cti2015header-morning comments web

Market update

US tsys trading lower, US 10Y 1.88 (+2.5bps), core European bonds are sharply lower, crude above $44.00 with the CRB index at five month highs. Ten year futures lower on heavy volume (447K vs 275k) holding in briefly in Asian session on buying from Asian real money & commercial banks according to MNI. JGB 20Y auction saw strongest demand since Nov, at an avg yield of 0.265 and a b/c 3.55.  10Y gilt yields ~9bps higher on UK public finance data as planned gilt sales expected to rise by GBP2.1bln from GBP 129.4bln for 2016/17 FY.  The ECB kept rates unch as expected, the EUR still higher in front of Draghi’s press conf at 8:30EST. GOCs are lower in line with tsys after yesterday’s strong outperformance saw 10Y spd close 4bps tighter – Int’l buying yest overnite left GOCs bid all day yest, even going into the 10Y auction with the new 10Y roll slightly tighter (9.5 vs 9.8 pre auction). Ontario spds another 2-3bps tigther yest – Ont 26 87/86 (88.5), Ont 46 98.5/97.5. In corps, new Royal 3Y covered the focus yest , upsized to $2bln from $1bln initial guidance spd 77bps, yet still 2bps tighter in secondary trading.

News headlines

  • Commodities’ Five-Month High Weighs on Bonds; Europe Stocks Slip (Bloomberg) A gauge of commodities headed for a five-month high, spurred by gains from metals to soy beans, and weighing on government bonds as the European Central Bank kept interest rates unchanged at its latest policy meeting. Steel reinforcement bars jumped to a 19-month high in Shanghai, buoyed by an improving Chinese property market, supporting the Australian dollar. Brent crude held near $46 a barrel after data showed U.S. production slipped and Iraq said talks to freeze output may occur next month. Commodity gains boosted the outlook for inflation, sending German bund yields to a four-week high. Sweden’s krona rose after the Riksbank expanded bond buying less than some investors expected. The Stoxx Europe 600 Index slid.
  • ECB Keeps Up Unprecedented Stimulus as Draghi Assesses Impact (Bloomberg) The European Central Bank left its interest rates at record lows and kept the size of its bond-buying program unchanged as President Mario Draghi waits to see how fresh stimulus measures announced last month affect the economy. The 25-member Governing Council, which met in Frankfurt on Thursday, left the benchmark rate at zero, the deposit rate at minus 0.4 percent and asset purchases at 80 billion euros ($90 billion) a month. Economists in a Bloomberg survey had predicted no change in rates. Draghi will explain the decision in a press conference at 2:30 p.m. local time.
  • Swedish cbank holds rates as expected, extends QE programme (Reuters) Sweden’s central bank held its benchmark rate unchanged at -0.50 percent as expected on Thursday and said it would expand its asset purchase programme. “The Executive Board has decided to purchase government bonds for a further SEK 45 billion during the second half of 2016,” the central bank said in a statement. “This will reduce the risk of the krona appreciating faster than in the forecast and of a break in the upturn in inflation.”
  • Oil higher as IEA expects biggest non-OPEC output fall in 25 years (Reuters) Crude prices firmed on Thursday after the International Energy Agency (IEA) said 2016 would see the biggest fall in non-OPEC production in a generation, helping to rebalance a market dogged by oversupply. IEA chief Fatih Birol said low oil prices had cut investment by about 40 percent in the past two years, with sharp falls in the United States, Canada, Latin America and Russia.
  • Volkswagen shares surge as U.S. Dieselgate deal looms (Reuters) Volkswagen (VOWG_p.DE) shares jumped more than 6 percent early on Thursday on expectations that the carmaker was close to reaching a deal to buy back 500,000 diesel cars in the United States in a step toward resolving an emissions rigging scandal.
  • Silver `Spike’ Seen Extending Best Start in Five Years: Chart (Bloomberg) Silver, up 24 percent in the best start to a year since 2011, is still gaining steam, according to one technical indicator. The metal surged for a second straight session above the upper limit of its Bollinger band, which has itself been climbing since April 11, signaling a “spike is coming,” according to Fain Shaffer, the president of Infinity Trading Corp. in Indianapolis. Silver has rallied on signs of industrial demand for the metal and bets that policy makers will be slow to raise U.S. interest rates.
  • Japan, Not Germany, Leads World in Negative-Yield Bonds: Chart (Bloomberg) Europe’s central bank took the unorthodox step of cutting interest rates below zero in 2014. Japan followed suit earlier this year, and has become home to more negative-yielding debt than anywhere else, leading Germany, France, the Netherlands and Belgium.

Overnight markets 

  • Overview: US 10yr note futures are down -0.1084% at 129-20, S&P 500 futures are down -0.04% at 2097.25, Crude oil futures are down -0.14% at $44.12, Gold futures are up 1.18% at $1269.2, DXY is down -0.29% at 94.218.

 US Economic Data 

  • 8:30 AM: Initial Claims w/w,  247k, est. 265k (prior 253k)
    •   Continuing Claims w/w, 2137k, est. 2173k   (prior 2171k, revised 2176k)
    •   Philadelphia Fed Index, April, -1.6, est. 9.0 (prior 12.4)
    •   Chicago Fed National Activity Index, March, -0.44, est. -0.15 (prior -0.29, revised -0.38)
  • 9:00 AM: FHFA House Price Index m/m,  est. 0.4% (prior 0.5%)
  • 10:00 AM: Leading Indicator Change m/m, est. 0.4% (prior 0.1%)

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