cti2015header-morning comments web

Market update

US tsys trading slightly higher at NY open, 10Y edging closer to 2.0% support from Jan 29th @ 1.98 (-1bp). Ten yr futures in narrow 4 tick range on light, way below avg volume (189k). Light calendar today in the US but Tues thru Fri action packed with retail sales , FOMC & CPI.USD higher except vs JPY, Nikkei up 1.74% on surge in machine orders in Jan, up 15% vs 1.9%. Crude off 2.8% @ 37.42 as Iran said it would raise output and not join output Saudi led output freeze. German 10Y bunds higher, curve flatter a third day since ECB QE ann last Thurs. The latter also helping to propel EU periph bonds higher – Italy 10Y new low @ 1.30%.  GOCs higher, curve unch. Friday’s price action unusual given Cda/US cheapened (i.e. Cda underperformed) ~5bps in 10s after weak employment report. But better buying in provis sent spds another 5 bps tighter or 10bps on week. In corps we’ve seen some switching out of deposit notes into NVCC, buying of telco/reits outright.

News headlines

  • Stocks Rally Wins Fans as Central Banks Lift Credit: Oil Drops (Bloomberg) Investors are gaining confidence that March’s rally in equities and credit markets has further to run. The Stoxx Europe 600 Index and the MSCI Asia Pacific Index were on course for the highest closes in two months. Shares in Egypt extended the longest rally since December after the country’s central bank devalued its currency, and thawing credit markets enabled UBS Group AG to hold the first sale of the riskiest type of bank debt in Europe for two months.
  • Fed to sit tight on rates at March meet, hint at hikes to come (Reuters) The Federal Reserve won’t raise interest rates this week, but will likely make clear that as long as U.S. inflation and jobs continue to strengthen, economic weakness overseas won’t stop rates from rising fairly soon. That will be a big change from the last time the Fed met, when uncertainty over the impact of slower growth in China and Europe drove policymakers to signal it would stay on hold until it could make a better call on the outlook.
  • Oil back below $40 as Iran dashes hopes for quick deal on output (Reuters) Oil fell around 3 percent on Monday after Iran dashed hopes of a coordinated production freeze any time soon, returning bearish sentiment to the market over a supply glut that has sent prices crashing. Global benchmark Brent crude futures LCOc1 fell back below $40 a barrel, trading at $39.20 at 1157 GMT, down $1.19 on Friday’s close. Brent hit a 12-year low of $27.10 in January.
  • China’s ‘easy’ home financing could raise property bubble risk (Reuters) Alarm that parts of China’s housing market are overheating, raised at the ongoing annual parliament meeting, highlights concern about unregulated, online-based financing that can fuel a property bubble. Officials vowed to crack down on players in the property business illegally lending home-buyers the money to make downpayments.
  • The Effects of a Month of Negative Rates in Japan (Bloomberg) The Bank of Japan shocked markets in January with negative rates. The policy had immediate effects on financial markets, even before it actually started on February 16. Although most analysts don’t expect a change on Tuesday, they are expecting the central bank eventually to cut the rate further.
  • Indian WPI Falls More Than Estimated Before Rajan’s Rate Review (Bloomberg) India’s wholesale prices fell more than estimated ahead of benchmark consumer data due later on Monday, as investors assess whether central bank Governor Raghuram Rajan will lower interest rates after the government stuck with a plan to narrow the budget deficit. Wholesale prices declined 0.91 percent in February from a year earlier after a 0.90 percent decrease in January, the Commerce Ministry said in a statement on Monday. The median of 30 estimates in a Bloomberg survey of economists had predicted a 0.19 percent decline. A separate survey shows consumer-price inflation easing to 5.51 percent from 5.69 percent.
  • Egypt Adopts More Flexible Exchange Rate After Devaluation (Bloomberg) The Egyptian central bank surprisingly devalued the pound by almost 13 percent and said it will adopt a “more flexible exchange rate” policy, steps that seek to ease a foreign-currency shortage hampering growth in the most populous Arab country. Stocks rallied. The decisions will achieve “exchange-rate levels that reflect the strength and real value of the local currency in a short period of time,” the central bank, led by Governor Tarek Amer, said in a statement on Monday. The regulator earlier sold $198.1 million to local lenders at 8.85 pounds per dollar. That compares with a previous exchange rate of 7.73 pounds.
  • Will Canada join the negative interest rate club? (Financial Post) There are currently five countries or regions in the negative rate club, and Citigroup expects more will join the fray. Perhaps even Canada. With the European Central Bank cutting its deposit rate by 10 basis points to negative 0.4 per cent last week, it cemented its place in the group alongside Switzerland, Sweden, Denmark and Japan. The economic benefit of looser monetary policy eventually runs out of steam, and recent data supports the notion that things are fading. Yet Citigroup analysts insist that it is too early to declare that negative interest rates aren’t still helping.

Overnight markets

  • Overview: US 10yr note futures are up 0.0852% at 128-15, S&P 500 futures are down -0.26% at 2005.25, Crude oil futures are down -2.73% at $37.45, Gold futures are down -0.21% at $1256.7, DXY is up 0.25% at 96.411.

US Economic Data

  •  There is no major economic data Today

Canadian Economic Data

  • Teranet/National Bank HP Index was at a level of 178.40 higher than prior month
  • Teranet/National Bank HPI YoY growth 6.5%, up 5.9% from prior year
  • Teranet/National Bank HPI YoY growth 6.5%, up 5.9% from prior year



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