Market Update Tsys trading mixed, short end yields higher, yields slightly lower out the curve, 10Y 2.88% (-0.5bps), moderate volume in TY futures (350k), ongoing March/June roll impacting figure, narrow 3 tick range. Equities lower in Europe, Focus today on Jan FOMC minutes, $15bln 2Y FRN and $35bln 5Y note auction. Core EGBs higher, curves flatter. French and German PMIs weaker than exp- 10Y bund yield 0.706% (-2.3bps). USD index higher for third day, euro at a one-week low 1.2315. GOCs higher, outperforming tsys by 0.5- 1bps. Provis unch, QC 5Y green bond expected to be launched shortly, Newf issued a 5Y FRN @ CDOR +14.5bps which was well received.
News headlines
The U.S. 10-Year Looks Poised to Cross a Red Line This Week (Bloomberg) Enter the danger zone. Bond markets are signaling the 10-year U.S. Treasury yield may reach 3 percent as early as this week — a potential watershed for risk appetite across asset classes. A deluge of debt supply and the strengthening momentum of bears feeding off inflation fears could help send benchmark yields higher. The 10-year yield currently sits at about 2.9 percent, with the U.S Treasury poised to kick off a big week of issuance by auctioning $151 billion of short-term notes and $28 billion of two-year debt later on Tuesday.
Fed Minutes May Give Clues to 2018 Interest Rate Word Puzzle (Bloomberg) Federal Reserve officials added the word “further” twice to their January statement. On Wednesday, investors may find out why. At Chair Janet Yellen’s last meeting Jan. 30-31, the central bank pledged twice to make “further gradual adjustments” in interest rates as opposed to just “gradual adjustments” at the prior gathering. While the language was consistent with adding more emphasis to the plan for rate hikes, the minutes of the closed-door meeting, due Wednesday, will probably give details on what message officials wanted to send with the wording tweak.
U.K. Wages Pick Up as Fewer Eastern EU Workers Fill Jobs (Bloomberg) U.K. pay is picking up after employment among citizens of the eastern countries that joined the European Union more than a decade ago fell for the first time since 2009. Average weekly earnings excluding bonuses rose 2.5 percent in the fourth quarter from a year earlier, the most since December 2016, the Office for National Statistics said on Wednesday. The overall employment rate rose to 75.2 percent, close to a record, though unemployment increased to 4.4 percent as fewer workers were economically inactive.
Mueller Gets Plea, No Cooperation, as Skadden Lawyer Admits Lies (Bloomberg) U.S. Special Counsel Robert Mueller on Tuesday extracted another guilty plea as prosecutors bear down on former Trump campaign chairman Paul Manafort and his deputy, Rick Gates. Alex van der Zwaan, a former associate at Skadden, Arps, Slate, Meagher & Flom, admitted in court in Washington that he misled investigators about the last time he talked with Gates, who was indicted in October with Manafort over their consulting work in Ukraine. Gates is reportedly considering cooperating with Mueller.
Dollar Extends Gain; Europe Bonds Rise, Stocks Dip: Markets Wrap (Bloomberg) The dollar extended its rally and benchmark Treasuries were flat before another round of U.S. debt sales and the release of minutes from the latest Fed meeting. European bonds advanced and stocks dropped after some worse-than-expected data dented the region’s growth story.
Maple Leaf fourth-quarter profit falls (Reuters) Canadian meat packaging company Maple Leaf Foods Inc’s quarterly profit fell 22.4 percent as costs rose. Net earnings fell to C$59.1 million, or 45 Canadian cents per share, in the fourth quarter ended Dec.31, from C$76.2 million, or 56 Canadian cents per share, a year earlier.Total sales rose to C$876.8 million from C$828.2 million.
TSX stock futures point to higher open (Reuters) Stock futures for Canada’s main stock index were slightly higher on Wednesday as investors waited for minutes from the U.S. Fed’s last policy meeting in January. March futures on the S&P TSX index SXFc1 were up 0.11 percent at 7:15 a.m. ET. Canada’s main stock index closed lower on Tuesday, following a mixed session, with weakness among gold mining stocks offsetting gains for the energy group.
B.C. hikes foreign buyers’ tax in effort to cool hot housing markets (BNN) British Columbia moved to ease the province’s housing crisis Tuesday with a budget that introduces a new tax on property speculators, higher taxes on foreign homebuyers and plans to create 114,000 affordable housing units over the next decade. Finance Minister Carole James said the tax measures are part of the government’s aim to improve housing affordability in markets where some seniors are forced to live in their vehicles and young professionals are refusing to take jobs in B.C. because they can’t find a place to live.
Overnight markets
Overview: US 10yr note futures are up 0.065% at 120-18, S&P 500 futures are up 0.06% at 2715.75, Crude oil futures are down -0.5% at $61.48, Gold futures are down -0.04% at $1330.7, DXY is up 0.25% at 89.943, CAD/USD is up 0.22% at 0.789.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.818% | 2 Year | 2.258% |
| 5 Year | 2.11% | 5 Year | 2.643% |
| 10 Year | 2.309% | 10 Year | 2.882% |
| 30 Year | 2.452% | 30 Year | 3.155% |
US Economic Data
| 7:00 AM | MBA Mortgage Applications, Feb 16th -6.6% (-4.1% prior) |
| 9:45 AM | Markit US Manufacturing PMI, Feb est 55.5 (55.5 prior) |
| Markit US Services PMI, Feb est 53.7 (53.3 prior) | |
| Markit US composite PMI, Feb (53.8 prior) | |
| 10:00 AM | Existing Home Sales, Jan est 5.60m (5.57m prior) |
| Existing Home Sales MoM, Jan est 0.5% (-3.6% prior) | |
| 14:00 PM | FOMC Meeting Minutes, Jan 31st |
Canadian Economic Data
There is no Canadian 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, Hugues Savard
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230