Market Update Tsys trading lower across the curve, off the early Europe lows which saw the 10Y reach above 2.94%, a new 4-year high, on heavy volume in TY futures (>560k). JPY rose to a new 15 mth high as Japanese FM said there was no need to intervene in xcy mkts. Heavy data slate this morning with PPI, claims & TICs flows as well as a $7bln 30Y TIPS auction. S&P futures +10pts, Euro stocks +0.90%, crude slighty weaker 60.55. Gilts sharply lower led by the long end, 30Y +5bps @ 2.065, a new high since last Feb, large 0.7bp tail in this morning’s 40Y gilt reopening. GOCs lower in line with tsys, the 10Y rising above 2.40% resistance earlier, now 2.38%. Domestic calendar has Existing home sales,. Provis spreads tighter yest on ‘risk on’, CHT 10Y , new 2.6% March 2028 was well recived clsing 36/35.5.
News headlines
U.S. Stocks Rally as 10-Year Yield Reaches 2.9%: Markets Wrap (Bloomberg) U.S. stocks extended a rebound while Treasury yields rose to a four-year high as economic data supported expectations that the Federal Reserve will maintain a gradual approach to raising interest rates. The S&P 500 Index climbed for a fourth day as banks and durable-goods makers rallied, returning the gauge to a gain for the year after it fell more than 10 percent from a January peak. Gold rallied and the dollar slumped as the 10-year yield topped 2.9 percent.
Bond Traders Swarm 2019 Fed-Hike Bets After Inflation Surprise (Bloomberg) Bond traders, seeking a way to bet on more Federal Reserve rate hikes, are setting their sights on 2019. After a Wednesday report showed consumer prices rose in January by more than projected, traders used eurodollar futures to express their view that central bankers have a clearer path to tighten. The expected number of increases from now until the end of next year is up to four, from 3.6 before the inflation report. In contrast, the odds of a move in March haven’t changed much, rising to about 90 percent from around 85 percent ahead of the data.
Zuma’s Exit Ends ‘One-Man Disaster’ That Roiled His Nation (Bloomberg) Before he was pushed from office, South African President Jacob Zuma went from fighting apartheid to facing multiple accusations of corruption during a political career that spanned almost six decades. His resignation will bring an end to an ignominious tenure that undermined the nation’s democracy and crippled the economy.
Dollar Under Siege With U.S. Deficits Back on Wall Street’s Radar (Bloomberg) America’s fiscal largesse and the specter of wider current-account shortfalls are fueling a renewed wave of dollar bashing. Congress’s bipartisan vote last week to increase spending by nearly $300 billion over the next two years comes on the heels of a $1.5 trillion tax cut that could boost domestic demand and the country’s trade gap. Strategists are taking heed, zeroing in on America’s twin deficits as a likely catalyst of continued greenback weakness following February’s brief respite.
U.S. Jobless Claims Decline, Approach an Almost 45-Year Low (Bloomberg) U.S. filings for unemployment benefits unexpectedly declined last week, hovering close to an almost 45-year low and signaling a tight job market, Labor Department figures showed Thursday.
Futures trade higher; earnings in focus (Reuters) Futures pointed to a higher opening for Canada’s main stock index on Thursday, as investors assessed a slew of corporate earnings including Bombardier, Cenovus Energy and Encana. March futures on the S&P TSX index were up 0.23 percent at 7:15 a.m. ET. Canada’s main stock index rose on Wednesday after investor sentiment rebounded following a bullish U.S. inflation report and energy stocks rallied on strong oil prices. Dow Jones Industrial Average e-mini futures were up 1.01 percent at 7:15 a.m. ET, while S&P 500 e-mini futures were up 0.57 percent and Nasdaq 100 e-mini futures were up 0.7 percent.
Bombardier profit tops estimates on rail strength (Reuters) Canadian train and plane maker Bombardier on Thursday beat quarterly profit estimates, driven by an improvement in both sales and margins in its rail division. Bombardier is in the middle of a five-year turnaround plan to cut costs and boost margins, after years of heavy investments in two new aircraft programs pushed it to the brink of bankruptcy in 2015.
Home Capital Q4 profit sinks 40%, CEO says lender ‘turned the corner’ (BNN) Home Capital Group’s CEO is telling shareholders his company has “turned the corner” after weathering a run on deposits that pushed the lender to the brink last spring, but the company’s performance in the fourth quarter of 2017 illustrates the profound impact on its growth and bottom line. Home Capital’s profit in the last three months of 2017 sank 39.6 per cent to $30.6 million, or 38 cents per share. The company attributes the year-over-year profit erosion to lower loan balances and securitization income.
Overnight markets
Overview: US 10yr note futures are down -0.052% at 120-09, S&P 500 futures are up 0.44% at 2708.75, Crude oil futures are down -0.18% at $60.49, Gold futures are down -0.24% at $1354.7, DXY is down -0.45% at 88.724, CAD/USD is up 0.05% at 0.8001.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.846% | 2 Year | 2.189% |
| 5 Year | 2.168% | 5 Year | 2.656% |
| 10 Year | 2.391% | 10 Year | 2.913% |
| 30 Year | 2.52% | 30 Year | 3.156% |
US Economic Data
| 8:30 AM | Empire Manufacturing, Feb est 18.0 (17.7 prior) |
| Initial Jobless Claims, Feb 10th est 228k (221k prior) | |
| Continuing Claims, Feb 3rd est 1925k (1923k prior) | |
| PPI Final Demand MoM, Jan est 0.4% (-0.1% prior) | |
| PPI Ex Food and Energy MoM, Jan est 0.2% (-0.1% prior) | |
| PPI Ex Food, Energy, Trade MoM, Jan est 0.2% (0.1% prior) | |
| PPI Final Demand YoY, Jan est 2.4% (2.6% prior) | |
| PPI Ex Food and Energy YoY, Jan est 2.0% (2.3% prior) | |
| PPI Ex Food, Energy, Trade YoY, Jan (2.3% prior) | |
| Philadelphia Fed Business Outlook, Feb est 21.8 (22.2 prior) | |
| 9:15 AM | Industrial Production MoM, Jan est 0.2% (0.9% prior) |
| Manufacturing (SIC) Production, Jan est 0.3% (0.1% prior) | |
| Capacity Utilization, Jan est 78.0% (77.9% prior) | |
| 10:00 AM | NAHB Housing Market Index, Feb est 72 (72 prior) |
| 16:00 PM | Total Net TIC Flows, Dec (33.8b prior) |
| Net Long-Term TIC Flows, Dec (57.5 prior) |
Canadian Economic Data
| 8:30 AM | ADP Publishes January Payrolls Report |
| 9:00 AM | Existing Home Sales MoM, Jan (4.5% prior) |
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, Hugues Savard
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230