cti2015header-morning comments web

Market update

Tsys higher, yields 2-3bps lower across the curve, risk aversion overnite as Brexit vote dominates as four polls showed the ‘leave’ side gaining momentum, the GBP falling 1.0% back to yest low 1.4125. Ten year gilts sharply higher, 10Y gilt record low 1.144 (-6.4bps) , while the 10Y bund fell below 0% for the first time. JGB yields hit record low, the Nikkei fell below 16,000 while Euro-Yen fell to a 38-month low below 119. Euro stocks 1.2% lower, oil lower. Fed begins two-day meeting with odds of rate hike priced out for this meeting and 13% for July from ~50% at the start of the month. GOCs higher yet pressured by stronger US retail sales/ Cda Teranet home prices. Ont spds out 1-1.5bps, Ont 46 109/108, Ont 26 98.5/98. CMB 5Y to price this morning , 50.5/50 (+0.5bps)

News headline

  • U.S. Index Futures Fall Amid Brexit Concern Before Fed Decision (Bloomberg) U.S. stock-index futures fell, signaling equities will extend losses for a fourth day, amid growing uncertainty about the U.K.’s future in the European Union, and as investors awaited Wednesday’s Federal Reserve announcement. Contracts on the S&P 500 Index expiring in September retreated 0.2 percent to 2,066 at 7:25 a.m. in New York. The equity benchmark fell to a three-week low on Monday, capping its worst three-day performance since February. Dow Jones Industrial Average futures lost 24 points, or 0.1 percent, to 17,615, today.
  • German Bunds Reach New Milestone as Yield Declines Below Zero (Bloomberg) The yield on Germany’s 10-year government bund, Europe’s benchmark security, fell below zero for the first time on record, as investors’ seemingly insatiable demand for haven assets created another bond-market milestone. The nation joined Japan and Switzerland in having 10-year bond yields of less than zero. The plunge in yields, which has been driven by European Central Bank’s policy of negative interest rates and asset purchases, has accelerated amid a weakening global economic outlook and as polls indicate the “Leave” campaign in Britain’s European Union referendum is gaining momentum.
  • U.K. Moves Closer to Brexit as The Sun Backs ‘Leave’ Vote (Bloomberg) Four polls put the “Leave” campaign ahead of “Remain” as The Sun newspaper came out in favor of Britain quitting the European Union, sending stocks and the pound down. Sterling approached a two-month low against the dollar and investors rushed to havens Tuesday after a series of new polls the previous evening put “Leave” ahead with just nine days of campaigning left. The final blow came when The Sun, Britain’s biggest-selling newspaper, backed a so-called Brexit on its front page.
  • Oil falls as Brexit threat rattles markets (Reuters) Oil fell on Tuesday, as investor nervousness over next week’s vote on Britain’s possible European Union exit swept financial markets, eclipsing signs of a return to health for crude prices. Perceived safe-haven assets such as the Swiss franc EURCHF= and German Bunds DE10YT=RR rallied, while industrial commodities and equity markets, seen as more vulnerable to economic risk, fell after polls showed Britain’s “Leave” campaign leading before a referendum on EU membership.
  • Yen hits three-year highs vs euro as Brexit worries mount (Reuters) The yen surged to its strongest level against the euro for more than three years on Tuesday as the chances of Britain voting next week to leave the European Union grew, pushing investors towards the security of Japan and other traditional safe havens. As opinion polls continued to show the “Leave” camp moving ahead before the June 23 vote, and Britain’s biggest selling paper, the Sun, came out in favour of leaving the bloc, sterling fell 1 percent to a two-month low of $1.4112.
  • IEA sees global oil market returning to surplus in early 2017 (Reuters) Global oil supply and demand appear to be balancing in 2016, after a series of unplanned production outages, but the market is expected to return to a surplus in the first half of next year, the International Energy Agency said on Tuesday. The agency said demand growth in 2017 is likely to be flat at around 1.3 million barrels per day (bpd), which is where it now estimates growth will be this year.
  • IMF housing heat map shows Canadian household debt scorching (TheGlobeandMail) The International Monetary Fund is warning policy makers they may have to take action that would cool Canada’s hot housing markets and ease the consumer debt binge. It’s not the first time that the IMF has issued such an alert. For that matter, such warnings have been pouring in from far and wide amid a surge in home prices in Vancouver and Toronto and their surrounding regions.

 Overnight markets 

  • Overview: US 10yr note futures are up 0.1897% at 132-1, S&P 500 futures are down -0.31% at 2063.25, Crude oil futures are down -1.21% at $48.29, Gold futures are down -0.04% at $1286.4, DXY is up 0.44% at 94.78.

 US Economic Data

  • 8:30 AM: Import Price Index, m/m May, 1.4%, est. 0.7% (prior 0.3%, revised 0.7%)
    Import Price Index, y/y, May, -5.0%, est. -5.9% (prior -5.7%, revised -5.3%)
    Retail Sales Advance, m/m, May, 0.5%, est. 0.3% (prior 1.3%)
    Retail Sales Ex Auto, m/m, May, 0.4%, est. 0.4% (prior 0.8%)
    Retail Sales Ex Auto & Gas, m/m, May, 0.3%, est. 0.3% (prior 0.9%)
  • 10:00 AM: Business Inventories, April, est. 0.2% (prior 0.4%)

Canadian Economic Data 

  •  8:30 AM: Teranet/National Bank HPI, m/m, May, 1.8% (prior 1.2%)
    Teranet/National Bank HPI, y/y, May, 9.0% (prior 8.1%)

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