cti2015header-morning comments web

Market update

US tsys moving higher despite better than exp CPI (0.4% vs 0.3% largest monthly advance since 2013) & housing starts, US 10Y 1.75%.  Core Euro bonds lower on higher stocks and crude – the latter traded near seven month highs on Nigeria/Cdn supply interruptions and a forecast decline in inventories (exp 3.5mln bbls) last week. UK gilts lower despite weak inflation data. The latest Brexit poll showed more in favor of remaining in the Euro than leaving, with the GBP advancing for a second day on the news. The latest JPM Treasury Client Survey showed the most net longs among both all clients & actives since April 4th. This comes a day after a CFTC COT report showing large specs reducing shorts/ adding to longs across the curve. GOCs bouncing higher with tsys after 8:30 data, provis unch. CMB launch today for pricing tomorrow – 5Y FRN (new Sep 21) & 10Y fixed. The BOC auctions $1.75 bln in reopened Dec 48s tomorrow with the roll having steepened to ~2.2 bps over the last several weeks – which looks ~3stds cheap on a 60day basis, even considering the ~10bp steepening in 10s30s over the period. For those reasons we expect the auction to go well, keeping in mind the larger size (1.75bln vs 1.4bln Nov 25th).

News headlines

  • Global stocks rally as Buffett bites into Apple, oil eyes $50 (Reuters) World shares rose on Tuesday as technology giant Apple Inc’s biggest rise in over two months and oil’s march higher to near $50 a barrel boosted investor demand for riskier assets at the expense of safe-haven bonds. MSCI’s index of global shares rose 0.2 percent .MIWD00000PUS, putting it on track for its second consecutive rise, something it has not managed in a month.
  • Oil near six-month high as outages support (Reuters) Oil traded at around $49 a barrel on Tuesday within sight of a six-month high, supported by supply outages in Nigeria, Canada and other producers that are eroding a persistent glut. Prices eased from the highs after Libyan factions agreed in principle to have one oil organization, potentially bringing higher output a step closer. Also, traders were eyeing the restart soon of some of the shut Nigerian output.
  • K. Inflation Unexpectedly Slows to 0.3%; Core Rate Drops (Bloomberg) U.K. inflation unexpectedly slowed in April, highlighting the struggle Bank of England policy makers face to revive price growth. The rate fell to 0.3 percent from 0.5 percent in March, driven lower by the cost of air fares and clothes, the Office for National Statistics said in London on Tuesday. Inflation hasn’t been lower since last year and the April reading was less than the 0.5 percent forecast by economists in a Bloomberg survey.
  • As Brexit vote looms, U.S. banks review their European commitments (Reuters) If Britain votes to leave the European Union in June, some U.S. banks could give up parts of their business in the bloc altogether. The option is an extreme scenario under consideration by some Wall Street firms if the terms of an exit, currently a matter of speculation, leave financial services companies in Britain unable under their current set-ups to do business inside the EU, according to discussions Reuters had with several U.S. banks and their lawyers.
  • BlackRock’s Fink Expresses Concern About China’s Rising Debt (Bloomberg) BlackRock Inc.’s Laurence D. Fink, who oversees the world’s largest money manager with $4.7 trillion of client assets, said “we all have to be worried” about China’s mounting debt amid slowing growth, even as he remains bullish on the economy in the long run. “You can’t grow at 6 percent and have your balance sheets grow faster,” Fink said in a Bloomberg Television interview with Angie Lau on the sidelines of a forum in Hong Kong on Tuesday. “In the future, I would prefer seeing the economy growing 6 percent with some form of deleveraging,” he said.
  • China able to keep economic growth within reasonable range: premier (Reuters) China will be able to keep its economic growth within a reasonable range, even as it faces difficulties and challenges, Premier Li Keqiang said on Tuesday. China’s overall debt levels remained under control and the government will be able to ward off systemic financial risks, Li said in a comment posted on the central government’s website.
  • A chart guaranteed to chill the Bank of Canada (GlobeAndMail)  Emanuella Enenajor has built a chart that’s guaranteed to keep the Bank of Canada “up at night.” It’s this graphic below, which shows capital spending and production in the manufacturing sector, Canada’s great hope given what should be a boost from the weak loonie. It’s also hoped that a pickup in manufacturing could help offset the dramatic impact of the oil slump.


Overnight markets 

  • Overview: US 10yr note futures are down -0.0718% at 130-14, S&P 500 futures are down -0.22% at 2058.25, Crude oil futures are up 0.31% at $47.87, Gold futures are up 0.06% at $1275, DXY is up 0.05% at 94.621.

US Economic Data 

  • 8:30 AM: Housing Starts, April, 1172k, est. 1125k (prior 1089k, revised 1099k)
    • Housing Starts, m/m, April,  6.6%, est. 3.3% (prior -8.8%, revised -9.4%)
    • Building Permits, April,  1116k, est. 1135k (prior 1086k, revised 1077k)
    • Building Permits, m/m, April, 3.6%, est. 5.5% (prior -7.7%, revised -7.7%)
    • Consumer Price Index, m/m, April, 0.4%, est. 0.3% (prior 0.1%)
    • CPI Ex food and Energy, m/m, April,  0.2%, est. 0.2% (prior 0.1%)
    • CPI, y/y, April, 1.1%, est. 1.1% (prior 0.9%)
    • CPI Ex Food and Energy, y/y, April, 2.1%, est. 2.1% (prior 2.2%)
  • 9:15 AM: Industrial Production, m/m, April, est. 0.3% (prior -0.6%)
    • Capacity Utilization, April, est. 75% (prior 74.8%)

 Canadian Economic Data 

  • 8:30 AM: Manufacturing Sales, m/m, March, -0.9%, est. -1.9% (prior -3.3%, revised -4.0%)


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