Market Update US tsys lower, yields ~3-4bps higher with the 10Y 2.85% on above avg volume in TY futures (365k) as S&P futures are rebounding , up 37pts (1.4%) on news China will look to avert a trade war with the US, both countries have been negotiating to increase US access to Chinese markets according to the WSJ, also news that South Korea has struck a deal with the US on trade to avoid tariffs on steel. The US auctions $30bln in 2Y notes this aft – the largest 2Y supply since 2014, along with $35bln in 5Y notes tomorrow and $29bln in 7Y notes Wed. In Canada, GOCs opening weaker, outperforming tsys by 0.5-1bp out to 10s, wider in longs. Provis opening 0.5bps tighter, Ont 27s 61.5/60, QC/Ont 48 -3.5/-3.9 (unch).
News headlines
Mnuchin ‘Hopeful’ Truce Can Be Reached With China on Trade (Bloomberg) Treasury Secretary Steven Mnuchin said he’s optimistic the U.S. can reach an agreement with China that will avert the need for President Donald Trump to impose tariffs on at least $50 billion of goods from the country. “We’re having very productive conversations with them,” Mnuchin said on “Fox News Sunday,” when discussing talks with China. “I’m cautiously hopeful we reach an agreement.”
Global Trading Giants Dip Toes in China Oil Futures on Debut Day (Bloomberg) Two of the world’s biggest oil traders gave China’s crude futures contract a go on its long-anticipated trading debut. Commodity giants Glencore Plc and Trafigura Group were among foreign participants as the yuan-denominated futures started on the Shanghai International Energy Exchange Monday. After an initial surge in volume that outpaced overnight transactions in global benchmark Brent crude in London, trading tapered off toward the end of the session and the contract closed at 429.9 yuan a barrel ($68.22).
Facebook Hasn’t Been ‘Forthcoming,’ Warner Says, Floating New Rules (Bloomberg) Facebook Inc. hasn’t been “fully forthcoming” as Congress probed Russia’s attempted meddling in the 2016 presidential election, U.S. Senator Mark Warner of Virginia said Sunday as the social-media giant faced continued fallout from an ongoing data crisis. Warner, the top Democrat on the Senate Intelligence Committee, said on NBC’s “Meet the Press” that he questioned “the use of this really sketchy firm Cambridge Analytica,” but Facebook “blew that off” as they did other concerns over Russia’s actions.
Stocks Advance, Bonds Fall as Trade Fears Subside: Markets Wrap (Bloomberg) A rebound in U.S. equity futures Monday offered hope of stabilization after last week’s rout, with shares in Europe and Asia also rising as investor fears of an escalation of trade tensions began to ease. Carmakers and oil companies were among the top gainers in Europe as futures on the S&P 500 Index and the Nasdaq pointed to a higher open and Asian shares shook off earlier losses. Ten-year Treasury yields climbed three basis points ahead of major debt sales. The dollar dropped to the lowest in a month and the yen slipped back from the strongest in more than 16 months. Copper extended losses following the largest weekly decline for base metals since early February.
Bond Traders Face Gut-Check in Record $300 Billion U.S. Auctions (Bloomberg) Bond bulls who enjoyed a rare rally in short-term Treasuries last week might not want to get too comfortable: The world’s biggest debt market is about to be inundated with an unprecedented wave of issuance. The U.S. Treasury will probably auction about $294 billion of bills and notes this week, its largest slate of supply ever. The $30 billion two-year note sale is the biggest since 2014, and comes as the maturity posted just its fourth weekly gain in the last six months. The three- and six-month bill offerings remain at record sizes.
Canada inflation jumps to three-year high, retail sales disappoint (Reuters) Canada’s annual inflation rate in February jumped to a three-year high while January retail sales put in another disappointing performance, giving the Bank of Canada room to ponder when next to hike interest rates. The annual inflation rate rose to 2.2 percent from 1.7 percent in January, the highest since the 2.4 percent seen in October 2014, in part due to costlier gasoline, Statistics Canada said on Friday. The Bank of Canada, which has a 2.0 percent target for inflation, has raised interest rates three times since July 2017 amid a strengthening economy and near record low unemployment, and markets expect another hike by this July.
Trump signs US$1.3T budget deal after threatening veto (BNN) President Donald Trump said he has signed a spending bill funding the federal government for the next six months, reversing a veto threat he made earlier Friday that shocked Washington after his administration had previously said he would approve the legislation.Trump’s turnabout came after a meeting with Defense Secretary James Mattis, who advocated for the bill’s increases in defense spending and wanted the relative certainty of six months of assured funding.
Overnight markets
Overview: US 10yr note futures are down -0.13% at 120-15, S&P 500 futures are up 1.26% at 2630.5, Crude oil futures are down -0.05% at $65.85, Gold futures are down -0.05% at $1355, DXY is down -0.27% at 89.195, CAD/USD is down -0.05% at 0.7758.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.867% | 2 Year | 2.285% |
| 5 Year | 2.083% | 5 Year | 2.633% |
| 10 Year | 2.219% | 10 Year | 2.841% |
| 30 Year | 2.333% | 30 Year | 3.082% |
US Economic Data
| 8:30 AM | Chicago Fed Nat Activity, Feb 0.88 est 0.15 (0.12 prior Revised 0.02) |
| 10:30 AM | Dallas Fed Manf. Activity, Mar est 33.5 (37.2 prior) |
Canadian Economic Data
| 10:00 AM | Bloomberg Nanos Confidence, Mar 23rd (56.2 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