Market update
US tsys lower overnite , off the lows as equities pare gains, crude recedes after initial spike on Saudi Russian agreement to freeze crude prod, US 10Y 1.78 (+2.6bps). Core Euro bonds lower, curves steeper – German govt curve ~3bps steeper despite weak Feb ZEW. China stocks up 3.0% on surge in bank lending, stability in yuan. Tsys traded in narrow range o/n but on huge volume (879k TY1), a lot of vol going thru when crude spked on Saudi news ~4:00am. In Canada, GOCs are higher after weaker Empire Man, provi spds ~1bp tighter – expect some supply with relative stability in provi mkts – long Onts are ~6bps off the wides of last Wed, haven’t had a Ont/Qc issue since Jan 29th.
News headlines
- Saudis and Russia agree to oil output freeze, Iran still an obstacle (Reuters) Top oil exporters Russia and Saudi Arabia agreed on Tuesday to freeze output levels but said the deal was contingent on other producers joining in – a major sticking point with Iran absent from the talks and determined to raise production.
- Oil eases off highs after output freeze agreement (Reuters) Oil prices slipped off session highs on Tuesday after four of the world’s largest producers agreed to freeze output at January levels if other major exporters joined the pact, dashing hopes among the price bulls for an outright cut to supply.
- Offshore Yuan Forwards Show Bears’ Confidence Has Been Shaken (Bloomberg) Global investors are winding in bets on a yuan devaluation as a dollar rally reverses at the same time as China strengthens support for its currency. Twelve-month forwards for the offshore yuan rallied 2 percent so far this month in Hong Kong, outperforming the exchange rate’s 1.2 percent gain, data compiled by Bloomberg show.
- China January new yuan loans climb to record high in seasonal surge (Reuters) Chinese banks armed with fresh lending quotas extended a record 2.51 trillion yuan ($385.40 billion) of new loans in January, far more than markets had expected, suggesting Beijing is keeping monetary policy loose to counter a protracted economic slowdown.
- S&P 500 Futures Rise After China Stock Gains; Oil Pares Advance (Bloomberg) Futures on the Standard & Poor’s 500 Index rose as U.S. markets reopened after the Presidents’ Day holiday, buoyed by the biggest rally in Chinese shares in three months.
- K. Inflation Rate Rises to Highest in a Year on Motor Fuel (Bloomberg) U.K. inflation climbed to its highest in a year in January, driven by motor fuels, food and clothing.
- Canadian investor sentiment worsens to levels not seen since crisis, Manulife says (Financial Post) One of Canada’s biggest insurance and financial services companies says nervousness among Canadian investors has risen to levels not seen since the financial crisis. Manulife Financial says that Canadian investors have lost confidence in mutual funds, exchange-traded funds and balanced mutual funds over the past six months.
- Bank of Japan launches negative interest rates (TheGuardian) The Bank of Japan’s negative interest rates came into effect on Tuesday in a radical plan already deemed a failure by financial markets, highlighting Tokyo’s lack of options to spur growth as global markets sputter.
Overnight markets
- Overview: US 10yr note futures are down -0.13% at 130-29, S&P 500 futures are up 1.16% at 1879.75, Crude oil futures are down -0.14% at $29.4, Gold futures are down -2.16% at $1212.6, DXY is up0.67% at 96.586.
US Economic Data
- The Empire Manufacturing number came in at a level of -16.64 points, missing the estimate by 6.64 points , and up 2.73 from the previous period
- The Total Net TIC Flows will be released at 4:00 PM
- The Net Long-term TIC Flows will be released at 4:00 PM
Canadian Economic Data
- The Manufacturing Sales MoM growth was 1.2%, beating estimate by 0.7% and up 0.2% from prior month
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