cti2015header-morning comments web

Market update

Tsys lower, curve steeper, US 10Y 1.79 (+3bps) –as initial claims fell to the lowest since 1973 even as core CPI weaker (0.9 vs 1.0). Tsys under pressure since mid-morning as European equities rise, core euro bonds lower & steeper pressured by more long govt supply – this time Irish 10y @ 0.817% record low auction yield. The US auctions $12bln in reopened 30Y bonds at 1PM after successful 10Y yest (2bps thru WI).  Redemption flows in Europe this month are large – E121.6bln according to IFR with E34bln being payed out tomorrow alone, so net issuance for the week negative ~E22bln. Australian employment beat estimates – 26K vs 17K with the unemployment rate falling from 5.8% from 5.7% – the lowest in thirty months. Based on OIS mkts are still pricing ~50% chance of a rate cut by Sept – trend employment has slowed from last yr while the part rate has declined since last nov. GOCs lower, 10s ~4bps wider in directional move with the 10Y close to 1.30% resis. Provis unch, Ont & NB rumoured supply, with Alberta budget later today – long Alberta/Ont roll 12.5/11.5 +2bps since last week.

News headlines

  • Dollar Rally Hits Commodities as Europe Halts Global Stock Gains (Bloomberg) The dollar strengthened, weighing on commodities, and Singapore’s currency declined as the city state unexpectedly loosened monetary policy. European stocks bucked a five-day rally in global equities. The greenback rose against most major peers and base metals denominated in the U.S. currency fell to compensate for the appreciation. Crude reversed losses as Qatar said there was a “positive feeling” before major producers meet in Doha on April 17 to discuss freezing output.
  • IEA Sees Oil Oversupply Almost Gone in Second Half on Shale Drop (Bloomberg) Global oil markets will “move close to balance” in the second half of the year as lower prices take their toll on production outside OPEC, the International Energy Agency said. The world surplus will diminish to 200,000 barrels a day in the last six months of the year from 1.5 million in the first half, the agency said in a report on Thursday. Production outside the Organization of Petroleum Exporting Countries will decline by the most since 1992 as the U.S. shale oil boom falters.
  • IEA expects limited impact from oil output freeze at Doha (Reuters) A deal to freeze oil production by OPEC and non-OPEC producers will have a limited impact on global supply and markets are unlikely to rebalance before 2017, the International Energy Agency (IEA) said on Thursday. The IEA, which oversees the energy policies of industrialized nations, said even though the decline in U.S. output was gathering pace and Iran was not adding as many barrels as expected, the world would still produce more oil than it consumes throughout 2016.
  • Energy XXI Files for Bankruptcy After $5 Billion Expansion (Bloomberg) Energy XXI Ltd., a U.S. oil and gas explorer, filed for bankruptcy protection after spending $5 billion on acquisitions in the years leading up to the crude slump. The company entered Chapter 11 in Houston after reaching a restructuring agreement with noteholders, it said Thursday in a statement. “Energy XXI will eliminate more than $2.8 billion in debt from its balance sheet, substantially deleverage its capital structure and position the company for long-term success,” it said.
  • BofA Profit Misses Estimates on Dealmaking Slump, Energy Loans (Bloomberg) Bank of America Corp. posted a first-quarter profit that missed analysts’ estimates as trading and underwriting revenue dropped and energy loans soured. The stock fell in early trading in New York. Net income at the second-biggest U.S. bank fell 13 percent to $2.68 billion, or 21 cents a share, from $3.1 billion, or 25 cents, a year earlier, according to a statement Thursday from the Charlotte, North Carolina-based firm. Adjusted earnings per share were 20 cents, 1 cent less than the average estimate of analysts surveyed by Bloomberg.
  • Bank of England leaves policy on hold amid ‘Brexit’ uncertainty (MarketWatch) The Bank of England on Thursday kept its key interest rate at a record low of 0.5% and made no changes to its 375-billion-pound ($529.99 billion) asset purchase program. The vote was unanimous. Policy makers were widely expected to leave rates where they’ve been since March 2009 ahead of the U.K.’s EU referendum on June 23 on whether to stay in or leave the union . Polls are currently neck-to-neck, sparking jitters in the U.K. financial markets.
  • Stephen Poloz defends the central bank’s independence from Finance Department (Financial Post) After delivering a mostly positive outlook on the Canadian economy, and keeping its trendsetting lending rate on hold — as was well-telegraphed — the Bank of Canada found itself unexpectedly on the defensive Wednesday over its policy independence from the federal government. “The Bank of Canada ‘had’ to raise its 2016 growth forecast, since the governor’s boss, Minister Morneau, is out touting the benefits of fiscal stimulus, and December/January GDP surprised on the upside,” said Avery Shenfeld, chief economist at CIBC Capital Markets.

Overnight markets

  • Overview: US 10yr note futures are down -0.2153% at 130-11, S&P 500 futures are up 0.08% at 2077.75, Crude oil futures are up 0.57% at $42, Gold futures are down -0.99% at $1236, DXY is up 0.04% at 94.783.

US Economic Data 

  • Initial Jobless Claims was at a level of 253k, stronger than expected by the analysts
  • Continuing Claims was at a level of 2171k, beating the analyst expectation
  • CPI MoM growth was 0.1%, missing the analyst estimate by 0.1%
  • CPI Ex Food and Energy MoM growth was 0.1%, 10 basis points weaker than the analyst expectation
  • CPI YoY growth was 0.1%, missing the analyst expectation by 0.1%

 Canadian Economic Data 

  • New Housing Price Index MoM growth was 0.2%, beating the analyst estimate


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