cti2015header-morning comments web

Market update

US tsys moving lower, accelerating since mid-morning on stronger core PPI (0.4% vs 0.1%) equity mkts improve: Euro stoxx up 2%, S&P futs +1.6%. US 10Y 1.82% (+4bps), curve ~1bp steeper.  Crude up 3% @ 29.90 after falling on Russia/Saudi news.  Yesterday’s TIC data showed China holdings of tsys fell to the lowest since last Feb at 1.25trln, while Japan’s fell $22.4bln. Core Euro bonds lower led by 10Y UK gilts (1.47 +3bps) despite weaker empl data – likely focus on higher wage growth (2% vs 1.9%), lower productivity. Also pressure from 10Y UK & German supply. GOCs lower led by 10s, 2bps on the curve, longs outperforming 10s/30s below 80. Five year auction today – $3.8bln reopening Mar 21s. The 5Y roll @ 8.7/8.3 is sitting just off recent lows, ~2bps tighter since last auc. Long Ontarios opening 1bp tighter 117/116 after 3bp rally yesterday on Ont budget announcement, risk on env. BC48/Ont46 roll tighter (-11.1/-11.5) – BC budget better surplus ($377mln 2016FY, $264mln for FY17, lower net borrowing etc). Yest Sunlife priced a 5+5Y sub debt at 250 or ~ 55 back of Sr Holdco paper where we thought 40bps was closer to the basis – it broke 3bps tighter on secondary. Shaw issued 5Y @ 255 which also looked very cheap and was quoted 8 bps tighter on the break (still solid value in our opinion). We are 248 bid for 2MM this morn.

News headlines

  • Futures rise as oil gains hold steady (Reuters) U.S. stock index futures were higher on Wednesday, setting the stage for a third straight day of gains, as oil prices rose and investors snatched up beaten-down shares.
  • China promises economic stability as G20, parliament loom (Reuters) Chinese policymakers emerged from the Lunar New Year hiatus with one collective message for nervous investors at home and abroad – Beijing will put a floor under the slowing economy, keep its currency steady and ensure employment remains stable even as bloated industries undergo restructuring.
  • Iran says will resist curbs on oil output as part of global pact (Reuters) Iran said on Wednesday it would resist any plan to restrain its oil output as fellow OPEC ministers tried to persuade the country to join the first global oil pact in 15 years.
  • Canada misses out on new auto assembly plants (TheGlobeandMail) Investment by auto makers in Canada doubled last year from 2014 levels, but the country failed to win any of the three new assembly plants that were announced for North America, pushing Canada’s losing streak for new plants to a decade.
  • Bombardier Plans to Cut 7,000 Jobs as Profit Misses Estimate (Bloomberg) Bombardier Inc. said it planned to cut about 7,000 jobs as it reported fourth-quarter profit that fell short of analysts’ estimates. It also signed a letter of intent for Air Canada to buy at least 45 of the planemaker’s C Series jets.
  • UK wage growth slows as employment rises (TheGuardian) A first UK interest rate rise since the financial crash appears to be even further away after official figures showed that wages growth last year dipped to 1.9%. Wages growth, which is watched carefully by the Bank of England for signs of inflation, lost momentum in December for an eighth month as the global slowdown in trade and turmoil on world stock markets hit the previously bouyant UK economy.


Overnight markets 

  • Overview: US 10yr note futures are down -0.32% at 130-16, S&P 500 futures are up 0.99% at 1907.5, Crude oil futures are up 2.89% at $29.88, Gold futures are down -0.03% at $1207.8, DXY is up0.12% at 96.985.

US Economic Data 

  • MBA Mortgage Applications was released at a level of 8.2%, down 0.9% from prior week.
  • Housing Starts for January was at a level of 1099k, worse than expected and down 50k from December.
  • Building Permits was released at a level of 1202k better than expected and down 30k prior period.
  • PPI Final Demand MoM growth for January was 0.1%, beating the estimate by 0.3% and up 0.3% from the previous month
  • PPI Ex Food and Energy MoM growth was at 0.4%, better than expected by the analysts and up 0.3% from previous month.
  • PPI Final Demand YoY growth was at -0.2%, beating the estimate 0.4% and up 0.8% from prior period
  • PPI Ex Food and Energy YoY growth was 0.6%, better than expected by the analyst and up 0.3% from the previous month
  • Industrial Production MoM will be released at 9:15 AM
  • Capacity Utilization will be released at 9:15 AM


Canadian Economic Data 

  • There is no major economic data release 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