cti2015header-morning comments web

Market update

Tsy futures down on light volume due to Memorial Day holiday, TY1 129-08 (-14) on volume of 108k (280k qavg) . Core Euro govt bonds lower , steeper  – supply in the Eurozone this week est at E24bln vs E3.5bln last week, skewed towards the long end according to MNI.  Month end extensons for Europe are higher than avg due to ultra long end supply from Spain & 30Y Belgium. Barclays Euro Treasury index 0.04 yrs – small yet higher than avg, while the CITI &MS EGB duration wil increase 0.09yrs.  In the US the Barclays US Tsy Index rises 0.13yrs., the Agg 0.10yrs. The USD index is higher, stock futures higher after odds of a rate increase by July more than doubled in the wake of Yellen’s remarks on Friday and Q1 GDP cam ein ahead of expectations. GOCs are lower, yields 2bps higher in the 8-10 yr sector, the front month for CGBs is the Sep contract (144.22), with the CTD now the Can 2.25/25. Provis openin unch, supply unlikely yet Ont 10Y rumoured for this week. Issuance picked up last week with fixed & FRN supply totalling $3.7bln including 2 tranche from Union Gas (A/BBB+) – 10Y @ 147, 30Y @ 181 – both 2-3bps tighter than guidance with UOP for repayment of short term and upcoming debt. The bonds immediately went 3bps tighter on the break. We were active in the 10Y.

News headlines

  • Gold Sinks as Dollar Gets Boost From Yellen; European Bonds Fall (Bloomberg) The Fed factor dominated global markets, battering gold, bonds and emerging-market assets, while lifting the dollar. Bullion fell for a ninth day in its longest losing streak in a year after Federal Reserve Chair Janet Yellen said an interest-rate increase is likely in coming months. The dollar strengthened against all but four of its 16 major peers. Treasury 10-year futures slid the most in almost two weeks, German bunds declined and emerging-market currencies headed toward the worst month since August. European stocks swung between gains and losses, with trading volumes less than half the daily average amid market closures in the U.S. and U.K.
  • Yellen Hawkish Turn Sees Treasury Futures Tumble on Memorial Day (Reuters) Treasury 10-year futures contracts fell by the most in more than one week after Federal Reserve Chair Janet Yellen said Friday improvement in the U.S. economy would warrant raising interest rates in the coming months. Ten-year Treasury futures contracts for September delivery slid 14/32, or $4.38 per $1,000 face amount, to 129 9/32 as of 12:21 p.m. in London, based on electronic trading at the Chicago Board of Trade. It was the biggest decline since May 18.
  • Oil Pessimists Exit Market as Supplies Seen Closer to Balance (Bloomberg) The oil market doomsayers are beginning to capitulate. Speculators reduced bets on falling prices to the lowest level in 11 months as oil briefly breached $50 a barrel on signs supplies are coming into balance. Crude climbed 7.4 percent this month in New York amid lower U.S. production and unplanned disruptions in Canada and Nigeria. Prices are up almost 90 percent since February. Money managers’ short position in U.S. benchmark crude reached the least since June, according to data from the Commodity Futures Trading Commission.
  • Suncor Energy Inc resumes oilsands operations after fire shutdown, enabling thousands to return to work (Financial Post) Suncor Energy Inc. restarted oil-sands operations in the Regional Municipality of Wood Buffalo, an area in Canada that includes wildfire-ravaged Fort McMurray. It’s a move that enables thousands to return to work. Suncor and other oil-sands operators took offline this month more than 1 million barrels a day of output, as wildfires spread in the region and forced evacuations and the shutdown of pipelines and power supplies.
  • Japan’s Abe to delay sales tax hike until 2019: government source (Reuters) Japanese Prime Minister Shinzo Abe plans to delay an increase in sales tax by two and a half years, a government official said on Sunday, as the economy sputters and Abe prepares for a national election. Abe told Finance Minister Taro Aso and the secretary general of his ruling Liberal Democratic Party, Sadakazu Tanigaki, on Saturday of his plan to propose delaying the tax hike for a second time, until October 2019, said the official, who was briefed on the meeting.
  • French growth brisker than first thought in first quarter (Reuters) The French economy grew a stronger-then-expected 0.6 percent in the first quarter, official data showed on Monday, driven by a surge in consumer spending and a pick-up in business investment. The brisker growth figures, which augured well for the government’s 1.5 percent target for the full year, were the latest positive developments for the euro zone’s second-largest economy, where unemployment has finally started to decline and consumers are more optimistic despite strikes and protests.
  • Greece tells lenders it can’t implement some extra demands – letter (Reuters) Greece has told its European and International Monetary Fund creditors it cannot implement some of the extra changes sought in exchange for fresh bailout loans, three sources close to the talks said on Monday. The move, if confirmed, could further delay the disbursement of the bailout funds which Athens badly needs to pay off IMF loans in June and European Central Bank bonds maturing in July and increasing state arrears.

Overnight markets

  • Overview: US 10yr note futures are down -0.3614% at 129-8, S&P 500 futures are up 0.21% at 2101.75, Crude oil futures are down -0.18% at $49.24, Gold futures are down -0.58% at $1209.6, DXY is up 0.2% at 95.711.

US Economic Data 

  • There is no major economic for today

 Canadian Economic Data 

  • 8:30 AM: Industrial  Product Price, m/m, April, -0.5%, est. 0.4% (Prior -0.6%)
    • Raw Material Price Index, m/m,  April, 0.7%, est. 1.1% (Prior 4.5%)



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