cti2015header-morning comments web

Market update

US tsys lower this morning, in follow thru to Yellen’s comments Fri afternoon saying it was appropriate for the Fed to raise rates in the coming months. Flows relatively light according to MNI, volume in TY futures   Core Euro bonds lower, curves flatter, pressured by the rise in Asian stocks & surprise fall in German unemployment to a record low 6.1%.  Longer dated bunds supported by month duration buying as the Barclays Euro Tsy index extends 0.04yrs which while quite low (0.11yrs for US tsy index) is larger than normal due to ultra long supply from Spain & 30Y from Belgium. GOCs lower after Mar GDP came in -0.2% vs -0.1% exp. Long end of the curve continues to flatten, long rolls getting lifted – 45/26 @ 62, 37/33 @12.2. Provis opening unch this morn, provis well bid yest in quiet trading with Ont 10s & 30s lifted @93 & 103. Alberta/Ont 46 roll coming in since last week ~2bps now 18.5/17.5. Quebec/Ont rumoured supply this week. In corps bank supply possible as well as autos/reits etc..

News headlines

  • US. Index Futures Are Little Changed as Focus Returns to Data (Bloomberg) U.S. stock-index futures were little changed before data that may indicate how ready the economy is for higher interest rates that could come as soon as next month. Westar Energy Inc. jumped 9.6 percent in early New York trading after accepting a cash and stock offer valued at $8.6 billion from Great Plains Energy Inc. Celator Pharmaceuticals Inc. soared 72 percent after agreeing to a $1.5 billion takeover bid from Jazz Pharmaceuticals Plc. Frontline Ltd. added 1.5 percent after the oil-tanker company posted better-than-estimated first-quarter net income.
  • Treasuries Lose Their Lead Over Shares as Fed Moves Toward Shift (Bloomberg) Treasuries have lost their edge over stocks as the U.S. economy expands enough to push the Federal Reserve toward raising interest rates. U.S. government securities stagnated for a second month in May, leaving them little changed for the second quarter. The S&P 500 Index of shares has returned 2.3 percent since the end of March, based on data compiled by Bloomberg. The figures are a reversal from the first three months of the year, when Treasuries beat stocks. Treasuries fell Tuesday after being closed the previous day.
  • Brent crude lower on strong Middle East oil output (Reuters) Brent crude prices fell on Tuesday on rising output from the Middle East and ahead of an OPEC meeting on Thursday, while U.S. crude edged higher as the summer driving season began. Brent crude oil futures LCOc1 were down 26 cents at $49.50 a barrel by 1056 GMT (6.56 a.m. ET), while U.S. West Texas Intermediate (WTI) crude oil futures CLc1 traded 9 cents higher at $49.42 a barrel. Iraq will supply 5 million barrels of extra crude to its international oil company partners in June, industry sources familiar with the issue said, joining other Middle East producers by lifting market share.
  • Euro-Area Inflation Rate Stays Negative as ECB Mulls Outlook (Bloomberg) Euro-area consumer prices failed to increase for a fourth consecutive month, highlighting policy makers’ struggle to stoke inflation despite multiple rounds of stimulus. Prices fell 0.1 percent in May from a year earlier, the European Union’s statistics office in Luxembourg said on Tuesday. That’s in line with the median estimate in a Bloomberg survey of economists and follows a drop of minus 0.2 percent in April. The unemployment rate held at 10.2 percent last month, according to a separate Eurostat release.
  • German Unemployment Rate Falls to Record Before ECB Meeting (Bloomberg) German unemployment declined more than economists estimated, pushing the jobless rate to the lowest level since reunification. The number of people out of work fell by a seasonally adjusted 11,000 to 2.695 million in May, data from the Federal Labor Agency in Nuremberg showed on Tuesday. The median estimate in a Bloomberg survey was for a decline of 5,000. The jobless rate dropped to 6.1 percent.
  • CMHC trims its exposure to the housing market once again in first quarter (Bloomberg) Canada Mortgage and Housing Corp., the Crown corporation that controls a majority of the mortgage default insurance industry in the country, continues to reduce its exposure to the housing market. CMHC said its total insurance-in-force was $520 billion as at March 31, 2016, a $6 billion decrease from year-end 2015. It has a government limit of $600-billion but continues to reduce the amount it loans to banks.
  • Lost Decade for Value Stocks Tests Faithful Who Say End is Nigh (Bloomberg) Hopes are high again for buying low. Exchange-traded funds that track value stocks, the ones trading cheapest to earnings and book value, have received $5.5 billion of fresh cash in 2016, data compiled by Bloomberg show. The inflows stand out in a market where money is being withdrawn from practically everything else. Growth stocks, enjoying the longest winning streak over value in history, have seen withdrawals of $6.2 billion.

Overnight markets

  • Overview: US 10yr note futures are down -0.2771% at 129-11, S&P 500 futures are up 0.14% at 2100.25, Crude oil futures are up 0.57% at $49.61, Gold futures are down -0.16% at $1214.7, DXY is up 0.01% at 95.531.

US Economic Data 

  •  8:30 AM: Personal Income, April, 0.4%, est. 0.4% (prior 0.4%)
    Personal Spending, April, 1.0%, est. 0.7% (prior 0.1%, revised 0.0%)
    PCE Core, m/m, April, 0.2%, est. 0.2% (prior 0.1%)
    PCE Core, y/y, April, 1.6%, est. 1.6% (prior 1.6%)
  •  9:45 AM : Chicago Purchasing Manager, May, est. 50.5 (prior 50.4)
  • 10:00 AM: Consumer Confidence Index, May, est. 96.3 (prior 94.2)
  • 10:30 AM: Dallas Fed Manufacturing Activity, May, est. -8.0 (prior -13.9)

 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