cti2015header-morning comments web

Market update

US tsys slightly higher & 1bp steeper, US 10Y 1.865%. Euro stocks up for a third day, Asian stocks higher, USD lower and brent/WTI both above $50 for the first time in seven months.  A Chevron facility in Nigeria was attacked by militants (Rtrs) while yest EIA reported crude inventories fell 4.23mln more than exp (2mln). The JPY well bid early in the Asian session on FT story suggesting direct intervention to stem rise less likely. Core Euro bonds lower with higher stocks, risk on, Barclays month end extension for June 1st – Pan Euro Agg 0.06yrs vs 0.13yrs for US tsy index. GOCs higher in line with tsys, BOC auctions $3.9bln in 0.50% Aug 1 18s at noon with the roll vs 2s tighter 1.2/1.1 and 2Y yields ~5bps shy of their April highs (0.70%). Provi spds unch, Ont  rumored as well as another Alberta & NF. Yest BMO 5Y NVCC @ 250 saw strong demand, this morning bonds are quoted 245/240, with more supply likely after bank earnings.

News headlines

  • Oil Hits ‘Sweet Spot’ at $50, Boosting Producers as Dollar Drops (Bloomberg) Brent surpassed $50 a barrel for the first time since November on signs a two-year surplus is coming to an end, lifting commodity companies and buoying currencies where oil is produced. A drop in U.S. stockpiles and shrinking output in Nigeria and Venezuela contributed to the gains in Brent, which is up more than 80 percent from January’s low of $27.10. The Bloomberg Commodity Index headed for the highest close in six months as metals also advanced, and miners in the Stoxx Europe 600 Index headed for their biggest three-day jump in more than a month.
  • Japan’s Abe points to 2008 crisis as G7 leaders debate global risk (Reuters) Group of Seven leaders voiced concern about emerging economies at a summit in Japan on Thursday as their host, Prime Minister Shinzo Abe, made a pointed comparison to the 2008 global financial crisis but not all his G7 partners appeared to agree. The G7 leaders did agree on the need for flexible spending to spur world growth but the timing and amount depended on each country, Deputy Chief Cabinet Secretary Hiroshige Seko told reporters, adding some countries saw no need for such spending.
  • Fed’s Bullard: tight U.S. labor market may put upward pressure on inflation (Reuters) U.S. labor markets are relatively tight and may put upward pressure on inflation, St. Louis Federal Reserve President James Bullard said on Thursday. “By nearly any metric, U.S. labor markets are at or beyond full employment,” Bullard said in an OMFIF lecture in Singapore. “In short, labor markets are relatively tight,” he said. “This may put upward pressure on inflation going forward.”
  • RBC profit beats expectations, but bad loans rise 19% as credit to oil firms turns sour (Financial Post) Royal Bank of Canada (RBC) said on Thursday bad loans increased by $583 million, or 19 per cent, in the second quarter from the quarter before, largely due to a rise in credit to oil firms that had turned sour. Canada’s biggest banks are seeing an increase in energy clients struggling to pay back loans following a sharp decline in the price of oil. Bank of Montreal said on Wednesday it had set aside more funds to cover losses.
  • Toronto-Dominion profit rises 10% on higher earnings in U.S., Canada retail banking (Financial Post) Toronto-Dominion Bank said fiscal second-quarter profit rose 10 per cent on higher earnings from its U.S. and Canadian retail operations. Net income for the period ended April 30 climbed to $2.05 billion, or $1.07 a share, from $1.86 billion, or 97 cents, a year earlier, the Toronto-based bank said Thursday in a statement. Profit excluding some items was $1.20 a share, beating the $1.17 average estimate of 13 analysts surveyed by Bloomberg.
  • CIBC boost dividend as profit grows despite rise in provision for bad loans (Financial Post) CIBC saw its second-quarter profit grow to $941 million, up 3.3 per cent from the same period last year despite an increase in provisions for soured loans to the oil and gas sector and writeoffs in its personal lending portfolios. The profit amounted to $2.35 per share of net income, up from $2.25 or $911 million during the second quarter of 2015. Adjusted income for the quarter ended April 30 was $962 million or $2.40 per share, compared with $924 million or $2.28 a year ago.
  • Bombardier Inc’s Delta sale signals ‘beginning of the end’ of Boeing-Airbus duopoly: Moody’s (Financial Post) Bombardier Inc. has finally joined the big leagues with its recent sale to Delta Air Lines Inc., signalling the “beginning of the end” of Boeing Co. and Airbus Group’s duopoly, according to Moody’s. The global bond ratings agency said it won’t be easy for Bombardier to take market share away from Boeing and Airbus, but Delta’s order for 75 CSeries jets showed it’s finally in the running in the 100-plus-seat narrowbody market.


Overnight markets 

  • Overview: US 10yr note futures are up 0.0603% at 129-18, S&P 500 futures are up 0.1% at 2089.25, Crude oil futures are up 1.01% at $50.06, Gold futures are up 0.18% at $1228.8, DXY is down -0.13% at 95.234.

 US Economic Data 

  • 8:30 AM: Initial Jobless Claims, May 21, 268k, est. 275k (prior 278k)
    • Continuing Claims, May 14, 2163k, est. 2142k (prior 2152k, revised 2153k)
    • Durable Goods Orders, April,  3.4%, est. 0.5% (prior 0.8%, revised 1.9%)
    • Durables Ex Transportation, April,  0.4%, est. 0.3% (prior -0.2%, revised 0.1%)
    • Cap Goods Orders Nondef Ex Air, April, -0.8%, est. 0.3% (prior 0.1%, revised -0.1%)
    • Cap Goods Ship Nondef Ex Air, April, 0.3%, est. 0.1% (prior 0.5%, revised -0.3%)
  • 9:45 AM: Bloomberg Consumer Comfort Index, May 22, (prior 42.6)
  • 10:00 AM: Pending Home Sales, m/m, April, est. 0.7% (prior 1.4%)
  • 11:00 AM: Kansas City Fed Manufacturing Activity, May, est. -3 (prior -4)

 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