US tsys slightly lower, curve flatter, US 10Y 1.877 (+1.1bps), avg volume in TY futures overnite, trading in a narrow 6 tick range. European equities lower led by 7% decline in Daimler on news of emissions probe. Nikkei rose for a fourth day to at an 11 week high on speculation the BOJ may increase the size of its asset purchase program next week, while it is also contemplation negative rate loan support for banks. Core European bonds higher on lower stocks, also heavy redemptions/coupon pmts next week (~E90bln) as well as month end extension – 0.14yrs Euro tsy index (US tsy index 0.09 yrs). GOCs lower led by 5s after CPI/ Retail Sales came in above exp for Feb, 2s5s ~2bps flatter on the news, spds ~2bps wider vs tsys. Provis opening unch after closing tighter again yest 2-3bps, Ont 46 97/96, Ont 26 86/85.
- Stocks Retreat With Commodities as Yen Drops on BOJ Speculation (Bloomberg) Stocks fell and commodities retreated as investors wound back enthusiasm that had sent gauges of both to this year’s highs earlier in the week. The yen dropped as the Bank of Japan weighed the possibility of offering negative-rate loans to banks. Carmakers led declines in Europe as emission probes loomed over Daimler AG and PSA Group, while Asian equities slid from a four-month high. Raw materials fell as steel futures slumped in China after exchanges announced measures to cool speculation and Goldman Sachs Group Inc. cut price outlooks metals and crops. Japan’s currency weakened versus all 31 major peers and banks led the Topix higher.
- BOJ Officials Are Said to Eye Possible Negative Rate on Loans (Bloomberg) Having adopted a negative interest rate on some excess reserves to penalize financial institutions for leaving money idle, the Bank of Japan may consider helping them lend by offering a negative rate on some loans, according to people familiar with talks at the BOJ. Such a discussion could happen in conjunction with any decision to make a deeper cut to the current negative rate on reserves, said the people, who asked not to be named as the matter is private. The BOJ’s Stimulating Bank Lending Facility, which now offers loans at zero percent interest, would be the most likely vehicle for this option, they said.
- Euro zone business growth slows despite discounting -PMI (Reuters) Further price cutting failed to prevent a slowdown in euro zone business growth this month, a survey showed, likely disappointing the European Central Bank which wants inflation to rise. The ECB’s swathes of cheap loans and interest rate cuts, alongside a top-up to its monthly bond purchases, appear to have had little effect on inflation or private sector growth. Markit’s Composite Flash Purchasing Managers’ Index (PMI) for the euro zone, based on surveys of thousands of companies and seen as a good guide to growth, dipped to 53.0 from March’s 53.1, matching a 13-month low in February.
- Brazil Stocks’ Biggest Driver Isn’t Impeachment Hype After All (Bloomberg) Lately, in Brazil markets, investors can be split into two camps: those who pick stocks based on the political turmoil and those who think that’s crazy. Turns out they’re sort of both right though one more so than the other. While the correlation between the Ibovespa and the impeachment of President Dilma Rousseff has been gaining strength this year, nothing drives the benchmark’s stock moves quite like oil and other commodities, data compiled by Bloomberg show.
- No deal between Greece and lenders on Friday: officials (Reuters) There will be no deal between Greece and its lenders on Friday that would unlock loans and enable vital debt relief talks, despite some progress on the reforms Athens must implement in exchange, euro zone and IMF officials said on Friday. “Don’t expect any deals today,” the chairman of euro zone finance ministers Jeroen Dijsselbloem told reporters, noting however, he was “hearing good news from Athens” on headway made in negotiations on a Greek reform package.
- Record VIX Bets Keep Surging as Wall Street Divines Mixed Signal (Bloomberg) One thing’s certain about the market for equity volatility — it’s jumping. Why that’s happening is a source of debate on Wall Street. Going long market turbulence has surged in popularity in the last nine weeks, with investors sending an unprecedented $3.2 billion into securities that reap gains from wider price swings. That pushed shares outstanding on exchange-traded notes tied to the Chicago Board Options Exchange Volatility Index to a record and has wagers on volatility near the highest level since 2014.
- Federal-provincial deficits: $126-billion and a ‘long time healing’ (GlobeandMail) For anyone who lost track of where Canada stands after government budget season, it’s $126-billion. That represents combined federal-provincial deficits from fiscal year 2015-16 to 2018-19, the bulk of it resting on Ottawa’s shoulders. This isn’t to argue against government stimulus amid an oil shock that has hit three provinces hard, but rather just to show the “fairly striking” sum compared to last year, calculated by Warren Lovely, the chief of public sector research and strategy at National Bank of Canada.
- Overview: US 10yr note futures are down -0.0723% at 129-17, S&P 500 futures are down -0.01% at 2082.5, Crude oil futures are up 1.2% at $43.7, Gold futures are down -0.29% at $1246.7, DXY is up 0.33% at 94.907.
US Economic Data
- 9:45 AM: Markit US Manufacturing PMI, est. 52 (prior 51.5)
Canadian Economic Data
- 8:30 AM: CPI y/y, 1.3%, est. 1.2%, (prior 1.4%)
- Core CPI m/m, 0.7%, est. 0.4% (prior 0.5%)
- Core CPI y/y, 2.1%, est. 1.7% (prior 1.9%)
- Retail Sales m/m, 0.4%, est. -0.8% (prior 2.1%, revised 2.0%)
- Retail Sales Ex Auto m/m, 0.2%, est. -0.7% (prior 1.2%, revised 1.3%)
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