cti2015header-morning comments web

Market update

Tsys sharply lower led by the 10Y with the curve ~2bps steeper, US 10Y 1.67 (+6bps) as remain side seen gaining in latest Brexit polling, the GBP . Euro stocks ~3.0% higher, core Euro bonds lower led by 10Y gilts (+9bps) while EU peripheral spds tighter vs Germany. The latest CFTC COT report for June 14th showed large specs unwinding shorts in the front end in front of last week’s FOMC and this week’s Brexit vote. GOCs are opening lower, led by 10s which are ~4bps cheaper on the curve vs 2s & longs, spds 1-2bps wider vs tsys. Provis 2bps tighter in ‘risk on’ move, Ont 26 95/94, Ont 46 106/105.

News headlines

  • Stocks Surge With Pound as Brexit Chances Decline; Naira Weakens (Bloomberg) Global equities rallied and the pound strengthened the most since 2008 on signs the campaign for the U.K. to stay in the European Union was gaining momentum. The yen declined with U.S. Treasuries and gold as haven demand eased. The Stoxx Europe 600 Index headed for its biggest gain since August and emerging-market shares advanced for a second day. Sterling jumped after a poll showed the campaign for the U.K. to remain in the EU leading by three percentage points before the referendum on Thursday. Spanish and Italian bonds gained and credit risk fell the most since March.
  • Oil rallies as fears over Brexit abate (Reuters) Oil rallied on Monday, lifted by a wave of investor confidence and a weaker dollar after polls showed a diminishing chance that Britain may vote to leave the European Union later this week. August Brent crude futures were up 85 cents at $50.02 a barrel by 5.55 a.m. ET, set for a gain of 6 percent in two trading days. NYMEX crude for July delivery, which expires on Tuesday, was up 80 cents at $48.78 a barrel.
  • Sterling rallies as Brexit worries ebb, yen drops (Reuters) Sterling jumped nearly 2 percent against a trade-weighted basket of currencies on Monday after opinion polls swung in favor of the campaign for Britain to stay in the European Union, boosting risk sentiment and sending the safe-haven yen tumbling. The implied probability of a “Remain” vote in Thursday’s referendum rose to around 78 percent after falling as low as 60 percent last Thursday, according to odds from gambling website Betfair.
  • Japan’s exports drop for 8th month in a row in May (MarketWatch) Japanese exports fell for the eighth straight month in May, buffeted by the strong yen and slowing global growth. Merchandise exports decreased 11.3% from a year earlier to Y5.091 trillion ($49 billion) last month, after falling 10.1% in the previous month, according to data released Monday by the finance ministry. Economists surveyed by The Wall Street Journal had expected a 10.4% decrease. The data underlines how Prime Minister Shinzo Abe’s growth policy has lost momentum in the face of moderating global demand and the yen’s resurgence to its highest level in over a year and a half against the dollar. A stronger yen reduces the value of repatriated profits and undermines Japan’s export competitiveness.
  • German trade body lowers export forecast: ‘Brexit is poison’ (Reuters) German exports will grow less than expected this year due to external risks, including a British exit from the European Union and uncertainties ahead of elections in the United States and France, the head of the BGA trade association said on Monday. Britain votes on Thursday on whether to stay in the 28-member bloc, a choice with far-reaching consequences for politics, the economy, defence and diplomacy on the continent.
  • Factbox: Bank of England risks being caught in Brexit cross-currents (Reuters) The Bank of England could be pulled in very different directions if British voters take the historic step of leaving the European Union in Thursday’s referendum. The Bank, along with most private economists, has warned that a Brexit vote would deliver a shock to Britain’s economy. The BoE could attempt to soften the hit by cutting interest rates from their current record low of 0.5 percent.
  • Couche-Tard acquires assets of Premium 7 network in Estonia (GlobeAndMail) Alimentation Couche-Tard Inc. continues its growth trajectory in Europe with a deal to buy 23 convenience stores and fuel stations in Estonia. Laval, Que.-based Couche-Tard said on Monday it has struck an agreement to acquire the majority of the assets operated under the Premium 7 brand from Sevenoil Est OU and its affiliates. The purchase price was not disclosed. The agreement follows on other European acquisitions, including a deal late last year to buy the Topaz chain in Ireland and a deal prior to that to buy Royal Dutch Shell PLC’s retail and other businesses in Denmark.


 Overnight markets                                                                   

  • Overview: US 10yr note futures are down -0.237% at 131-18, S&P 500 futures are up 1.29% at 2085.5, Crude oil futures are up 2.21% at $49.04, Gold futures are down -0.67% at $1286.1, DXY is down -0.66% at 93.58.

US Economic Data

  • There is no major economic data for today

Canadian Economic Data 

  • 8:30 AM:  Whole Trade Sales, m/m, April,  0.1% est. 0.5% (prior -1.0% revised at -0.8%)


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