Tsys opening slightly higher, giving up most of the early gains from the Tokyo session, US 10Y 1.89 (-1bp). Core Euro bonds higher, flatter yey fading as crude (40.88 +1.6%), Euro stocks rise (40.88 +1.6%). The USD index recovering somewhat (0.25%) after a fed induced 2.0% slide over the last two days. EUR lower on comments from ECB Praet that the ECB could continue to cut the deposit rate if necessary. Strong buying of tsys from Asian comm banks and yen funded buying of two year notes in 2s & longs according to MNI. Ten year JGBs surged after the BOJ’s ‘rinban’ (security purchase) operation, with the 10Y yield ~8bps lower at -0.1% or below the official BOJ deposit rate. Yields on JGBs have tumbled since Jan29th negative rate announcement and the 2s30s curve has flattened 40bps to the narrowest in at least 13yrs. Light calendar today with only Michigan Sentiment but several Fed speakers including NY Fed Pres Dudley at 9:00am. Another heavy week of corporate issuance in the US with ~$30bln priced, yet spds continue to grind tighter – 40 bps since Feb 20th high of 221 based on BB US IG index. GOCs lower after Jan retail sales rose 2.1% vs 0.6% exp, rebounding from Dec 2.1% decline (rev from -2.2%). Ex-autos particularly strong 1.2% vs 0.4%. CPI lower than exp 0.2% vs 0.4% exp. Quebec budget yest confirmed balanced budget for this FY and for the next 5 yrs, borrowings will drop to $14bln this FY from $15.5bln net of prefinancings.
- Japan 10-Year Yield Drops to Record, Below Negative Deposit Rate (Bloomberg) Investors at home and abroad can’t get enough 10-year Japanese government bonds, driving the yield to an unprecedented minus 0.135 percent. Yields sank across the curve Friday after the Bank of Japan’s operation to buy long-term debt met the lowest investor participation on record, spurring what Bank of America Merrill Lynch strategist Shuichi Ohsaki called “panic buying.” The yield on the benchmark 2026 notes sank as much as 8 1/2 basis points Friday to below the minus 0.1 percent deposit rate introduced by the central bank last month, while that on 20-year securities tumbled more than 10 basis points to an unprecedented 0.29 percent.
- Oil hits 2016 high above $42 on production and demand outlook (Reuters) Oil rose above $42 a barrel on Friday, hitting its highest this year and extending a rally into a fourth week on expectations of a production freeze by major exporters, stronger seasonal demand and dollar weakness. Brent crude’s front-month contract LCOc1 was up 59 cents at $42.13 a barrel by 1113 GMT, having touched a 2016 high of $42.31. U.S. crude CLc1 gained 64 cents to $40.84 a barrel after rising as high as $40.93. The benchmark had jumped by 4.5 percent to close the previous session at $40.20.
- Merkel Dodges Draghi Call for Clarity With Bank Union Swerve (Bloomberg) European Central Bank President Mario Draghi pushed European Union leaders for clarity on the future of the euro on Thursday. But Germany still chose to skirt a critical area of disagreement with its partners. During a closed-door session in Brussels, Draghi told EU leaders that the most important thing they could do would be to set out a clear path forward for the monetary union, according to two officials familiar with deliberations.
- Dow’s Freakish Bounce Makes Investors Whole, Can’t Erase Doubts (Bloomberg) Just as fast as U.S. stocks tumbled in what was the worst-ever start to a year, they have staged one of the biggest turnarounds in history — and yet all anyone seems to focus on are the negatives. An advance of 0.9 percent in the 119-year-old Dow Jones Industrial Average Thursday wiped out a year-to-date decline that swelled to as much as 10 percent in February, making investors whole 11 weeks into a year that was shaping up to be a disaster. It’s the fastest that a retreat of 10 percent or more has ever been reversed this early in a year, data compiled by Bloomberg show.
- Justin Trudeau’s Message to Wall Street: I Am Not My Father (Bloomberg) Canada Prime Minister Justin Trudeau sought to reassure Wall Street investors he’ll remain cautious on spending as he prepares to push the nation deeper into deficit, distancing himself from another deficit-spending leader: his father Pierre. Trudeau says his new Liberal government isn’t looking to flood the economy with money now beyond what was promised in last year’s election campaign, saying he needs to be responsible and keep the budget gap under control.
- BofA Joins JPMorgan, Capital One in Expanding Share Buybacks (Bloomberg) Bank of America Corp. said its board approved the repurchase of as much as $800 million in shares, joining JPMorgan Chase & Co. and Capital One Financial Corp. this year in returning more capital to shareholders. Bank of America’s repurchases are in addition to the $4 billion announced a year ago, the Charlotte, North Carolina-based company said Friday in a regulatory filing. The latest buyback is to offset share dilution that would otherwise result from incentive-compensation awards, according to the filing.
- TransCanada Corp to overhaul its business in US$13B acquisition of Columbia Pipeline Group (FinancialPost) TransCanada Corp. proved rumours of its interest in Columbia Pipeline Group true on Thursday when it announced a US$13-billion deal to buy the Texas-based natural gas pipeline firm.
- Valeant Pharmaceuticals International Inc creditors prepare to slam company with tougher demands in face of possible default: sources (FinancialPost) Creditors of Valeant Pharmaceuticals International, which has been in violation of lender agreements since Wednesday, are beginning to demand new terms that could further pressure the drugmaker’s business model, according to three people familiar with the matter.
- More Hedge Funds Shuttered Than Opened During 2015 Turmoil (Bloomberg) Hedge-fund shutdowns outnumbered startups last year for the first time since 2009, according to data firm Hedge Fund Research, as the global industry contracted amid market volatility. In the last quarter, 305 funds closed compared with 257 a year earlier, taking the total for the year to 979. Startups totaled 968, the Chicago-based company said in a report on Thursday. In 2009, hedge-fund closures totaled 1,023 and 784 opened.
- The U.S. Is Exporting Its Oil Everywhere (Bloomberg) Three months since the U.S. lifted a 40-year ban on oil exports, American crude is flowing to virtually every corner of the market and reshaping the world’s energy map. Overseas sales, which started on Dec. 31 with a small cargo aboard the Theo T tanker, have been picking up speed. Oil companies including Exxon Mobil Corp and China Petroleum and Chemical Corp have joined independent traders such as Vitol Group and Trafigura Pte in exporting American crude.
- Overview: US 10yr note futures are up 0.1331% at 129-9, S&P 500 futures are up 0.31% at 2036.5, Crude oil futures are up 2.04% at $41.02, Gold futures are down -1.17% at $1250.2, DXY is up 0.16% at 94.916.
US Economic Data
- University of Michigan Sentiment will be released at 10:00 AM
Canadian Economic Data
- Retail Sales MoM growth was 2.1%, stronger than expected by the analysts and up from prior month
- Retail Sales Ex Auto MoM growth was 1.2%, better than the estimate and up from prior month
- CPI NSA MoM growth was 0.2%, weaker than expected by the analysts and at the same level than prior month
- CPI YoY growth was 1.9%, worse than the estimate and down form prior year
- CPI Core MoM growth was 0.5%, as expected by the analysts and up from prior month
- CPI Core YoY growth was 1.9%, weaker than the estimate and down form prior year
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