Market Update US tsys higher, yields 1-3 bps lower led by the 7Y, with the 10Y another 2bps lower @ 2.84%, after declining 5bps Friday. Core EGBs lagging the rally in tsys, bunds giving back some of outperformance which left the 10Y bund/tsy spd at 1yr wides. Gilts/bunds lower on hawkish comments from BOW Ramsden, stronger European equities – the stoxx up for a 3rd day, 0.60%, 36% retracement of the January pullback. GOCs higher in line with tsys, – data calendar is light this week after GOCs brushed off stronger Jan CPI, highlight is tomorrow’s Federal budget.  provis bettenfitting from ‘risk on’ environment, spds enfing ~1bp lower Friday.

News headlines

U.S. Stocks Rise With Treasuries, Dollar Mixed: Markets Wrap (Bloomberg) U.S. stocks rallied, Treasuries advanced and the dollar slipped as investors grew confident that the Jerome Powell-led Federal Reserve won’t rush to raise interest rates as the economy picks up steam. The S&P 500 Index pushed past its average price for the past 50 days and erased losses for the week with its biggest gain in almost three weeks. The gauge extended gains in afternoon trading, reversing a four-day pattern had seen it swoon. The 10-year Treasury yield slipped to 2.87 percent, roughly where it started the week, as investors dissect the Fed’s semiannual monetary policy report to Congress. The dollar was flat versus major peers.

Bond Traders Step Back From 3% to Watch Powell Navigate Fedspeak (Bloomberg) Bond traders came the closest in four years to a 3 percent yield on the 10-year Treasury note. Whether it breaches that level may be determined by how new Federal Reserve Chairman Jerome Powell handles the limelight. Powell, who took over from Janet Yellen this month, will speak before the House Financial Services Committee on Tuesday and the Senate Banking Committee two days later, in what’s known as the Humphrey-Hawkins testimony. It’ll be the first time since Powell was sworn in that bond traders get a chance to parse every word from the new Fed leader, as they did with his predecessors.

China Faces Rule by Xi for Decades With Repeal of Term Limits (Bloomberg) China’s Communist Party is set to repeal presidential term limits in a move that would allow Xi Jinping to rule beyond 2023, completing the country’s departure from a political system based on collective leadership. The party’s Central Committee announced Sunday it was seeking to end a constitutional provision that bars the head of state from serving more than two consecutive terms. That would remove the only formal barrier to Xi, who is also party leader and commander-in-chief of the military, staying in power indefinitely.

Oil Steady on Libya Halt as Saudis Promise a Smooth End to Curbs (Bloomberg) Oil steadied as Libya’s crude exports from a key terminal were disrupted and Saudi Arabia pledged that global producers will ease their output curbs without shocking the market. Futures in New York were little changed, after rising 3 percent the previous two sessions. Libya’s crude loadings from the Mellitah terminal will be “modified” after protests impeded output at the El-Feel field. Cuts by OPEC and its allies may be phased out in 2019 in a way that won’t disturb the market, Saudi oil minister Khalid Al-Falih said. Still, U.S. supply remains a threat, with the nation’s rig count rising for a fifth week to the highest since April 2015.

Federal budget plan aims for long-term resilience against volatility (BNN) With so much economic uncertainty radiating from the United States, the Trudeau government will table a federal budget Tuesday that aims to establish a firewall against all that volatility next door. Canadians can expect a budget designed to make the economy more resilient over the long term, insiders say — rather than one featuring more immediate, targeted measures to address those ever-present, Donald Trump-fuelled competitiveness and trade unknowns.

Trump says U.S. re-entering TPP a ‘possibility’ (BNN) U.S. President Donald Trump said he would consider rejoining the Trans-Pacific Partnership if the U.S. could negotiate more favourable terms. “TPP was a very bad deal for the United States. There’s a possibility we would be going in” if offered better terms, Trump said at a news conference with Australian Prime Minister Malcolm Turnbull on Friday at the White House. Turnbull was expected to encourage Trump privately to renew talks on a Pacific trade pact. The U.S. has adopted protectionist trade policies since Trump took office on a nationalist “America First” campaign.

Overnight markets

Overview: US 10yr note futures are up 0.142% at 120-29, S&P 500 futures are up 0.39% at 2759.5, Crude oil futures are down -0.05% at $63.52, Gold futures are up 0.62% at $1338.5, DXY is down -0.22% at 89.685, CAD/USD is up 0.3% at 0.7892. 

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.778% 2 Year 2.226%
5 Year 2.044% 5 Year 2.598%
10 Year 2.242% 10 Year 2.848%
30 Year 2.394% 30 Year 3.136%

US Economic Data

8:30 AM Chicago Fed Nat Activity, Jan 0.12 est 0.2 (0.27 prior)
10:00 AM New Home Sales, Jan est 648k (625k prior)
New Home Sales, Jan est 3.6% (-9.3% prior)
10:30 AM Dallas Fed Manf. Activity, Feb est 30.0 (33.4 prior)

Canadian Economic Data

10:00 AM Bloomberg Nanos Confidence, Feb 23rd  (58.3 prior)


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, Hugues Savard

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230