Market update
US tsys slightly lower in quiet overnite trade, volume on ten yr futs below avg (283k), US 10Y 1.82%, curve 1bp steeper. Crude up 2.7% at 31.50, Euro & Asia stocks higher, S&P futs up slightly. Core Euro bonds mixed, gilts underperforming bunds for 2nd day, bund curve 3bps flatter as Spain & France sold combined E11bln in short end issuance. Japan sold Y2.5trln in 5Y bonds at a negative yield for the time, -0.138%, bid/cover 3.57 lowest since Oct. GOCs slightly lower after another weak session yest led by cheapening in 5s by ~2bps on the curve post auction thou the 5Y roll is basically unch (8.5/8.3). Omers Realy Corp came in with a 8Y issue which was well oversubscribed @178 (~80 over ont). CMB 10Y this morn – guidance 71.5 but WI is 70 bid so likely 70.5 (we are sold out). Provis opening unch, solid tone, Q 26s yest @ 115 – 114/113 this morn.
News headlines
- OECD downgrades global growth, says world’s economy needs urgent fiscal response from governments (Financial Post) The global economy is growing at a stubbornly weak pace and governments should be deploying fiscal tools alongside monetary policy to stoke growth, the Organisation for Economic Co-operation and Development said in its latest outlook Thursday.
- Oil extends rally to $35 after Iran welcomes output freeze (Reuters) Oil rose to $35 a barrel on Thursday after Iran welcomed plans by Russia and Saudi Arabia to freeze output and an industry report showed a surprise drop in U.S. inventories.
- Brexit nerves knock FTSE as oil rally cools (Reuters) A four-day rally in world stocks cooled in Europe on Thursday, as oil prices steadied and nerves set in ahead of crunch talks between EU leaders aimed at keeping Britain in the 28-member bloc. Asian bourses had seen gains overnight including almost 3 percent for Tokyo’s Nikkei. But the mood faltered shortly after Europe.
- Iran sees oil freeze pact as not enough to help market: Iranian sources (Reuters) Iran believes a global agreement to freeze oil output will not be enough to help prop up prices as the world is producing too much crude, Iranian oil sources told Reuters. Iranian Oil Minister Bijan Zanganeh and his counterparts from Qatar, Iraq and Venezuela held talks in Tehran on Wednesday aimed at persuading Iran to join a global pact to restrain output, agreed this week by OPEC leader Saudi Arabia and non-OPEC member Russia, the world’s two largest oil exporters.
- ECB sees new growth risks, fears second-round effect of low oil price (Reuters) The euro zone’s modest economic recovery was progressing but risks are on the rise and there were also signs that low energy prices could feed into the price of other goods and services, the European Central Bank said on Thursday.
- China inflation quickens in January (FT) Chinese consumer prices rose in January, an encouraging sign for the world’s second largest economy in a month characterised by turbulence in its financial markets. The consumer price index rose by 1.8 per cent year-on-year in January, from 1.6 per cent in December 2015. However, CPI continues to trail Beijing’s target of “around 3 per cent“. Analysts survey by Bloomberg expected a rise to 1.9 per cent in January.
- Japan’s Exports Drop Most Since 2009 as Sales to China Fall (Bloomberg) Japan’s exports fell for a fourth consecutive month and dropped the most since 2009, underscoring continued weakness in an economy that contracted in the final months of 2015. Exports to China, Japan’s largest trading partner, were down almost 18 percent, driving an overall decline of nearly 13 percent in the value of overseas shipments in January from a year earlier. Imports dropped 18 percent, leaving a 645.9 billion yen ($5.7 billion) trade deficit, the Ministry of Finance said on Thursday.
- Bank Indonesia Cuts Rates as Emerging-Market Risk Appetite Perks Up (WSJ) Bank Indonesia on Thursday cut its main policy rates for the second time this year as it looks to support the economy and take advantage of improving emerging-market risk appetite. The central bank cut the benchmark BI rate by another quarter percentage point, to 7.0%, in a bid to help the government achieve its 5.3% economic growth target this year. The bank also cut the yields on its lending facility to 7.50% and on its deposit facility to 5.0%.
- Venezuela Boosts Gas Price, Devalues Bolivar as Economy Unravels (Bloomberg) Venezuela hiked gasoline prices for the first time in almost two decades and devalued its currency as President Nicolas Maduro attempts to address triple-digit inflation and the economy’s deepest recession in over a decade.
Overnight markets
- Overview: US 10yr note futures are down -0.024% at 130-13, S&P 500 futures are up 0.23% at 1927.25, Crude oil futures are up 2.84% at $31.53, Gold futures are down -0.46% at $1205.8, DXY is up 0.21% at 96.986.
US Economic Data
- Philadelphia Fed Business Outlook came in at a level of -2.8, better than expected and up from prior month
- Initial Jobless Claims number was released at of 262k, beating the estimate by 13k and down from the previous week
- Continuing Claims number came in at a level of 2273k, worse than expected and up from the previous week
- Leading Index will be release at 10:00 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