cti2015header-morning comments web

Market update

US tsys opening slightly higher, flatter with longs out performing, US 10Y 1.777 (-0.5bps), avg volume in TY1 futs (280K). European equities higher led by banks. Crude 2.0% lower as Kuwaiti strike ends. Core Euro bonds higher, flatter led by UK gilts as UK jobless claims surprised to the upside, while German PPI came in below exp (-3.1% vs -2.9%). Germany sold  E3.2bln 10Y bonds at 0.15%. GOCs opening higher led by 10Y before BOC auctions CAD$3bln in reopened June 2026 bonds to bring the outstanding to $10.5bln. The 10Y auction size is 500mln larger than last yr and is expected to remain so going forward as part of the DMS. 10Y yields at 1.32% are ~6bps higher vs the last 10Y auction on Jan 11th, while the 10Y fly is ~2.5stds cheap vs 5s30s.  The 26/25 roll @ 9.8 looks fair compared to the 10Y roll, both have flattened over the last two months. Provis opening tighter – Ontarios well bid this week closing 3bps tighter yest on no domestic supply & higher cda yields – thou screens are getting hit this morning Ont 26s @ 89, Ont 46s @ 100.5.

News headlines

  • Stock Rally Sputters as Oil Falls, China Shares Sink; Bonds Gain (Bloomberg) The global stocks rally stumbled as Chinese equities dropped by the most since February and oil sank toward $40 a barrel, while demand for haven assets lifted sovereign bonds. The Stoxx Europe 600 Index failed to extend a three-month high and the Shanghai Composite Index fell more than 2 percent as the People’s Bank of China signaled a reduced appetite for monetary easing. Crude oil also weighed on equities after Kuwait workers said they would end a strike and Japanese government bond yields fell to records. BHP Billiton Ltd. and Rio Tinto Group paced miners higher after BHP cut its iron ore production forecast for its Australian operations, spurring gains in the material’s price.
  • Oil falls on end to Kuwaiti strike, supply outlook (Reuters) Oil prices fell on Wednesday as investor focus returned to worries about oversupply after Kuwaiti workers ended a three-day strike that had halved the nation’s crude output. Industry data showed U.S. crude stockpiles rose last week, reinforcing concerns about the global surplus. Brent futures LCOc1 were down 77 cents at $43.26 a barrel at 1046 GMT (5:46 a.m. ET).
  • China’s Stocks Tumble Most in Seven Weeks to Break Trading Calm (Bloomberg) China’s stocks sank the most in almost two months, pushing a gauge of volatility up from its lowest level this year as turnover surged. The Shanghai Composite Index dropped as much as 4.5 percent, the biggest loss since Feb. 29, before paring declines to 2.3 percent at the close. Industrial and technology companies led losses, while 13 stocks fell for each that rose. The Hang Seng China Enterprises Index retreated from a three-month high in Hong Kong.
  • Argentina Bond Sale Just Too Good to Pass Up, Defaults Be Damned (Bloomberg) The most surprising thing about Argentina’s record bond sale isn’t that it issued $16.5 billion of debt while still in default. It’s that the country could have sold even more. The bonds rallied in early trading, signaling strong investor demand and a turnaround in sentiment after Argentina’s $95 billion default in 2001 set off more than a decade of litigation and isolation from global capital markets. Finance Minister Alfonso Prat-Gay couldn’t help gloating a bit, telling reporters that with orders from more than 600 investors he could have easily issued double the amount.
  • Bank of Canada’s Stephen Poloz says economic ‘adjustment’ still work in progress (Financial Post) For the governor of the Bank of Canada, the collapse of the global energy market and its impact on growth provides a cautionary tale that has yet to end. “The global economy retains the capacity to disappoint further,” Stephen Poloz warned Tuesday, less than a week after the central bank decided to maintain its key lending rate at a near-historic low. “The complex adjustment to lower terms of trade will restrain Canada’s growth over much of our forecast horizon.”
  • EU charges Google with abusing market dominance of Android (Reuters) The European Union charged Google on Wednesday with abusing the dominant position of its Android mobile operating system, opening a second front against the U.S. technology giant that could lead to large fines. European Union antitrust regulators said that by requiring mobile phone manufacturers to pre-install Google Search and the Google Chrome browser, the U.S. company was denying consumers a wider choice of mobile apps and stifling innovation.
  • Brexit Vote a `Risky Bet,’ U.S. Ex-Treasury Secretaries Say (Bloomberg) Leaving the European Union would be a “risky bet” for the U.K. and the country should not “turn inward,” according to eight former U.S. Treasury secretaries going back to the era of President Richard Nixon. The intervention in a letter to the Times newspaper in London published Wednesday came two days before U.S. President Barack Obama is set to add his voice to those warning Britons of the danger of backing a so-called Brexit. Prime Minister David Cameron is hoping that the swell of voices from overseas will sway undecided voters before the June 23 referendum.
  • Mitsubishi Motors says it manipulated fuel economy tests, shares tumble (Reuters) Mitsubishi Motors Corp (7211.T) said it falsified fuel economy test data to make emissions levels look more favorable, and its shares slumped more than 15 percent, wiping $1.2 billion from its market value on Wednesday. Tetsuro Aikawa, president of Japan’s sixth-largest automaker by market value, bowed in apology at a news conference in Tokyo for what is the biggest scandal at Mitsubishi Motors since a defect cover-up over a decade ago.

Overnight markets

  • Overview: US 10yr note futures are down -0.024% at 130-11, S&P 500 futures are up 0.12% at 2096.25, Crude oil futures are down -2.22% at $40.17, Gold futures are down -0.18% at $1252.1, DXY is up 0.06% at 94.028.

US Economic Data 

  • 8:30 AM: Wholesale Trade Sales, m/m, February, -2,2%, est. -0.4% (prior 0.0%, revised 0.2%)
  • 10:00 AM:   Existing Home Sales, March, est. 5.28m (prior 5.08m)
    •  Existing Home Sales m/m, March, est. 3.9% (prior -7.1%)

 Canadian Economic Data 

  • There is no major economic data 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