US tsys higher, curve flatter, US 10Y 1.87% (-2bps). Core European bonds higher, in catchup mode after holiday yest. Fed chair Yellen to speak at 12:20 EST and 1:00PM $34bln 5Y auction. Light data calendar today but heats up the rest of the week with ISM man & jobs report Friday. S&P futs at the low of the session after early morning weakness after SF Fed Willieams reiterated he sees gradual rate hikes. GOCs higher , spds ~1bp wider vs tsys,muted reaction to lower raw materials/IPPI data. Provis starting the day better offered, after finishing 0.5bps wider in light trade yest.
- Crude Oil Extends Declines, Weighing on Stocks as Bonds Advance (Bloomberg) Oil led commodities lower, pulling down the currencies of raw-material producing nations and helping lift government bonds. Futures on the Standard & Poor’s 500 Index retreated as crude slipped through $39 a barrel in New York in a fourth day of losses. Euro-area sovereign securities climbed as lower energy prices dimmed the outlook for inflation and the European Central Bank prepared to increase its asset-purchase plan by 20 billion euros ($22 billion) a month in April. Treasuries advanced before a speech from Federal Reserve Chair Janet Yellen and several key pieces of economic data this week culminating in payrolls figures.
- Dollar Pares Drop Before Yellen’s Speech and Confidence Report (Bloomberg) A gauge of the dollar pared its biggest one-day decline in more than a week as the market awaited a speech by Federal Reserve Chair Janet Yellen that may provide more clarity about how she sees the economy. The U.S currency gained versus half of its 16 major peers before a report on Tuesday which economists forecast will show consumer confidence improved in March.
- Bank of England Raises Buffer Rate as Stability Risks Grow (Bloomberg) The Bank of England said banks should begin building up capital earmarked to support lending when the economy turns down, as the outlook for U.K. financial stability worsens. The BOE’s Financial Policy Committee raised the countercyclical capital buffer rate for U.K. exposures to 0.5 percent of risk-weighted assets from zero, becoming binding from March 29 next year. The buffer applies to U.K. banks and building societies, as well as to branches of other European Union banks that lend into the country.
- Abe Says Japanese Government Will Front-Load Budget Spending (Bloomberg) The best way to boost the economy is to quickly implement the existing budget for the next fiscal year, Prime Minister Shinzo Abe said Tuesday, rejecting speculation he would announce a supplementary spending package. Speaking after the parliament passed a record 96.7 trillion yen ($850 billion) in outlays for the 12 months starting April 1, Abe brushed off suggestions from some members of the ruling party that the government may announce another 10 trillion yen of fiscal stimulus.
- Fed’s Williams urges U.S. central bank to stay on track with rate rises (Reuters) The U.S. economy remains on track for a gradual path of rate hikes and fears over the impact of a slowing global economy and bouts of financial volatility are overdone, San Francisco Federal Reserve President John Williams said on Tuesday. “Others’ economic fates do not spell our own,” Williams said in prepared remarks before an audience at the National University of Singapore. “My view is essentially, let’s just stay on track. Let’s not get sidelined by the noise and distraction commentary can sometimes cause.”
- China March official factory PMI: activity seen contracting at slower pace (Reuters) Activity in China’s manufacturing sector likely shrank for an eight straight month in March, but at a slower pace than in February as a reviving property market gave a much-needed boost to sales of steel and other construction materials, economists polled by Reuters said. The official manufacturing Purchasing Managers’ Index (PMI) is expected to rise to 49.3 in March from 49.0 a month earlier, according to a median forecast of 32 economists in a Reuters poll. February’s reading was the weakest since November 2011.
- Automakers Expanding in China May Soon Face Weakening Demand (NYTimes) The new $1.3 billion Cadillac factory on the outskirts of Shanghai is a shrine to modern manufacturing, the kind of facility that automakers all over the world dream of building but can seldom afford. Hundreds of robots bend, arch and twist to assemble the body of Cadillac’s new flagship CT6. Lasers seal the car’s lightweight aluminum exterior using techniques that the carmaker, General Motors, has only just introduced in the United States.
- Financial sector confidence about UK economy drops sharply (TheGuardian) Fears over the UK’s faltering economic outlook have been underlined by a survey showing a sharp drop in confidence among financial services firms, against the backdrop of the Chinese slowdown and the EU referendum. Optimism among companies in the UK’s financial sector has fallen at the fastest rate since 2011, reflecting a backdrop of tumultuous markets and worries about a global economic slowdown. The downbeat outlook from one of the UK’s key sectors – which accounts for around 10% of GDP – will add to fears that the economy will slow this year amid global pressures and domestic challenges. The survey also indicated that banks in the UK are preparing to cut more jobs.
- OECD’s Gurria Calls for Demand-Side Measures to Spur Inflation (Bloomberg) A shift away from supply-side measures toward those that foster demand is needed to better address global worries about deflation, the Organization for Economic Cooperation and Development’s secretary general said. “A lack of demand means you have to do something on the other side — we’ve been focusing on the supply side for many years,” Angel Gurria said in an interview with Tom Keene and Francine Lacqua on Bloomberg Surveillance on Tuesday. “We should be worried about deflation.”
- Yahoo sets April 11 deadline for preliminary bids: WSJ (Reuters) Yahoo Inc (YHOO.O) has set an April 11 deadline to submit preliminary bids for its web business and Asian assets, The Wall Street Journal reported on Monday, citing sources. Yahoo asked bidders details regarding financing, conditions or approvals that would have to be met on their end, and what key assumptions they would be making by deciding to move forward with a deal, the Journal said, citing a letter sent to possible bidders.
- Buffett boosts Berkshire’s Wells Fargo stake to 10 percent (Reuters) Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) on Monday said it has increased its ownership stake in Wells Fargo & Co (WFC.N) to 10 percent, a level that could mean increased federal scrutiny over the investment. Berkshire owns 506.3 million shares of Wells Fargo, worth about $24.7 billion, mainly through subsidiaries, according to filings with the U.S. Securities and Exchange Commission. The ownership stake has risen from 6.5 percent at the end of 2009 and 9.8 percent as of Dec. 31, according to Buffett.
- Overview: US 10yr note futures are up 0.1449% at 129-19, S&P 500 futures are down -0.26% at 2022.75, Crude oil futures are down -2.59% at $38.37, Gold futures are down 0% at $1222, DXY is down -0.08% at 95.869.
US Economic Data
- S&P / Case-Shiller US HPI MoM Sa will be released at 9:00 AM
- S&P / Case-Shiller 20-City Index NSA will be released at 9:00 AM
- S&P / Case-Shiller Composite-20 YoY NSA will be released at 9:00 AM
- Consumer Confidence Index will be released at 10:00 AM
Canadian Economic Data
- Industrial Product Price MoM variation was -1.1%, worse than expected and down from prior month
- Raw Materials Price Index MoM variation was -2.6%, worse than expected and down 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