27 cents from their last settlement and near a six-month high of $48.50 hit at the end of April. West Texas Intermediate (WTI) U.S. crude futures CLc1 were 35 cents higher at $46.58.
- Outlook for oil brightens as output disruptions erode surplus: IEA (Reuters) Unplanned disruptions to oil output could help run down a global overhang of unused crude this year, while demand will profit from growing gasoline consumption particularly in India and China, the International Energy Agency said on Thursday. The IEA said output from non-OPEC producers is expected to fall by 800,000 barrels per day (bpd) in 2016, an acceleration from the agency’s previous forecast for a fall by 710,000 bpd.
- Bank of England Holds Rate at Record Low and Strengthens Brexit Warning (Bloomberg) The Bank of England cut its growth forecasts and issued its strongest warning yet that a vote to leave the European Union would hurt the economy. With just six weeks to go until Britain’s referendum, the nine-member Monetary Policy Committee, led by Governor Mark Carney, said there were more signs it was weighing on growth and clouding the outlook. Officials unanimously agreed to maintain their benchmark rate at a record-low 0.5 percent, saying inflation remains subdued.
- Fed to delay rate hike until September on tame inflation outlook: Reuters poll (Reuters) The U.S. Federal Reserve will likely wait until September before raising interest rates again, stretching to nine months the time since its first hike in nearly a decade, as it waits for clear signs inflation is picking up, a Reuters poll found. This is the second time this year that economists have delayed their rate-hike expectations, casting doubt on the likelihood the Fed will be able to deliver two rate hikes this year as the U.S. Presidential election in November could make further policy changes sensitive.
- Canadian natural gas prices hit lowest level on record as Fort McMurray fires curtail demand (Financial Post) Canadian natural gas prices are the latest casualty of Fort McMurray wildfires, falling this week to their lowest level on record. Alberta’s natural gas demand fell to its lowest level in a year, after oilsands facilities in Fort McMurray were shut down by a raging fire that forced the evacuation of the entire town. Oil producers need natural gas for upgrading and for gas-fired cogeneration plants, among other uses.
- Brazil Senate puts Rousseff on trial, ending 13 years of leftist rule (Reuters) Brazil’s Senate voted on Thursday to put leftist President Dilma Rousseff on trial in a historic decision brought on by a deep recession and a corruption scandal that will now confront her successor, Vice President Michel Temer. With Rousseff to be suspended during the Senate trial for allegedly breaking budget rules, the centrist Temer will take the helm of a country that again finds itself mired in political and economic volatility after a recent decade of prosperity.
Overnight markets
- Overview: US 10yr note futures are down -0.2268% at 130-20, S&P 500 futures are up 0.51% at 2068.5, Crude oil futures are up 0.95% at $46.67, Gold futures are down -0.29% at $1271.8, DXY is up 0.17% at 93.983.
US Economic Data
- 8:30 AM: Import Price Index, m/m, April, 0.3%, est. 0.6% (prior 0.2%, revised 0.3%)
- Import Price Index, y/y, April, -5.7%, est. -5.4% (prior -6.2%, revised -6.1%)
- Initial Jobless Claims, May 7, 294k, est.270k (prior 274k)
- Continuing Claims, April 30, 2161k ,est. 2120k (prior 2121K)
Canadian Economic Data
- 8:30 AM: New Housing Price Index, March, 0.2%, est. 0.1% (prior 0.2%)
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