25/06/2015

Market update

US tsys trading lower, curve ~0.5bps flatter , German 10Y bunds lower, EU periph spds tighter on ‘risk on’ as hopes rise for Greek deal. US 10Y close 2.40% (+2.3bps), short lived bounce after weaker Durable Goods (-1.8%, down in 3 out of 4 mnths). Fed gov Powell comments also pressuring bonds. Large retail pharmacy CVS Health (Baa1/BBB+) filed a shelf for ~20bln offering to fund purchase of Omnicare. Latest JPM Client Survey remains net short but lower than last week, Active Survey showed fewest net shorts since May 26th. In Canada, GOCs are lower , spds ~3bps wider vs tsys even as there is no cdn data, corp supply still factor with ‘Sea to Sky’ Hwy, Kraft deals poss today. CWB 5Y dep note yest was well received (~30% fills) tightened ~1bp in secondary – seems like last time a deal broke sign tighter was Allied Properties. Provi spds tighter yest, unch this morn with supply a possibility.

International news

China June factory activity shows signs of stabilization (Reuters) China’s factory activity showed signs of stabilizing in June, with two private surveys suggesting the economy may be regaining some momentum even as many analysts expect further policy support to ensure the recovery becomes more sure-footed.

Syriza Members Warn Alexis Tsipras Against Betrayal With Greek Bailout Compromise (WSJ) To avert a default and possible exit from the eurozone, Greek Prime Minister Alexis Tsipras must sell Germany’s chancellor, Angela Merkel, on his plan to fix Greece’s finances.

Europe’s Greece-Proof Economy (WSJ) Greece may be dominating the headlines, but the eurozone economy is proving quietly resilient. Tuesday’s flash eurozone purchasing managers index for June rose to 54.1 from 53.6 in May, its highest level for four years, data provider Markit said. France’s PMI hit a 46-month high at 53.4, while Germany’s bounced to 54.0.

Beijing Tries an Old Script in Debt Drama (WSJ) China is bailing out the nation’s heavily indebted local governments, relying on trusted methods to keep its financial system stable despite promises to allow market forces to play a greater role.

Canadian mining industry feeling the sting from China’s steel surplus (G&M) The steel industry is about to go from bad to worse. China, the world’s biggest consumer of steel, needs less metal. The Chinese housing market, responsible for using the bulk of steel, is bulging with empty properties.

Overnight markets

• Overview: IG24 5Y 65.1/65.5 (+0.05), US 10yr note futures are down -0.31% at 125-14, S&P 500 futures are up +0.18% at 2116.50, Crude oil futures are down -0.96% at 59.80, Gold futures are down -0.41% at $1179.30, DXY is up +1.13% at 95.364.

• US BANK CDS (5yr): BAC 68/71 (-1), GS 86/89 (-2), MS 77/80 (-1), C 77/80 (-2), JPM 64/67 (-1), WFC 49/52 (+0)

US Economic Data

• Durable goods orders decreased in May by -1.8%, below expectations of -1.0% MoM (0.5% vs 0.5% Ex Trans.) versus revised April -1.5% MoM (-0.3% Ex Trans.).
• Nondefense capital goods ( New Orders) rised by 0.4% in May, they were expected to increase 0.5% MoM (0.3% MoM vs 0.5% for Shipped) this is compared to -0.3% (NO) and 0.3% (S) for the previous month revised data.
• FHFA House price index is forecasted to increase 0.5% in April versus previous month 0.3%.
• Markit US Manufacturing PMI (Preliminary) is forecast at 54.1 for June, 0.1 point higher than previous month.
• New home sales are forecast at 523K (1.2% MoM) in May versus April 517K (6.8% MoM).
• Richmond Fed Manufacturing activity index is expected at 4 in June better than May (1).

Canadian Economic Data

• There is no major economic data 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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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