cti2015header-morning comments web

Market update

US tsys slightly lower, US 10Y 1.844 (+1bp), curve flatter, avg volume in TY1 futs (270k). More hawkish Fedspeak, this time from Fed Harker who stated he could ‘easily see two or three rate hikes this year’. Core Euro bonds higher, bund curve flatter despite better than exp ZEW.  The US auction $26bln in 2Y notes at 1:00 with 2Y yields the highest since mid-March and with the highest auction yield (0.925) since Dec. Spec positioning is fairly short the 2Y (based on latest COT report -121k contracts) yet with the Fed sounding hawkish the short pos could head higher; primary dealers are the longest the 2-3Y sector since Nov 2015.  GOCs lower in line with tsys, provis 0.5bps wider, long Alberta deal still expected, Alb/Ont 46 19bid.

News headlines

  • Asian stocks near 11-week lows, dollar bounces on Fed rate view (Reuters) Asian shares stumbled to near 2-1/2-month lows on Tuesday and the U.S. dollar pared some of its recent losses as investors worried about the likelihood of a U.S. interest rate increase in coming weeks. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slid 0.5 percent, taking its losses to more than 7 percent so far this month and nearing its lowest levels since March 9.
  • Oil falls for fifth day as focus returns to growing exports (Reuters) Oil fell for a fifth consecutive day on Tuesday on rising production from major exporters, and as the dollar strengthened. Brent futures LCOc1 had declined 25 cents to $48.10 a barrel by 1051 GMT, after closing down 37 cents in the previous session.
  • Dollar Rally Gathers Pace, Commodities Drop on Fed; Pound Jumps (Bloomberg) The dollar rallied and crude oil fell with gold as speculation mounted that the Federal Reserve will raise interest rates as early as next month. The pound jumped and European stocks gained. The U.S. currency touched its strongest level in eight weeks against the euro, while Australia’s dollar and the Malaysia’s ringgit were among the biggest losers, as the prospect of higher interest rates boosted demand for the greenback.
  • Valeant Pharmaceuticals Inc to lower debt by more than $1.5 billion this year by selling non-core assets, new CEO tells investors (Financial Post) Valeant Pharmaceuticals Inc plans to lower its debt by at least $1.5 billion this year, Chief Executive Joseph Papa said on Monday during his first large meeting with investors since taking the top job three weeks ago. Valeant has about $30 billion in debt and has had to appease creditors, who had the option of forcing early payment of some loans and bonds after Valeant missed deadlines for filing financial records with regulators and triggering default notices.
  • Thousands of oilsands workers are losing pay while Fort McMurray fires shut sites (Financial Post) While wages are continuing for many employees of oilsands companies forced off the job by Fort McMurray wildfires, thousands of tradespeople hired by contractors are off the payroll. “It’s certainly an economic hardship. People have bills to pay, people make plans around when they expect the work will take place,” Warren Fraleigh, executive director of the Building Trades of Alberta, said Friday.
  • The Hedge Fund That Couldn’t Stay Open Long Enough for a Big Payday (Bloomberg) Toby Dodson waited six months for his bet against a fragile Portuguese bank to pay off. But before the reckoning, word came down from his hedge fund bosses at Achievement Asset Management in Chicago: get ready to clear out your desk and unwind your trades, we’re shutting down. They’d lost too much on U.S. energy companies and so became one of the 979 firms to announce their closure last year.


Overnight markets

  • Overview: US 10yr note futures are down -0.0723% at 129-21, S&P 500 futures are up 0.55% at 2056.5, Crude oil futures are up 0.71% at $48.42, Gold futures are down -1.02% at $1238.7, DXY is up 0.25% at 95.468.

US Economic Data 

  • 10:00 AM: Richmond Fed Manufacturing Index, May,  est. 8 (prior 14)
    • New Home Sales, April, est. 523k (prior 511k)
    • New Home Sales, m/m, est. 2.3% (prior -1.5%)

 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