Market Update

US tsys higher, yields 3-5bps lower and the tsy curve 2bps steeper, 10Y 2.39% lowest since Dec 2017, S&P futures moving lower since early morning (-3.25).  Core EGBs rallying led by 10Y bunds, 10Y bund auction sold at -0.05%, first negative auction yield since 2016 with the highest bid-cover since May 2018. UK gilts lagging bunds by 2bps, the UK parliament to vote on PM May’s Brexit deal (extending deadline to end of May). ECB president Mario Draghi with further dovish comments, saying the ECB could adjust its forward guidance and delay rate increases if conditions warrant. Fed nominee Stephen Moore, said the central bank should cut rates immediately by 50bps, in an interview with the NYT.  GOCs higher in line with tsys, curve 1bp steeper with the 10Y 1.53% (-4bps), 2Y 1.46% low since Dec 2017. The BOC auctions $2bln in reopened 0.50% Mar 1 2022s at noon with the roll to 2Ys now negative, -0.4bps, in the context of  2s5s  at -4.5bps.

News headlines

Bonds Rally as Europe Stocks, U.S. Futures Decline: Markets Wrap (Bloomberg) Treasuries rallied with German bunds and the yen as investors turned their focus to a worrying economic outlook and a decisive shift toward accommodation by major central banks. Stocks in Europe declined along with U.S. equity futures.

U.S. consumer confidence slumps in March, missing all estimates (BNN) U.S. consumer confidence declined for the fourth time in five months on dimmer assessments of present conditions, suggesting that weak first-quarter growth and slower job gains in February are weighing on attitudes and potentially spending.

Oil Slides From Near $60 Amid Mixed Signs on U.S. Inventories (Bloomberg) Oil slid from near $60 a barrel in New York amid conflicting signals on U.S. crude inventories, while traders continued to weigh OPEC supply cuts and fragile demand.

China’s industrial profits shrink most since late 2011 as economy cools (Reuters) China’s industrial firms posted their worst slump in profits since late 2011 in the first two months of this year, data showed on Wednesday, as increasing strains on the economy in the face of slowing demand at home and abroad took a toll on businesses.

Recession Risks Creep Beyond Yield Curve Into U.S. Economic Data (Bloomberg) As the bond market’s yield curve flashes warning signs of a U.S. recession, some key economic indicators are offering more conflicting signals about the outlook.

Weak euro zone growth could raise stability risks: ECB’s de Guindos (Reuters) Weak euro zone growth is increasing the risk of financial instability as bank profits weaken and sovereign debt sustainability concerns rise, European Central Bank Vice President Luis de Guindos said on Wednesday.

May’s Deal Gains Support Ahead of Votes on Plan B: Brexit Update (Bloomberg) Theresa May’s Brexit deal is finally winning a bit of support from Conservative hardliners, though she may have to promise to step down to get it over the line. Brexiteers’ minds have been focused by the prospect of Parliament taking control of the process and voting to soften — or cancel — the divorce.

Overnight markets

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.466% 2 Year 2.2%
5 Year 1.419% 5 Year 2.153%
10 Year 1.533% 10 Year 2.379%
30 Year 1.831% 30 Year 2.838%

US Economic Data

7:00 AM MBA Mortgage Applications, Mar 22 Actual 8.9% Prior 1.6%
8:30 AM       Trade Balance, Jan -$57.0b  Prior -$59.8b
10:00 AM Current Account Balance, 4Q Surv -$130.0b Prior -$124.8b

Canadian Economic Data

8:30 AM Int’l Merchandise Trade, Jan Surv -3.55b Prior -4.59b

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, Émile Bordeleau

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.

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