Market Update Tsys trading higher, 10Y 2.88 (-1bp) – no reaction to Q4 GDP revision (2.5% vs 2.6% initial reading). Tsy prices supported by sharp rise in UK gilts after the release of the latest EU Brexit proposal – gilt yields 3-4bps lower. Big slide in Asian equities, Nikkei -1.44% after Fed Powell’s hawkish testimony, European stocks -0.30%, while S&P futures are +2.75. GOCs are higher, outperforming tsys by 1bp, 10Y 2.25%. The BOC auctions $3.0bln 2Y bonds at noon – reopening of the 1.75% May 1 2020 issue- – which should do well in the context of reduced bond issuance outlined in yesterday’s budget. Month end extensions also a factor with March 1st cpn payments. Expect more corp issuance after another day in primary yest – $2.2bn including $1.25bln BMO dep note and 2 tranche $740mln Bruce Power deal .
News headlines
Stocks, Treasuries Sink on Hawkish Powell Remarks: Markets Wrap (Bloomberg) U.S. stocks sold off for the first time in three sessions and Treasuries slumped as investors weighed the potential for added interest rate hikes this year following Federal Reserve Chairman Jerome Powell’s assessment that the economy is strengthening and inflation could be gaining speed. The dollar advanced.
Slowing Euro-Area Inflation Helps Draghi Push Back Exit Talk (Bloomberg) A third month of slowing inflation in the euro-area has given European Central Bank President Mario Draghi ammunition to ward supporters of a faster stimulus exit a little while longer. The rate of price growth slowed to 1.2 percent this month from 1.3 percent, dropping to its weakest since 2016. The core measure was unchanged at 1 percent. The figures follow a series of releases that have checked the economy’s thundering momentum at the start of 2018, which had emboldened policy makers who want a faster unwinding of the central bank’s crisis-era monetary stimulus.
Mnuchin Says Trump ‘Willing’ to Negotiate U.S. Return to TPP (Bloomberg) U.S. Treasury Secretary Steven Mnuchin said Tuesday he had “begun to have very high-level conversations” on the Trans-Pacific Partnership, and rejoining the regional trade pact is an option for President Donald Trump. Trump repeatedly attacked the TPP deal on the campaign trail and pulled the U.S. out of it soon after he took over early last year. However, last month he expressed openness to rejoining if the terms were improved. Mnuchin told the U.S. Chamber of Commerce in Washington that this was significant.
U.K.’s May Is Ready to Fight With EU Over Draft Brexit Deal, Official Says (Bloomberg) Prime Minister Theresa May is preparing to reject the European Union’s draft Brexit deal when it’s published Wednesday, a senior official said, as her government steps up its fight with the bloc over the terms of Britain’s departure.
Toronto’s housing supply challenge and the growth plan paradox (Reuters) Toronto, Canada’s largest city and one of the world’s hottest property markets, has a supply problem and the nation’s housing agency admits it is not quite sure why soaring prices have not spurred more construction. New homes replace demolished ones at a sharply lower rate than early this decade, completion times for multi-family projects have doubled and prospective buyers have far fewer new homes to choose from than only a few years ago. The reason, in part, may lie in an ambitious growth plan for the greater Toronto area the Ontario province forged over a decade ago.
Valeant reports profit in fourth quarter on $1.3 billion tax benefit (Reuters) Valeant Pharmaceuticals (VRX.N) (VRX.TO) on Wednesday reported a profit in the fourth quarter compared to a year-earlier loss, as it booked a one-time benefit because of new U.S. tax laws. The Canada-based drugmaker reported a net income of $513 million or $1.45 per share in the quarter ended Dec. 31, compared to a loss of $515 million or $1.47 per share a year earlier.
Hesitant 2018 federal budget sets lofty goals, but light on spending (BNN) Three years into its mandate, the federal government has presented Canadians with a budget perhaps best described as “hesitant” – one that sets lofty ambitions for gender equity, support for the marginally employed and reconciliation with First Nations, but falls short of game-changing spending commitments on those goals.
Overnight markets
Overview: US 10yr note futures are up 0.117% at 120-17, S&P 500 futures are up 0.08% at 2749.75, Crude oil futures are down -0.05% at $62.98, Gold futures are up 0.11% at $1320.1, DXY is up 0.16% at 90.496, CAD/USD is up 0.03% at 0.7825.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.799% | 2 Year | 2.262% |
| 5 Year | 2.067% | 5 Year | 2.657% |
| 10 Year | 2.255% | 10 Year | 2.881% |
| 30 Year | 2.414% | 30 Year | 3.141% |
US Economic Data
| 7:00 AM | MBA Mortgage Applications, Feb 23rd 2.7% (-6.6% prior) |
| 8:30 AM | GDP Annualized QoQ, 4Q 2.5% est 2.5% (2.6% prior) |
| Personal Consumption, 4Q 3.8% est 3.6% (3.8% prior) | |
| GDP Price Index, 4Q 2.3% est 2.4% (2.4% prior) | |
| Core PCE QoQ, 4Q 1.9% est 1.9% (1.9% prior) | |
| 9 :45 AM | Chicago Purchasing Manager, Feb est 64.1 (65.7 prior) |
| 10:00 AM | Pending Home Sales MoM, Jan est 0.5% (0.5% prior) |
| Pending Home Sales NSA YoY, Jan (-1.8% prior) |
Canadian Economic Data
| 8:30 AM | Industrial Product Price MoM, Jan 0.3% est 0.5% (-0.1% prior) |
| Raw Material Price Index MoM, Jan 3.3% (-0.9% 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