Market Update Tsys trading weaker, led by the front end as the mkt prepares to digest $151bln in bills and $28bln in 2Y notes being auctioned this aft, 10Y 2.902 (+2.bps), 2Y 2.22% new high & the WI 2Y 2.255% the highest since 2008, 20bps above last month’s auction level. Tsy auctions conclude with $35bln 5Y tomorrow and $29bln 7Y Thursday. Bloomberg Barclays estimates only 0.12yr duration extension March 1st in line with average for past decade. Equities higher in Europe yet S&P futures sharply lower ( -18.25), Walmart down 6.55 pre-mkt. Q4 eps missed ($1.33 vs $1.37) while guidance for this yr $4.75-$5.00 vs $5.13 est. Crude higher for a 4th day, 62.35 – comments from OPEC that the supply glut is declining at a faster pace. GOCs trading weaker, outperforming tsys 1-3bps – spreads across the curve at new eight month lows.
News headlines
Dollar Rises With Treasury Yields; Stocks Struggle: Markets Wrap (Bloomberg) Treasuries fell, with investors driving the benchmark yield up to the highest level in four years, as the dollar advanced with oil futures in New York. European shares pared earlier gains and U.S. futures dropped. Debt investors appeared to be trading with caution as Treasury markets reopened after the Presidents’ Day break. Declines in auto and banking shares depressed the Stoxx Europe 600 index, after a pullback in equities emerged in Asia after several days of increases, with more than 1 percent declines for benchmarks in Japan and South Korea. The VIX index of S&P 500 volatility increased for a second day. The yen weakened, and the yield on 10-year Treasuries eased after rising as high as 2.93 percent.
Goldman Sees U.S. Interest-Cost Surge on Yield, Deficit Rise (Bloomberg) An historic expansion in U.S. borrowing during a period of economic growth, alongside rising bond yields, will cause a surge in the cost of servicing American debt, according to Goldman Sachs Group Inc. “Federal fiscal policy is entering uncharted territory,” Goldman analysts including Alec Phillips in Washington wrote in a Feb. 18 note to clients. “In the past, as the economy strengthens and the debt burden increases, Congress has responded by raising taxes and cutting spending. This time around, the opposite has occurred.”
Latvian Central Banker Fires Back in Deepening Corruption Scandal (Bloomberg) The embattled head of Latvia’s central bank denied seeking bribes and accused two of the country’s lenders of conspiring against him as the crisis engulfing the Baltic nation’s banking system deepened. “I have taken the decision not to resign,” Ilmars Rimsevics, the Bank of Latvia’s governor and representative to the European Central Bank, told reporters at a press conference in Riga on Tuesday. “I am not guilty.”
HSBC Falls as Earnings Miss in Last Results Under Gulliver (Bloomberg) Stuart Gulliver’s final set of results at HSBC Holdings Plc weren’t quite the swansong he’d hoped for as he hands the reins over to his long-term lieutenant, John Flint. Europe’s largest bank missed estimates for fourth-quarter revenue and profit as it became the latest firm to take losses from two high-profile corporate failures and post a sharp decline in trading income at its investment bank. HSBC also said share buybacks were on hold, possibly through the first half, while it sells capital-boosting securities.
Walmart shakes off bread scandal as Canadian sales rally in Q4 (BNN) Walmart is emerging from an alleged industry-wide bread price-fixing scandal no worse for wear, with a crucial fourth-quarter sales metric rallying the most in almost two years. The Bentonville, Arkansas-based retailer said on Tuesday its total sales in this country rose 3.4 per cent in the three months ending January 31. Meanwhile, sales at stores that were open for more than a year rose 2.9 per cent, the strongest quarterly rally since the period ending April 29, 2016.
Canada province readies housing plan amid affordability crisis (Reuters) The British Columbia government will unveil its long-awaited housing strategy on Tuesday, taking aim at skyrocketing real estate prices and soaring rents that have crippled affordability in the West Coast Canadian province, particularly in Vancouver.
TSX futures weighed down by higher bond yields (Reuters) U.S. Treasury 10-year yields US1OYT=RR, the benchmark for global borrowing costs, hit four-year highs of 2.9042 percent in early trade on Tuesday. March futures on the S&P TSX index SXFc1 were down 0.44 percent at 7:15 a.m. ET. Wholesale trade date is expected at 8:30 a.m. ET. Canada’s main stock index rose on Friday as a boost from the heavyweight energy sector helped the market rack up its best weekly performance in nearly two years.
Overnight markets
Overview: US 10yr note futures are down -0.207% at 120-11, S&P 500 futures are down -0.66% at 2717, Crude oil futures are up 0.54% at $62.01, Gold futures are down -1.09% at $1341.4, DXY is up 0.6% at 89.632, CAD/USD is up 0.34% at 0.7934.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.833% | 2 Year | 2.219% |
| 5 Year | 2.129% | 5 Year | 2.663% |
| 10 Year | 2.331% | 10 Year | 2.902% |
| 30 Year | 2.48% | 30 Year | 3.151% |
US Economic Data
There is no US Economic data for today.
Canadian Economic Data
| 8:30 AM | Wholesale Trade Sales MoM, Dec -0.5% est 0.4% (0.7% prior) |
| 10:00 AM | Bloomberg Nanos Confidence, Feb 16th (58.6 prior) |
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, Hugues Savard
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230