cti2015header-morning comments web

Market update

Tsys  higher, curve flatter , low volume on TY1 futs, US 10Y 1.77 (-2bps) at the lower end of 2bp o/n range trade, muted reaction so far to stronger Empire Man index.  Tsys bid in Europe on weakness in equities, crude, with the USD lower vs EUR & JPY. Crude off 2.2% @ 40.58 before this weekend’s meeting of oil ministers in Doha where an output freeze is to be discussed, news that Iran will not attend the meeting. Core Euro bonds  higher, curves flatter amid fall in oil prices and heavy redemptions in Europe (~E36bln). Aussie bond yields up for 5th day with strong jobs report &better than exp China investment and lending data. GOCs opening higher , outperforming tsys with tens well bid ~4bps narrower on the curve. Provi spds at six month lows, the Ont 10/30 credit curve continues to steepen, spds were in another 1.5-2bps yest with no supply. Alberta budget – $10.4bln for this yr & $8.4bln next yr is consistent with expectations – Alberta/Ont 46 roll 13.5/12.5 (+1bp).

News headlines

  • Global stocks, dollar and oil cool ahead of Doha meeting (Reuters) Reassuring Chinese GDP data helped stocks, commodity markets and the dollar consolidate strong weekly gains on Friday, as focus turned to a meeting of top oil producers about a potential output freeze. Moves in most markets were small in Europe as investors eased back after a 2.5 percent weekly rally in world shares .MIWD00000PUS, a upward turn in the dollar and an 11 percent surge in oil prices this month. Data from China drew approval as it showed the country’s giant economy grew at 6.7 percent in the first quarter year-on-year, bolstering the view its slowdown may be bottoming out.
  • Oil Falls Before Doha as Global Markets Brace for Weekend Risk (Bloomberg) Oil fell for a third day before major suppliers meet in Doha to discuss an output freeze, boosting bonds and sending European stocks lower, with investors wary of potential disappointment from the talks. U.S. crude trimmed its second weekly advance and shares in Europe fell for the first time in six days. German bonds pared their first weekly drop in more than a month. New Zealand’s dollar and South Korea’s won led gains in Asian currencies as a flood of Chinese data added to evidence that the world’s second-largest economy is stabilizing.
  • Chinese economy shows signs of debt-fueled recovery (Reuters) China posted its slowest economic growth since 2009 but a surge of new debt appears to be fueling a recovery in factory activity, investment and household spending in the world’s second largest economy. That’s good news in the near-term, economists say, but many worry it marks a return to the old playbook used during the financial crisis, when Beijing hand-cranked its economy out of a slowdown through massive stimulus, rather than structural reform
  • IMF Says Greek Debt Numbers Don’t Add Up as EU Defends Its Plan (Bloomberg) The International Monetary Fund raised doubts about Greece’s ability to keep up repayments under a plan being negotiated with its European creditors, who insisted they’ve already provided plenty of debt relief. “Currently, as envisaged, the debt is not sustainable and what is required is a debt operation,” IMF Managing Director Christine Lagarde said Thursday in Washington, where finance ministers and central bankers are attending the fund’s spring meetings.
  • Valeant Working With Banks to Review Options: Reuters (Bloomberg) Valeant Pharmaceuticals International Inc. is working with investment banks to review options after receiving interest in a number of its businesses, Reuters reported Thursday. The drugmaker has previously said that it might dispose of certain “non-core” assets as it seeks to pay down some of its $32 billion in debt and return to stable footing after a disastrous eight-month run that has seen its stock lose almost 90 percent of its value.
  • Top Brazil Court Allows Impeachment Vote to Proceed Sunday (Bloomberg) Brazil’s Supreme Court overturned a government motion and allowed voting on impeachment to continue as scheduled on Sunday, delivering a blow to Dilma Rousseff as she struggles to keep her presidency. In a special session Thursday night, the court shot down arguments made earlier in the day by Attorney General Jose Eduardo Cardozo that the impeachment process was flawed and the administration hadn’t received the right to a proper defense
  • How 315 Billion Petrodollars Evaporated (Bloomberg) The world’s top oil exporters are burning through their petrodollar assets at an accelerating pace, increasing the pressure to reach a deal to freeze production to bolster prices. The 18 nations set to gather in Doha on Sunday to discuss a production freeze have spent $315 billion of their foreign-exchange reserves — about a fifth of their total — since the oil slump started in November 2014, according to data compiled by Bloomberg. In the last three months of 2015, reserves fell nearly $54 billion, the largest quarterly drop since the crisis started.
  • Alberta opts for deficits, Newfoundland chooses harsh tax hikes amid oil woes (GlobeandMail) The stinging impact of a year of persistently low oil prices has left economic wreckage across Canada, with the distress particularly acute in Alberta and Newfoundland and Labrador. With unemployment rates shooting up and both economies in distress, the two provinces unveiled dramatically different approaches to dealing with their deficits on Thursday. Alberta’s New Democrats took a hard turn against the province’s fiscally conservative past, adopting a plan that will lead to record debt. Newfoundland and Labrador has instead embraced austerity, tax hikes and layoffs.

Overnight markets 

  • Overview: US 10yr note futures are up 0.0719% at 130-15, S&P 500 futures are down -0.13% at 2073.75, Crude oil futures are down -2.65% at $40.4, Gold futures are up 0.44% at $1231.9, DXY is down -0.06% at 94.845.

 US Economic Data 

  • Empire State Manufacturing Survey number came in at a level of 9.56, much stronger than estimate by the analysts.
  • Industrial Production MoM variation will be released at 9:15 AM
  • Capacity Utilisation will be released at 9:15 AM
  • University of Michigan Consumer Sentiment Index will be released at 10:00 AM

 Canadian Economic Data 

  • Manufacturing Sales MoM variation was -3.3%, much weaker than expected by the analysts.


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