cti2015header-morning comments web

Market Update

US tsys trading higher, yields 1-2 bps lower with longs lagging on the curve & the US 10Y 2.474 (-2bps). Prices off the highs after Feb Phili Fed surged to 43 vs 18 exp., thou Housing Starts were weaker -2.6% vs unch exp. European govt bonds higher, big rally in peripherals led by Spain &Portugal after ECB said in its minutes that ‘limited deviations from capital key were possible and inevitable’. Fed Fischer said the central bank is close to achieving its dual goals repeating Yellen’s view. FRBNY Pres Dudley said removal of accommodation is warranted if the economy evolves as anticipated. GOCs higher in line with tsys, 10Y 1.761%. 5Y benchmark has switched to the March 22s trading 1.194% with the roll (M22/S21) continuing to come in now 4.9 bid from 5.2 at auction yest.  As we noted the 5Y auction was very well received despite a the roll being a full bp flatter on the week. We would highlight the attractiveness of the June 22/5Y roll  which has barely budged at ~5.4bps. Provis opening unch after closing 0.5bps tighter yest  with 10Y Ontario back to the tights of Dec @ 76.5. Expect supply today, Alberta in the mkt with a new 11/15/21 GBP benchmark. CMB 10Y & 5Y FRN yest unch from new issue levels, WI 27 47.5/46.5., CMB 3/15/22 FRN CDOR + 14.5 mid. Enercare (DBRS:BBB) priced $275mm in 5Ys @ 215 OTC (214.8 vs 0.5 3/22) & $225mm 7Ys @ 245 (253 vs 1.5 6/23) – both upsized and a the tighter end of guidance. Both tranches ~15 bps tighter on the break. Enercare’s recent acquisition of Service Experts in the US broadened its reach, and at the same time the firm has increased its focus on the more lucrative rental mkt which has a 2.5x long term EBITDA impact vs outright water heater sales.  Ford Cda (BBB/BBB) issued $750mm 5s @ 147.9 which came in 5bps on the break. This morning Brookfield Infrastructure Partners (S&P BBB+) in the mkt with a 7Y @ 185 +/-5 bps. We had the BIP curve at ~6bps/yr which would value new 7Y closer to 175. So this looks like a decent NIC.

News headlines 

World stocks ride to record high, dollar retreats (Reuters) World stocks hit an all time high on Thursday as the latest round of robust global data matched hopes that major economies like the United States will soon be serving up large helpings of fiscal stimulus. MSCI’s All Country World index, which spans 46 countries, notched the milestone as Wall Street hit its latest record and Asia and Europe consolidated the roughly 10 percent gains both have made since mid-December.

Oil rises after news OPEC could extend output cuts (Reuters) Oil prices rose on Thursday after OPEC sources said the group could extend its oil supply-reduction pact with non-members and might even apply deeper cuts if global crude inventories failed to drop to a targeted level.

BOJ’s Kuroda warns low rates may sow seeds of new financial crisis (Reuters) Bank of Japan Governor Haruhiko Kuroda said low profitability at financial institutions could sow the seeds of a new financial crisis, offering his strongest warning to date of the demerits of aggressive monetary easing pursued by major central banks.

Aussie Unemployment Rate Falls Despite Full-Time Jobs Plunge (Bloomberg) Australia’s labor market is sending mixed signals following lackluster hiring last year, when full-time jobs virtually stagnated as gains were primarily part-time. The unemployment rate held below 6 percent partly due to discouraged job-seekers giving up the hunt, underscoring spare capacity in the labor market.

Canada, United States will focus on bilateral NAFTA negotiations (TheGlobeandMail) Canada and the United States will focus on bilateral negotiations as part of President Donald Trump’s pledge to tweak the North American free-trade deal that governs Canadian commerce, leaving Mexico essentially to fend for itself.

Trudeau Says EU Must Spread Trade’s Benefits or Risk Its Decline (Bloomberg) The trade pact between Canada and the European Union approved this week could be one of the world’s last multilateral trade deals unless policy makers share the benefits more widely, Canadian Prime Minister Justin Trudeau told European lawmakers.

Bombardier revenue misses on weak demand for trains, business jets (Reuters) Canadian plane and train maker Bombardier Inc (BBDb.TO) reported lower-than-expected revenue, hurt by weak demand in its rail and business aircraft units. The company said revenue in the business aircraft division, which makes the Learjet, Global and Challenger business jets, fell 20.9 percent to $1.65 billion in the fourth quarter.

Overnight markets 

Overview: US 10yr note futures are up 0.1134% at 124-4, S&P 500 futures are down -0.16% at 2346.75, Crude oil futures are up 0.53% at $53.39, Gold futures are up 0.5% at $1239.3, DXY is down -0.45% at 100.72, CAD/USD is down -0.31% at 0.7667.

US Economic Data

8:30 AM Housing Starts, Jan, 1246k, est. 1226k,  (prior 1226k, revised 1279k)
Housing Starts, m/m, Jan, -2.6%,  est. 0.0% (prior 11.3%)
Building Permits, Jan, 1285k, est. 1230k (prior 1210k, revised 1228k)
Building Permits, m/m, Jan, 4.6%, est. 0.2% (prior -0.2%, revised 1.3%)
Initial Jobless Claims, Feb 11, 239k, est. 245k (prior 234k)
Continuing Claims, Feb 4, 2076k, est. 2050k (prior 2078k, revised 2079k)
Philadelphia Fed Index, Feb, 43.3, est. 18.0 (prior 23.6)

Canadian Economic Data

There is no major economic news for today.

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