cti2015header-morning comments web

Market update

US tsys slightly higher on light volume in TY futures (220K), US 10Y 1.70 (-0.5bps). Tsys pressured in Europe as stocks rose for a third day, German bunds lower & steeper in thin trade ahead of Brexit vote – latest poll shows ‘remain’ with a one point lead. Prices also weighed by 30Y bund auction – E820mln Aug 2046 reopening at 0.65% vs 0.88% in May. Fed gov Powell on CNBC saying Fed is ready for Brexit vote, can’t rely too much on one month’s job figures. GOCs slightly lower, underperforming tsys for a second day after yesterday’s 3bp cheapening – which could have something to do with today’s $3bln June 26 reopening – as the CTD for CGBs is now the June 25 bond (was 24s up until last month). The 10Y roll unch at 11.1/10.9. The roll is ~1bp cheaper than the last auction on April 20th, thou outright yields are 10bps lower. provis well bid to start with supply expected, Ont 26 93/92, ont 46 105/104. Alberta/Ont roll 2bps narrower from last Fri, now 16/15.

News headlines

  • Stocks Trade Near Week High Before Brexit Vote; Commodities Gain (Bloomberg) Global equities traded near a one-week high and the pound approached its strongest level in five months a day before Britons vote on membership in the European Union. Oil and copper led gains in commodities. The MSCI All-Country World Index was little changed following three days of gains as bookmakers’ odds implied there’s only about a one-in-four chance that Britons will opt to leave the EU in Thursday’s referendum. Sterling rose against most of its 16 peers and shares in emerging markets advanced for a fourth day. Crude oil was set to close above $50 a barrel for the first time in almost two weeks.
  • Janet Yellen Hints That Fed May Hold Back on Raising Interest Rates (NY Times) Weak economic growth in the United States could force the Federal Reserve to hold off on any imminent interest rate increases, the Federal Reserve chairwoman, Janet L. Yellen, told Congress on Tuesday. While Ms. Yellen said that the American economy’s long-term prospects remain favorable, she signaled that headwinds, including slower employment gains in recent months, weak productivity growth and the persistence of a sluggish pace of inflation have prompted the Fed to adopt a more cautious stance.
  • Nervy global investors revisit 1930s playbook (Reuters) Global investors are once again dusting off studies of the 1930s as fears of protectionism, nationalism and a retreat of globalization, sharpened by this week’s Brexit referendum, escalate anew. With markets on tenterhooks over Thursday’s « too close to call » vote on Britain’s future in the European Union, the damage an exit vote would deal business activity and world commerce is amplified by the precarious state of the global economy and its inability to absorb any left-field political shocks.
  • EU Bank Regulator Says Retail Bond Holdings May Affect Bail-Ins (Bloomberg) European Union officials newly charged with handling troubled banks would take account of the “public interest” before imposing losses on retail bondholders. Some weak banks may have sold bonds to vulnerable households, rather than big investors, which should be considered before the Single Resolution Board decides on a so-called bail-in, Vice Chairman Timo Loyttyniemi said at a Euromoney conference in London.
  • Oil rises further above $50 on API report, braced for Brexit volatility (Reuters) Oil rose further above $50 a barrel on Wednesday supported by an industry report that showed a large drop in U.S. crude inventories and a boost in investor risk appetite ahead of Britain’s referendum on EU membership. U.S. crude inventories fell by 5.2 million barrels, the American Petroleum Institute (API) said on Tuesday, far more than analysts expected. Official stocks data is due later on Wednesday from the U.S. Department of Energy (DOE).
  • Pound Resumes Rally as Odds Signal U.K. Will Vote to Stay in EU (Bloomberg) The pound climbed toward a five-month high versus the dollar as traders took cues from betting odds that point to the U.K. voting to stay in the European Union, rather than opinion polls showing the referendum is too close to call. A gauge of sterling against a basket of currencies rose toward its June 20 closing level, which was its strongest this month. With a day left before the referendum on Thursday, an index of betting odds compiled by Oddschecker put the vote to remain at 80 percent.
  • Top U.S. regulators discuss possibility of Britain leaving EU – Treasury (Reuters) The heads of the U.S. financial regulatory agencies, including Treasury Secretary Jack Lew, conferred on Tuesday about the upcoming « Brexit » vote in a regularly scheduled meeting closed to both the public and the press, according to a statement from the Treasury Department. « During the executive session, the council discussed recent market developments, including the possibility of the United Kingdom’s separation from the European Union, » it said in a summary of the meeting


 Overnight markets                                                                                         

  • Overview: US 10yr note futures are down 0% at 131-8, S&P 500 futures are up 0.11% at 2082.75, Crude oil futures are up 0.54% at $50.12, Gold futures are down -0.16% at $1270.5, DXY is down -0.28% at 93.751.

 US Economic Data

  • 9:00AM: FHFA House Price Index, m/m, April,  est. 0.6% (prior -0.7%)
  • 10:00AM: Existing Home Sales, May,  est. 5.55m (prior 5.45m)
    •        Existing Home Sales, m/m,  May, est. 1.8% (prior 1.7%)

 Canadian Economic Data

  •  8:30AM: Retail Sales, m/m, April, 0.9 %, est. 0.8% (prior -1.0%, revised -0.8%)
    •      Retail Sales Ex Auto, m/m, April, 1.3%,  est. 0.7% (prior -0.3%, revised -0.1%)


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