US tsys higher, US 10Y 1.75% (-1.5bps) in range bound overnite session (TY1 in 5 tick range) , mild risk off tone with European equities slightly down, China CSI Comp -2.3% despite cut in reserve ratio. No big headlines out of G20 meeting just a commitment to spurring growth. Core Euro bonds outperforming in bull flattener on month end duration buying with the 10Y bund @ .114% close to all time low in yield (Apr 15 0.095%). The European bond index extends 0.11yrs which is ‘exceptionally large’ according to MNI. Month end ext also a factor in the US as the Barclays Tsy index extends 0.13yrs but the long Govt/Credit is 0.18yrs. In Canada GOCs are slightly higher, little reaction to higher IPPI, Raw Materials prices. Provis opening 1bp wider after Friday’s rally – expect supply from Ont, Sask and NB. TD issued $1.25bln in 10Y NVCC on Friday @360 (368.7) which closed 361/357.
- S&P 500 Futures Trim Drop as China Boosts Support; Valeant Falls (Bloomberg) U.S. stock-index futures pared earlier losses, following a second weekly gain for the Standard & Poor’s 500 Index, after China’s central bank stepped up efforts to cushion the country’s economic slowdown. S&P 500 contracts expiring in March fell 0.2 percent to 1,938.75 at 7:19 a.m. in New York. They trimmed losses of as much as 0.8 percent after China cut the amount of cash the nation’s lenders must hold as reserve. Dow Jones Industrial Average futures dropped 0.3 percent to 16,558.
- China Stocks Tumble Toward 15-Month Low as Stimulus Bets Unwind (Bloomberg) Chinese stocks fell, with the benchmark index approaching the lowest level since November 2014, as some investors were disappointed by a lack of specific measures to boost growth during the Group of 20 meetings in Shanghai. The Shanghai Composite Index dropped as much as 4.6 percent. The measure has declined 24 percent this year, the worst performer among 93 global equity indexes, on concern capital outflows will accelerate and earnings deteriorate as the economic slowdown deepens. The yuan capped its longest losing streak this year.
- China cuts reserve requirement ratio for fifth time since Feb. 2015 (Reuters) China’s central bank reduced the amount of cash that banks must hold as reserves for the fifth time since February, 2015, as it seeks to revive a stumbling economy. The People’s Bank of China said on its website that it would cut the reserve requirement ratio by 50 basis points for all banks, taking the ratio to 17 percent for the country’s biggest lenders. China last cut the RRR on Oct. 23, when it also reduced interest rates by 25 basis points to rein in financing costs.
- Euro-Area Prices Decline Most in Year as ECB Mulls Easing (Bloomberg) The inflation picture in the euro area deteriorated in February, giving European Central Bank policy makers more bad news to digest just a week before their next meeting. Consumer prices in the 19-nation bloc declined to minus 0.2 percent from a positive reading of 0.3 percent in January, according to data published Monday. Core inflation, which strips out volatile elements such as food and energy, was at 0.7 percent, down from 1 percent in the prior month. Those are the worst readings since February and April of last year, respectively.
- Global shares fall on G20 disappointment, Fed hike prospect (Reuters) Global shares retreated on Monday after a weekend meeting of G20 finance chiefs ended with no new plan to spur global growth and as investors fretted the U.S. Federal Reserve could raise interest rates before year-end. The dollar, however, tumbled against the Japanese yen as investors sought shelter from the fall in equities, which saw Chinese stocks lose nearly 3 percent. Gold, another “safe haven”, rose and was on track for its best month in four years.
- Bullish Oil Bets Rise as Hedge Funds See Supply Tightening (Bloomberg) Talk of an output freeze by OPEC and Russia along with falling U.S. production spurred money managers to bet oil is ready for a rebound. Prices have risen 13 percent since Saudi Arabia, Russia, Venezuela and Qatar tentatively agreed on Feb. 16 to cap production at January levels. U.S. crude output dropped for a fifth week, government data showed Feb. 24.
- Brexit would negatively affect lives of millions, official UK report says (TheGuardian) Car manufacturing, farming, financial services and the lives of millions of Britons living in Europe will all be affected as the UK takes 10 years to extricate itself from the EU, an official report says. The government’s first official analysis into how Brexit would unfold in practice says a decade of uncertainty would hit “financial markets, investment and the value of the pound”. It also warns that the rights of 2 million British expats to work and access pensions and healthcare in EU countries may no longer be guaranteed.
- Overview: US 10yr note futures are down 0% at 130-12, S&P 500 futures are up 0.1% at 1944.75, Crude oil futures are up 1.31% at $33.21, Gold futures are up 0.57% at $1227.3, DXY is up 0.17% at 98.313.
US Economic Data
- ISM Milwaukee will be released at 9:00 AM
- Chicago Purchasing Manager will be released at 9:45 AM
- Pending Home Sales MoM growth will be released at 10:00 AM
- Dallas Fed Manufacturing Activity will be released at 10:30 AM
Canadian Economic Data
- Industrial Product Price MoM growth was released at a level of 0.5% higher than expected by the analysts and up 0.7% from prior month.
- Raw Materials Price Index MoM growth was -0.4%, beating the estimate and up from prior month.
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