cti2015header-morning comments web

Market update

US tsys trading slightly higher & flatter with the US 10Y 1.86 (-2.1bps), avg volume in TY futures, global stocks lower, crude 1.0% lower, EUR & JPY higher. JPY higher prior to this Thursday’s BOJ meeting where the central bank is expected to increase its QE program as much as 20%. Last week’s the Yen suffered its largest weely decline since the BOJ boosted its QE program in Oct 2014. Core European bonds slightly higher as well, 10Y bund 0.226%, close to one month highs. Bunds underpinned by both heavy reinvestment flows (~90bln) and large month end extension in the Euro govt bond index – 0.11 to 0.16yrs vs 0.09 yrs in the US. New Home Sales kick off a very busy week in the US with 2Y auction today, FOMC Wed & GDP – latest CFTC COT data how specs added to steepeners last week via FV & EDfuts. In Canada, light data week by contrast with Feb GDP the key release on Fri. GOCs starting the week on the backfoot led by 10s after Friday’s 5bp cheapening post CPI/Retail Sales. Provincials slightly better bid after closing 5-7bps tighter last week.

News headlines

  • Global Stocks Drop With Oil as Glut Seen Persisting; Yen Rises (Bloomberg) Shares fell around the world as oil dropped on signs a global surplus of crude is likely to persist. The yen strengthened with gold, reflecting investor caution before central bank meetings this week in the U.S. and Japan. U.S. crude futures erased Friday’s gains on Saudi Arabia’s plan to complete an expansion of the Shaybah oilfield by the end of May. Energy companies, banks and miners led declines in the Stoxx Europe 600 Index, which headed for its biggest loss in a week, as industrial metals also sank. The yen was the best-performing major currency, after tumbling on Friday by the most since 2014. Italian bonds fell with Spain’s, extending a decline from last week.
  • Oil falls as traders cash in after three weeks of gains (Reuters) Oil prices slipped on Monday as traders took profits after three weeks of gains and as a jump in the dollar late last week was priced into fuel markets. Front-month Brent crude LCOc1 was trading at $44.80 per barrel at 1101 GMT (6:01 a.m. ET), down 31 cents from its last settlement. U.S. West Texas Intermediate (WTI) futures CLc1 were down 44 cents at $43.29 a barrel.
  • Yellen’s Scope for Summer Rate Hike Widens as ECB Signals a Hold (Bloomberg) Mario Draghi has opened a door. Janet Yellen has to decide whether she wants to walk through. The European Central Bank president signaled last week that policy on his side of the Atlantic is going on hold as officials wait to see how their stimulus measures play out. That pause may hand the Federal Reserve chair an opportunity to raise interest rates in coming months, by reducing the risk of a sharp rally in the dollar if the policies of the two central banks conspicuously diverged.
  • Over 90% of China Bond Funds Dropped Last Week Amid Default Woe (Bloomberg) More than 90 percent of Chinese bond funds’ net asset value dropped last week as spreading corporate note defaults fueled investor concerns. A market value of assets held by 718 bond funds dropped in the five days through April 22, accounting for 95.6 percent of all the fixed-income funds tracked by Shanghai-based research firm Howbuy. The average decline for the week was 1.03 percent, the biggest since the week ended Jan. 8, according to Howbuy. “The sentiment in the corporate bond market is quite weak,” said Ni Xinchen, a researcher at Howbuy. “Investors are concerned corporate defaults will spread.”
  • Abe Says Japan Will Create Extra Budget for Kumamoto Earthquake (Bloomberg) Japan’s Prime Minister Shinzo Abe said Sunday he will create an extra budget to address the economic damage caused by deadly earthquakes in Kumamoto earlier this month. Abe wants to pass the budget before the current parliamentary session ends on June 1, which comes ahead of an upper house election in July. The earthquakes, which killed 48 people, have dealt a blow to policy makers struggling to gather momentum for an economic recovery.
  • Precision Drilling Corp swings into loss as revenue plummets, five contracts cancelled (Financial Post) Precision Drilling Corp. reported a loss of $19.9 million in its latest quarter compared with a profit of $24.0 million a year ago. The oilfield services company says the loss amounted to seven cents per share for the quarter ended March 31 compared with a profit of eight cents in the same quarter last year. Revenue this quarter totalled $301.7 million down from $512.1 million in the first quarter of 2015, mainly due to lower drilling activity in the U.S., Canada and internationally.
  • Quebec halts injunction request against TransCanada’s Energy East pipeline (Financial Post) The province of Quebec suspended its request for an injunction against TransCanada Corp’s Energy East pipeline on Friday after the company agreed to undergo a provincial environmental assessment. The resolution removes a potential hurdle but also introduces another approval process for the 4,600 kilometre cross-Canadian pipeline, which will carry 1.1 million barrels per day of crude from Alberta’s oil sands to the country’s Atlantic coast.


Overnight markets 

  • Overview: US 10yr note futures are down 0% at 129-15, S&P 500 futures are down -0.23% at 2081.25, Crude oil futures are up 0.3% at $43.86, Gold futures are up 0.62% at $1237.6, DXY is down -0.31% at 94.82.

US Economic Data 

  • 10:00 AM: New Home Sales, est. 520k (prior 512k)
    •      New Home Sales m/m, est. 1.6% (prior 2,0%)
  • 10:30 AM: Dallas Fed Manufacturing Activity April, est. -10.0 (prior -13.6)

Canadian Economic Data 

  • There is no major economic news 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