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Market Update

Tsys sharply lower after huge Feb ADp (298k vs 187k), yields 3-4 bps higher, 10Y at 2.56% above 2.55 resis. from Jan 26th,volume in TY futures heavy TYM7 taking out the lows for the year at 123-00.  Tsys weaker thru Asia session, selling picking up in Europe with bunds offered on better Jan. Ind Prod data & supply (uncovered bund auction). The bund curve ~3 bps steeper with the short end pinned by ECB buying, the 2Y -0.88%, 10s @0.352%. Gilts softer on UK spring budget statement as borrowing set to decline on stronger growth (2017 – 2.0% vs 1.4% in Nov). GOCs lower in line with tsys, 10Y 1.778% close to 1.80% high from Feb 15th.  Housing Starts rose for a third month in Feb by 0.6% to 210.2k vs 207.4k exp. Busy day for primary issuance in Cda yest – $2.75 bln /3 deals including $1.5bln RY 5Y dep note @ 81. Husky issued $750mln 10s @ 180 (188 vs 10Y) – the tighter end of guidance yet bonds broke 5-7 tighter. Nissan Cda issued $500mln 2Y FRN & 3Y fixed @ 80.6. The mkt had problem digesting supply – theres been a lack of bank issuance and CIBC & RY have $4.55bln in dep notes rolling out of the index this week and next.

News headlines 

Gundlach Predicts `Old School’ Fed Will Do Sequential Hikes (Bloomberg) The Federal Reserve is likely to begin raising rates sequentially as inflation and growth speed up, according to Jeffrey Gundlach, manager of the DoubleLine Total Return Bond Fund. “There’s starting to become a sequential type of Fed pattern,” Gundlach, chief executive officer of Los Angeles-based DoubleLine Capital, said during a webcast Tuesday. “It’s almost old school.”

Hammond Presents Upbeat Picture as Britain Braces for Brexit (Bloomberg) Chancellor of the Exchequer Philip Hammond will say Britain is well placed to weather the challenges of Brexit as he pledges to take the decisions needed to prosper outside the European Union. In his Spring Budget on Wednesday, Hammond will deliver an upbeat assessment of the future as Prime Minister Theresa May prepares to trigger formal talks with the EU this month. While the need to continue reducing the deficit means difficult decisions on tax and spending, investment remains a priority and the government will help ordinary working families still suffering from the effects of the 2008 financial crisis, the Treasury said in a briefing note.

Hammond Seen Cutting Gilt Sales to Decade-Low in First Budget (Bloomberg) U.K. Chancellor of the Exchequer Philip Hammond may deliver a boost for bondholders in his first budget, with analysts forecasting gilt issuance in the next fiscal year at its lowest since the financial crisis a decade ago. The Debt Management Office will sell 109.7 billion pounds ($134 billion) of gilts in the year starting April, compared to 146.5 billion pounds in the current fiscal year, according to the median prediction of 14 primary dealers surveyed by Bloomberg. With Britain’s economic data beating expectations since the decision to leave the European Union, analysts see improved growth projections, reducing the need to borrow in Wednesday’s budget.

China posts first monthly trade deficit in three years as imports soar (Reuters) China unexpectedly posted its first trade gap in three years in February as a construction boom pushed imports much higher than expected and as increasing U.S. protectionist rhetoric casts a spotlight on the export giant’s trade position. The upbeat import reading reinforced the growing view that economic activity in China picked up in the first two months of the year, adding to a global manufacturing revival. That could give China’s policymakers more confidence to press ahead this year with oft-delayed and painful structural reforms such as tackling a rapid build-up in debt.

Japan Is Poised for Its Longest Run of GDP Growth in a Decade (Bloomberg) Global tailwinds look set to sustain Japan’s modest recovery in 2017, as exports prop up an economy that’s still struggling to stoke domestic demand. Wednesday’s upward revision of gross domestic product in the final three months of last year sets the scene for a fifth-straight period of growth — the longest streak since the six quarters of gains to mid-2006.

