cti2015header-morning comments web

Market update

US tsys trading higher, flatter, US 10Y 1.92 (-4bps) after weaker Feb retail sales/PPI. crude lower (36.47 -1.9%), USD index is higher except against the yen, which rose the most in a week vs the USD (0.84%). The BOJ refrained from additional stimulus yet downgraded of economic growth and inflation. Core Euro bonds mixed, UK gilts higher with traders attributing outperformance to Barclays rsch expecting lower gilt issuance in fiscal 2016/17 (MNI). Latest JPM Treasury Client Survey showed the most net shorts since Jan25th. GOCs rallying with tsys post PPI/retail sales. CMB 5Y pricing this morn in the context of 50bps (now 52/51).

News headlines

  • Bank of Japan Holds Fire on Stimulus, Negative Rate Unchanged (Bloomberg) The Bank of Japan refrained from bolstering its record monetary stimulus as policy makers gauge the impact of the negative interest-rate strategy they adopted in January. Governor Haruhiko Kuroda and his board kept the target for increasing the monetary base unchanged, and left their benchmark rate at minus 0.1 percent, as forecast by 35 of 40 economists surveyed by Bloomberg. The central bank said it will add easing if necessary while the language in its statement Tuesday indicates a downgrade in its assessment of the economy.
  • Global Stocks Fall, Yen Jumps as Commodities Decline (Bloomberg) Global stocks dropped as the biggest two-day slide in commodity prices in a month reminded investors of the financial-market turmoil that marked the start of this year. The Australian and Canadian dollars weakened and the yen jumped the most in a week. Benchmark share gauges in Europe and Asia retreated from their highest closes since January, while U.S. stock index futures declined with Federal Reserve policy makers set to begin a two-day meeting. The yen strengthened against all 31 major peers as the Bank of Japan refrained from adding to record monetary stimulus at a review on Tuesday.
  • Near-Record Cash `Comfort’ for Canada Oil Firms Amid Price Rout (Bloomberg) Canada’s biggest oil producers are sitting on a near-record pile of cash, giving them the resources to keep investing and manage debt while weathering the worst price rout in a generation. The five largest oil producers including Suncor Energy Inc. and Cenovus Energy Inc. have a combined C$8.5 billion ($6.4 billion) in cash and cash equivalents, an increase of 7.6 percent from a year earlier and more than twice the levels seen during 2009 downturn. The figures, which are little changed from a record C$9 billion in 2014, don’t include the proceeds from Imperial Oil Ltd.’s recent sale of its Esso-brand gas stations for C$2.8 billion.
  • Oil price collapse could cost CMHC $7 billion a year in lost profits (Financial Post) Low oil prices could cost Canada’s federally owned mortgage insurer $7 billion a year in lost profits, though the organization’s top executive said Monday the oil price collapse will not drain its capital to unsustainable levels. The head of the Canada Mortgage and Housing Corp. said his organization has stress-tested the effects of sustained US$35 per barrel oil prices and the result is massive foregone profits for the Crown corporation.
  • China Drafts Rules for Tobin Tax on Currency Transactions (Bloomberg) China’s central bank has drafted rules for a tax on foreign-exchange transactions that would help curb currency speculation, according to people with knowledge of the matter. The initial rate of the so-called Tobin tax may be kept at zero to allow authorities time to refine the rules, said the people, who asked not to be identified as the discussions are private. The tax is not designed to disrupt hedging and other foreign-exchange transactions undertaken by companies, they said.
  • S. Investors Have Capitulated on Europe at the Worst Possible Time (Bloomberg) U.S. investors in European shares have capitulated at the worst possible time. They pulled $1.6 billion from the iShares MSCI Eurozone ETF in the past five weeks, including the biggest withdrawals since 2014. But the outflows gained traction just as the region’s shares bottomed in mid-February, with traders missing out on a 15 percent rally for the Euro Stoxx 50 Index since then. The skepticism may be traceable to December, when investors who piled into the fund were stung as stocks fell 20 percent over two months.


Overnight markets

  • Overview: US 10yr note futures are up 0.2677% at 128-25, S&P 500 futures are down -0.56% at 1998, Crude oil futures are down -2.5% at $36.25, Gold futures are down -0.7% at $1236.4, DXY is down -0.13% at 96.501.

US Economic Data 

  • Retail Sales Advance MoM growth was -0.1%, better than expected and up 0.3% from prior month
  • Retail Sales Ex Auto MoM growth was -0.1%, better than expected and up 0.3% from prior month
  • Retail Sales Ex Auto and Gas growth was 0.3%, better than expected and up 0.4% from prior month
  • PPI Final Demand MoM growth was -0.2%, as expected and down 0.3% from prior month
  • PPI Ex Food and Energy MoM growth was 0.0%, worse than expected and down 0.4% from prior month
  • PPI Final Demand YoY growth was 0.0%, missing the estimate and up 0.2% from prior year
  • PPI Ex Food and Energy YoY growth was 1.2%, as expected and up 0.6% from prior year
  • Empire Manufacturing Survey was 0.62, stronger than expected and up 17.26 from prior month
  • Total Net TIC Flows will be released at 4:00 PM
  • Net Long-term TIC Flows will be released at 4:00 PM

Canadian Economic Data 

  • Existing Home Sales MoM growth will be released at 9:00 AM


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