cti2015header-morning comments web

Market update

Tsys higher, following thru on yest Fed inspired rally, US 10Y 1.88 (-3bps) & cpn curve unch. Prices off the highs after better than exp Phili Fed index (12.4 vs -1.5) marked by improvements in both new orders and shipments. Yest the Fed chose to downplay the rise in core inflation, recovery in commodity prices, focusing instead on international developments. The ‘dot plots’ continue to be readjusted downwards with each successive meeting. After yesterday’s bull steepening mkts are pricing in ~65% odds of one rate hike by Dec. GOCs higher, spds unch vs tsys, curve 1bp steeper with longs underperforming, 10s30s 4bps wider since yest aft. Provis well bid, long Onts 107.5/107, QC48/Ont46 3/2.8 continues to ratchet tighter. Quebec budget this aft, rumours of MP and possible l.t. muni issue.

News headlines

  • Oil rallies towards $41, near 2016 high, on producer meeting (Reuters) Oil rose towards $41 a barrel on Thursday, trading close to a 2016 high, bolstered by a plan among some of the world’s biggest producers to meet next month to discuss supporting the market. OPEC and non-OPEC producers including the top two exporters, Saudi Arabia and Russia, will hold talks on April 17 in Qatar over a plan to freeze output, increasing the likelihood of the first global supply deal in 15 years.
  • Norway Cuts Rate and Signals More Easing Ahead Amid Oil Plunge (Bloomberg) Norway’s central bank cut its benchmark interest rate to a record low and signaled it’s prepared to ease policy further to ward off a recession in western Europe’s biggest crude oil producer. The overnight deposit rate was lowered by 25 basis points to 0.50 percent, the Oslo-based central bank said on Thursday. The decision was predicted by 18 of 20 economists surveyed by Bloomberg. The bank predicted that its rate will bottom at 0.2 percent in the first quarter next year.
  • Swiss Keep Franc Intervention Threat Alive as Rates Left on Hold (Bloomberg) Switzerland’s central bank held interest rates at a record low and repeated its pledge to intervene in currency markets, a threat President Thomas Jordan has used to keep the franc from strengthening. Describing the nation’s currency as “significantly overvalued,” the Swiss National Bank kept its deposit rate at minus 0.75 percent on Thursday, as expected by all economists in a Bloomberg survey. It cut both its growth and inflation forecast for 2016 and now sees prices dropping 0.8 percent this year.
  • Bank of England keeps rates steady, says sterling hit by EU vote (Reuters) Bank of England policymakers said sterling had been dealt a big hit by uncertainty in the run-up to the referendum on EU membership and that growth could slow, after voting unanimously to keep rates steady. The central bank said the upcoming vote on June 23 could delay some spending decisions, though it said recent indicators suggested growth would keep the same momentum this quarter as it had at the end of last year.
  • Australian dollar scales 8-month peak as unemployment rate falls (Reuters) Australia’s jobless rate took a surprising drop in February even as employment all but stalled, a mixed bag that left the outlook clouded but did seem to lessen the chance of a cut in interest rates in the near term. Thursday’s report from the Australian Bureau of Statistics showed unemployment fell to 5.8 percent in February, when analysts had expected it to stay at 6.0 percent.
  • Dollar at Five-Month Low as Commodities, Emerging Markets Jump (Bloomberg) The dollar sank to a five-month low, commodities gained with emerging markets, and government bonds advanced as central banks from the U.S. to Norway indicated a willingness to keep monetary policy accommodative. Developed-market stocks sank on concern that the stimulus is failing to boost growth and corporate earnings.
  • Canadian dollar hits 77¢ with ‘good reasons to rise and shine today’ (GlobeandMail) The Canadian dollar cracked the 77-cent mark today, carrying on the dramatic run from the Fed-induced weakness of the U.S. currency yesterday. The loonie is now up by about 9 cents from its January depths, at a five-month high, having been driven up over the past several weeks by more stable oil prices and the outlook for monetary policy in Canada and the United States.
  • Yellen steers Fed with cautious hand, despite hints of inflation (Reuters) Federal Reserve policymakers urging caution over interest rate hikes have gained the upper hand in the central bank’s internal debate, but the risk for the U.S. economy is that they are wrong to downplay a recent rise in inflation.


Overnight markets

  • Overview: US 10yr note futures are up 0.2789% at 129-7, S&P 500 futures are down -0.26% at 2012, Crude oil futures are up 1.43% at $39.01, Gold futures are up 2.99% at $1266.6, DXY is down -0.91% at 95.022.

US Economic Data 

  • Current Account Balance number came in at a level of $-125.3b better than expected by the analyst and down from prior month
  • Initial Jobless Claims number came in at a level of 265k as expected and up from prior week
  • Philadelphia Fed Business number came in at a level of 12.4 beating the analyst estimate by 13.9 points.
  • Leading Index will be released at 10:00 AM

Canadian Economic Data 

  • Wholesale Trade Sales MoM growth 0.0% missing the estimate by 0.3% and down 1.8% 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