cti2015header-morning comments web

Market update

Tsys opening lower, curve steeper, US 10Y 1.60% (+1.5bps) on heavy volume in TY1 futures (412k). Core Euro bonds lower, with the long end underperforming, the bund 5s30s curve 5bps steeper after reaching one year lows yest below 100bps. EU peripheral spreads tighter, European equities higher, crude on the rebound, above $47.00 (47.24). GOCs lower, short end reacting to lower May CPI – 0.4% vs 0.6% exp (1.5% vs 1.7%) with the core 2.1% unch. Provi spds better bid , Ont 46s 108/107, Ont 26 97/96. Yest saw $2.5bln in provi issuance fairly easily absorbed: (i) $600mln new Ontario 2048 at -0.5bps vs Ont 46s – opening at -0.7bps and (ii) Alberta $1.9bln in new 5Y benchmark – 1.35% Sep 21 @ 77, opening 76/75. So far this month weve seen $4.35bln in provi issuance against ~12bln in maturities/cpn pmts , yet domestic issuance in May came in at $5.8bln after a slow April ($1.9bln).

News headline

  • Stocks Climb With Pound as Brexit Campaign Suspended; Oil Gains (Bloomberg) Global stocks rebounded from a four-week low and commodities advanced with the pound as campaigning in Britain’s referendum on European Union membership was suspended for a second day. German bonds fell as demand for haven assets cooled. All 10 industry groups in the MSCI All-Country World Index advanced, while South Africa’s rand and Russia’s ruble led gains in emerging-market currencies. U.S. crude snapped a six-day losing streak and industrial metals rallied. Sterling rebounded from a two-month low as an opinion poll on voter intentions in next week’s referendum was delayed. Ten-year bonds in Japan and the U.K. declined for the first time in more than a week.
  • Sell-off abates as Brexit supporters suspend campaign (Reuters) Shares, oil and bond yields rose on Friday after a tumultuous week and as campaigning for Britain’s EU membership vote next week was suspended after the killing of a pro-« Remain » politician. European bourses rebounded 1.5 percent after a third straight week of falls and bond markets saw benchmark 10-year German bond yields claw back up to the zero mark as risk appetite slowly began to return.
  • Crude oil prices rise for first time in seven days (Reuters) Crude oil prices rose on Friday for the first time in seven days, but trading remains volatile less than a week before Britain goes to the polls over the country’s EU membership. Brent crude futures were up 69 cents at $47.88 a barrel at 0903 GMT after slumping 3.6 percent in the previous session. U.S. West Texas Intermediate crude futures rose 46 cents to $46.67 a barrel. The contract fell 3.8 percent in the previous session.
  • Sterling, euro recover as chance of Brexit seen falling (Reuters) Sterling rose half a percent in early London trading on Friday and the euro added to gains in the past 24 hours on expectations that the killing of a pro-EU British lawmaker may alter the balance of opinion in Britain’s referendum on EU membership. Speculation was rife among traders after the murder of Jo Cox on Thursday that Prime Minister David Cameron might push back the vote due to take place on June 23.
  • Louis Fed’s Bullard says U.S. may only need single rate hike for now (Reuters) The U.S. economy, stuck in a slow-growth pattern that is likely to persist for the forseeable future, may need no more than a single additional rate hike for as long as 2.5 years, St. Louis Fed President James Bullard said on Wednesday. Bullard, a former inflation hawk whose views of the economy have been shifting, said he now sees current growth, unemployment and inflation rates as so persistent, there is basically no reason to change the Federal Funds policy rate, currently set in a range of between .25 and .50 percentage points.
  • Pipelines are all about ‘trade-offs,’ Trudeau says: ‘You don’t ever hope for total 100% unanimity’ (FinancialPost) Prime Minister Justin Trudeau acknowledged Thursday he won’t be able to please all Canadians on the oilsands pipeline issue that has pitted Alberta’s desperate need for an economic boost with intense concerns in B.C. and Quebec. Trudeau, in an exclusive interview, also refused to say whether his 2015 election commitments would hand vetoes to local communities and First Nations who vehemently oppose oilsands pipelines in their midst.
  • Bank of Canada can’t do anything to stop housing ‘inferno,’ warns BMO economist (FinancialPost) Scorching prices in Canada’s top housing markets are unlikely to see declines because the major drivers are beyond the reach of traditional monetary policy, according to Bank of Montreal’s top economists. “Monetary policy can’t do anything about the inferno,” according to the draft of a report led by Douglas Porter, the bank’s chief economist . “None of the major drivers of Vancouver and Toronto’s housing market are pointing downward.”

 Overnight markets 

  • Overview: US 10yr note futures are down -0.1063% at 132-5, S&P 500 futures are down -0.19% at 2066.5, Crude oil futures are up 2.14% at $47.2, Gold futures are down -0.59% at $1290.7, DXY is down -0.16% at 94.422.

 US Economic Data

  • 8:30 AM: Housing Starts, May, 1164k, est. 1150k (prior 1172k, revised 1167k)
    Housing Starts, m/m, May, -0.3%, est. -1.9% (prior 6.6%, 4.9%)
    Building Permits, May, 1138k, est. 1145k (prior 1116k, revised 1130k)
    Building Permits, m/m, May, 0.7%, est. 1.3% (prior 3.6%, 4.9%)

Canadian Economic Data 

  • 8:30 AM: CPI NSA, m/m, May, 0.4%, est. 0.5% (prior 0.3%)
    CPI, y/y, May, 1.5%, est. 1.6% (prior 1.7%)
    CPI Core, m/m, 0.3%, est. 0.3% (prior 0.2%)
    CPI Core, y/y, 2.1%, est. 2.1% (prior 2.2%)

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