Market Update US tsys lower & flatter, the 10Y 2.82%, narrow o/n range in TY futures on above avg volume (395k) – prices moving lower after 8:30 data – claims lower and import prices up for the 7th month in a row, 0.4% in Feb vs 0.2% exp. The 10Y almost back to 2.80% low from late Feb after rising above 2.90% in the wake of the Feb payroll data. Equities futures +1.25, USD index slightly higher, crude +0.32 @ 61.28. Core EGBs higher, gilt curve in bullish flattener reaching new narrows after solid 10Y gilt auction (b/c 2.62 vs 2.38 prior), 10Y yield at a two week low 1.43% . In Canada, GOCs slightly higher, outperforming tsys, GOC curve in flattening mode, 2s30s 54bps lowest since Feb 1st, while Can/US spreads 3bps tighter since BOC Poloz comments Tuesday. In provis the story is Quebec outpeformance, Qc/Ont 48 spread trading up at -3.2 yest aft, now -3.1/-3.7.
News headlines
Kudlow Backs Strong Dollar, Tough China Stance as Trump Adviser (Bloomberg) Incoming White House economic adviser Larry Kudlow signaled that President Donald Trump would support a strong dollar, pursue a second phase of his tax overhaul to make cuts permanent and take a tougher line on trade with China.
Davis to Go to Brussels for Brexit Talks Before Crunch Summit (Bloomberg) Brexit Secretary David Davis will go to Brussels on Sunday for talks on issues including the transition arrangement that businesses are keen to pin down. Davis’s team are in negotiations with their EU counterparts on the transition — the two year grace period that’s due to come into effect after Brexit day — and the divorce agreement. Davis will join them on Sunday and have a meeting with chief EU negotiator Michel Barnier on Monday, he told BBC Newsnight, according to a transcript from his office.
May Targets Putin Over Poisoned Former Spy as Ties Deteriorate (Bloomberg) Prime Minister Theresa May threw 23 Russian diplomats out of Britain in retaliation for the poisoning of a former spy and his daughter on U.K. soil, as she braced the country for further attacks.
Stocks, Bonds Fluctuate as Traders Size Up Kudlow: Markets Wrap (Bloomberg) Stocks and bonds fluctuated in Europe and Asia as traders assessed the first statements of President Donald Trump’s new economic adviser. U.S. equity futures pared gains and Treasuries drifted higher. The Stoxx Europe 600 Index was steady, with gains in insurance shares offsetting drops in retail and household goods. Gold edged lower as new White House appointee Larry Kudlow said he’d sell the metal and buy the dollar, which was little changed on Thursday. Norway’s krone rose to its strongest level since early February after its central bank signaled faster interest-rate increases. The yen gained for a second day and benchmark Treasuries advanced after a brief drop earlier.
Trudeau Dodged Steel Tariffs. Now He’s Trying to Save Nafta (Bloomberg) Donald Trump is already taking up a lot of Justin Trudeau’s bandwidth. Steel tariffs sent it to another level. The Canadian prime minister is on an impromptu tour of steel and aluminum country this week, a denim-clad, open-collared victory lap with workers after Canada and Mexico were excluded from new U.S. tariffs. The exemption came after frenzied lobbying by the Trudeau government, throughout Washington and as far away as Seoul and Berlin.
Quebec government says to cut debt by C$10 billion as election looms (Reuters) Quebec plans to draw about C$10 billion ($7.72 billion) over the next five years from a specialized fund to tackle the Canadian province’s debt, Premier Philippe Couillard said on Wednesday. Couillard’s Liberal government, which is lagging in polls ahead of October elections, said it would use the province’s Generations Fund, a trust fund set up to reduce public debt, to pay it down by C$2 billion a year, starting in 2018-2019.
Canadian small business lending inches up in January: PayNet (BNN) ending to small Canadian businesses was little changed in January as stronger activity in the accommodation and food industry was offset by weakness in support services for the resource sector, data showed on Thursday. The PayNet Small Business Lending index rose to 110.6 in January from a downwardly revised 110.2 in December. But medium-sized companies fared worse, with the measure of lending falling to 184.6 from 192.3. Compared to a year earlier, lending to small companies was down 6 per cent, moderating from December’s 8 per cent annual drop and suggesting the recent declines in lending may be leveling off, said PayNet President Bill Phelan
Overnight markets
Overview: US 10yr note futures are up 0.026% at 120-19, S&P 500 futures are up 0.02% at 2754.5, Crude oil futures are up 0.57% at $61.31, Gold futures are down -0.16% at $1323.5, DXY is up 0.14% at 89.833, CAD/USD is up 0.1% at 0.7711.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.777% | 2 Year | 2.266% |
| 5 Year | 1.995% | 5 Year | 2.606% |
| 10 Year | 2.159% | 10 Year | 2.813% |
| 30 Year | 2.321% | 30 Year | 3.052% |
US Economic Data
| 8:30 AM | Empire Manufacturing, Mar 22.5 est 15.0 (13.1 prior) |
| Import Price Index MoM, Feb 0.4% est 0.2% (1.0% prior) | |
| Initial Jobless Claims, Mar 10th 226k est 228k (231k prior) | |
| Continuing Claims, Mar 3rd 1879k est 1903k (1870k prior) | |
| Philadelphia Fed Business Outlook, Mar 22.3 est 23.0 (25.8 prior) | |
| 9:45 AM | Bloomberg Consumer Comfort, Mar 11th (56.8 prior) |
| Bloomberg Feb. United States Economic Survey | |
| 10:00 AM | NAHB Housing Market Index, Mar est 72 (72 prior) |
| 16:00 PM | Total Net TIC Flows, Jan (-119.3b prior) |
| Net Long-term TIC Flows, Jan (27.3b prior) |
Canadian Economic Data
| 8:30 AM | ADP Publishes February Payrolls Report |
| 9:00 AM | Existing Homes Sales, Feb (-14.5% 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