Market update
Tsys opening lower in quiet trading due to Japanese market holiday, US 10Y 1.89 (+1bp). Tsys pressured by higher Euro stocks even as crude is ~1.0% lower at $39.00. Latest CFTC COT report showed specs adding to shorts in the ultralong (new record short), slightly reducing longs in the 10Y and adding to longs in the 30Y bond. Core Euro bonds higher, bunds higher led by the 5Y. Dovish comments from a couple of ECB members Villeroy & Coeure led to a rally in bunds with Coeure nothing the ECb has other tools at its disposal to fight low inflation. GOCs are trading lower, spds ~1bp tighter vs tsys – last week GOCs cheapened 5-7 bps vs tsys in the wake of a surprisingly dovish FOMC. Provi spds unch, Ont 46 106/105, Ont 25s 93/92 – the 10/30 box has steepened 4bps since the peak in spds late Feb as 10s have led the charge. Munis have lagged the rally in provis to a great extent, York 25s still ~30 bps over Onts hasn’t budged in two months.
News headlines
- Global Market Volatility Falls to Two-Month Low; Oil Pares Drop (Bloomberg) Volatility across global financial markets is at a two-month low as signs central banks will continue to support asset prices settles investor nerves that frayed at the start of the year. Stocks and bond markets were little changed on Monday after a measure of global stocks posted the strongest close since Jan. 1 last week following five weeks of gains. The Shanghai Composite Index topped 3,000 for the first time in two months amid plans to loosen margin-lending curbs, South Africa’s rand fell on political turmoil and gains in Indian bonds sent yields to the lowest since 2013 on a government decision to cut rates on small savings plans.
- S&P 500 Futures Little Changed After Equities Erase 2016 Losses (Bloomberg) U.S. stock-index futures were little changed as investors assessed a rally that turned equities positive for the year. Standard & Poor’s 500 Index contracts expiring in June added less than 0.1 percent to 2,038.5 at 7:11 a.m. in New York. A slower pace of rate increases signaled by the Federal Reserve helped the benchmark climb for a fifth week, its longest winning streak since November. Dow Jones Industrial Average futures gained 12 points to 17,504.
- Oil prices stabilize after falling on higher U.S. rig count (Reuters) Oil prices recovered from early losses on Monday as the market digested news of a modest rise in U.S. drilling activity, though uncertainty lingered over the outcome of a meeting of the world’s major exporters next month to discuss freezing output. U.S. energy firms last week added one oil rig after 12 weeks of cuts, according to data from industry firm Baker Hughes. Oil rigs have fallen by two-thirds over the past year to their lowest since 2009, and this surprise addition suggested the drop-off in crude drilling may be stabilizing after the oil price’s 50-percent rally since February.
- Fed’s Lacker Confident Inflation Poised to Rebound to 2% Target (Bloomberg) Federal Reserve Bank of Richmond President Jeffrey Lacker said that inflation will rise back to the U.S. central bank’s 2 percent target once energy prices stabilize and the dollar stops advancing. “I am reasonably confident that, barring subsequent shocks, inflation will move back to the FOMC’s 2 percent objective over the medium term,” Lacker said in remarks prepared for a speech at the Banque de France in Paris Monday, referring to the policy-setting Federal Open Market Committee.
- China says it will fend off financial risks, communicate better with markets (Reuters) China has many policy tools at its disposal to fend off financial risks and will improve its communication with markets, Premier Li Keqiang said on Monday. Li told the visiting International Monetary Fund Managing Director Christine Lagarde that China will not rely on yuan depreciation to spur exports.
- Sterling hit by British political row, yen inches higher (Reuters) Sterling was the big loser among major currencies on Monday, sinking more than half a percent on concerns that a split in the ruling Conservative Party is deepening ahead of June’s referendum on EU membership. With stock markets mixed, the safe-haven yen inched higher against the dollar, euro and commodity-linked currencies like the Australian and New Zealand dollars. The dollar index, which measures the U.S. currency’s broad strength against a basket of its peers, was roughly steady at 95.102 after falling by more than 1 percent for the third week running last week.
- Greek Bailout Tranche Deal Eludes as Refugee Challenge Grows (Bloomberg) Greece and its creditors ended the latest round of talks on Sunday without reaching an agreement on the terms attached to the country’s bailout, as Europe’s most-indebted state faces the challenge of handling the continent’s biggest-ever wave of irregular migration. Work will continue over the Easter break and bailout monitors will return to Athens on April 2 with a view to concluding negotiations as soon as possible, a European Commission spokeswoman said in an e-mail.
- Exclusive: China central bank to Fed: A little help, please? (Reuters) Confronted with a plunge in its stock markets last year, China’s central bank swiftly reached out to the U.S. Federal Reserve, asking it to share its play book for dealing with Wall Street’s “Black Monday” crash of 1987. The request came in a July 27 email from a People’s Bank of China official with a subject line: “Your urgent assistance is greatly appreciated!” In a message to a senior Fed staffer, the PBOC’s New York-based chief representative for the Americas, Song Xiangyan, pointed to the day’s 8.5 percent drop in Chinese stocks and said “my Governor would like to draw from your good experience.”
- Valeant Pharmaceuticals International Inc naysayers say company can be saved, but it’s going to take some major changes (FinancialPost) It’s not easy to be a naysayer. Only a handful of short-sellers and analysts were ringing alarm bells when Valeant Pharmaceuticals International Inc. was in the midst of its rise to the top of the TSX. They were largely ignored at first.
Overnight markets
- Overview: US 10yr note futures are down -0.2173% at 129-4, S&P 500 futures are down -0.09% at 2035.75, Crude oil futures are up 0.23% at $39.53, Gold futures are down -0.76% at $1244.8, DXY is up 0.07% at 95.152.
US Economic Data
- Chicago Fed Nat Activity Index was at a level of -0.29, missing the estimate and down from the previous period
- Existing Home Sales will be relased at 10:00 AM
- Existing Home Sales MoM variation will be released at 10:00 AM
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