Market Update
US tsys higher, moving higher with core Euro bonds on Brexit news and Reuters story that the ECB is wary of making a policy change before June. Tsys underperforming EGBs in the rally, US 10Y below 2.40 (2.396 -2bps), 10Y bund ~5bps lower @ 0.337%, 10Y tsy/bund spd widening to 2 week high 205bps. Gilt were actually lower early on yet surged into NY open as mkt turned attention to PM May Article 50 trigger. The US auctions $13bln 2Y FRNs at 11:30 & $28bln in 7Y notes at 1:00, with Fed speakers Evans, Rosengren and Williams. GOCs higher led by 10Y with longs lagging once again, 10s30s at 1mnth highs 69.5, 2Y auction today – $3.9bln reopened Feb 19s with the 2Y roll 2.6/2.1. Provis unch after widening 0.5bps yest despite firmer credit, Ont 27s 77/76, long Alberta 46 still expected. City of Toronto issued $300mln in June 46s at 119 or Onts +31 . National Bank new 5.25Y (June 22) dep note yest – $750mm @ 83.2 which broke 3bps tighter. Quebec budget – no impact on spds, balance budget (3rd in a row) and borrowing to be cut in half for FY 2017/18.
News headlines
Pound Choppy on Brexit Day; European Stocks Drift: Markets Wrap (Bloomberg) European stocks and U.S. share futures struggled for direction as a bounce on optimism over the American economy faded and President Donald Trump battled to revive his legislative agenda. The pound reversed losses as the U.K. started its exit from the EU.
Dollar climbs on Fed talk, sterling pressured by Brexit launch (Reuters) The dollar pulled away from 4-1/2-month lows on Wednesday after solid data backed expectations for more U.S. interest rate hikes this year, while sterling dipped as Britain moved to launch its exit from the European Union.
Oil Gains as Libyan Crude Drop Offsets What OPEC Curbs Couldn’t (Bloomberg) Oil rose after a pipeline halt reduced output in OPEC member Libya, countering concerns that a U.S. surplus shows little sign of diminishing. Libya’s output was said to fall to about 500,000 barrels a day after a pipeline carrying crude from the Sharara field — its biggest — stopped operating.
Huge range of sterling forecasts clouds horizon for Brexit talks (Reuters) While banks warn Britain’s European Union divorce could drive the pound below $1.20, their option traders have cut the cost of insuring against further falls in the two years it has left inside the bloc.
Quebec Cuts Personal, Business Taxes After Balancing Budget (Bloomberg) Quebec will balance its budget for the third straight year, giving Finance Minister Carlos Leitao more room to lower taxes for workers and businesses while increasing spending on transit and health care.
EU vetos Deutsche Boerse-London Stock Exchange merger deal (Reuters) An attempted merger between the German and British stock exchanges was struck down by European regulators on Wednesday, formally ending a deal that unraveled in the wake of Britain’s vote to leave the European Union.
Overnight markets
Overview: US 10yr note futures are up 0.113% at 124-16, S&P 500 futures are up 0.05% at 2352.75, Crude oil futures are up 0.43% at $48.58, Gold futures are down -0.28% at $1255.3, DXY is up 0.33% at 100.04, CAD/USD is down -0.07% at 0.7477.
US Economic Data
| 7:00 AM | MBA Mortgage Applications, Mar 24, -0.8% (prior -2.7%) |
| 10:00 AM | Pending Home Sales, m/m, Feb, est. 2.5% (prior -2.8%) |
| Pending Home Sales NSA, m/m, Feb, (prior -2.7%) |
Canadian Economic Data
There is no major economic news release 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