Mnuchin’s Treasury Staff Picks Stall as White House Scrutinizes Tweets (Bloomberg) Steven Mnuchin’s picks for the top ranks of the U.S. Treasury are stalled due to resistance from White House aides, including one recruit whose Twitter account was scrutinized for potential criticism of Donald Trump, according to people familiar with the matter.

OPEC Said to Break Bread With Shale in Rare Show of Détente (Bloomberg) For the last two years, they’ve been locked in a battle for supremacy of the oil market. But for a couple of hours in Houston over dinner on Sunday, the head of OPEC and leaders of some of America’s top shale producers shared a table for a rare off-the-record chat about the future of oil.

Ivey purchasing index slows in February as material prices cool (TheGlobeandMail) The pace of purchasing activity in Canada slowed in February, driven by a decline in prices paid by companies for materials, according to Ivey Purchasing Managers Index data released on Tuesday. The seasonally adjusted index fell to 55.0 from 57.2 in January, though the unadjusted index rose to 55.1 from 52.3. A reading above 50 indicates an increase in the pace of activity.

Overnight markets 

Overview: US 10yr note futures are down -0.38% at 122-32, S&P 500 futures are up 0.08% at 2368.5, Crude oil futures are down -1.22% at $52.49, Gold futures are down -0.48% at $1210.3, DXY is up 0.21% at 102.02, CAD/USD is up 0.34% at 0.7431.

US Economic Data 

Canadian Economic Data

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

Market Update

Tsys slightly lower in NA trading with the 10Y 2.505%, curve ~0.5bps flatter in a narrow range .  EGBs higher outperforming on weaker data bund curve steeper on long end supply. Tsys still pressured by huge IG supply – $22bln yest with 11 issues. Meanwhile expectations for March rate hike weighing on the front end of the curve.  GOCs lower in line with tsys, 10Y 1.72%, 10s30s flatter for second day @ 69.2. Husky (Alow/BBB+) in the mkt with a 10Y @~183 which looks fair with Husky 25s trading in the ~150 area.

News headlines

Trump signs revised travel ban in bid to overcome legal challenges (Reuters) President Donald Trump signed a revised executive order on Monday banning citizens from six Muslim-majority nations from traveling to the United States but removing Iraq from the list, after his controversial first attempt was blocked in the courts. The new order, which takes effect on March 16, keeps a 90-day ban on travel to the United States by citizens of Iran, Libya, Syria, Somalia, Sudan and Yemen. It applies only to new visa applicants, meaning some 60,000 people whose visas were revoked under the previous order will now be permitted to enter.

Euro-Area Growth Boosted by Domestic Demand as Trade Dragged (Bloomberg) Domestic spending drove euro-area growth in the fourth quarter of 2016, with trade damping output. Gross domestic product rose 0.4 percent, matching earlier estimates and the rate of expansion in the previous quarter. Household consumption added 0.2 percent point to growth, while government spending and investment contributed 0.1 point each, the European Union’s statistics office said on Tuesday.

China FX reserves rebound above $3 trillion in February, first rise in eight months (Reuters) China’s foreign exchange reserves unexpectedly rose for the first time in eight months in February, rebounding above $3 trillion as a regulatory crackdown and a steadying yuan helped staunch capital outflows. The rebound in reserves could ease fears in global markets that China will engineer another sharp one-off devaluation of the yuan, which would run the risk of inflaming trade tensions with the new U.S. administration under President Donald Trump. Reserves rose $6.92 billion during February to total $3.005 trillion, their first increase since June 2016, central bank data showed. That compared with a drop of $12.3 billion in January, when reserves fell to $2.998 trillion.

House Republicans reveal bill to repeal and replace Obama’s healthcare law (The Guardian) After weeks of promises, Republicans unveiled a bill to repeal the Affordable Care Act (ACA) with a plan that shrinks the government’s role in healthcare, and could leave more Americans without health insurance. Called the American Health Care Act, the bill would eliminate the individual mandate, which required Americans to have health insurance or pay a fine; cut the number of people insured under Medicaid; and allow insurance companies to charge the elderly up to five times more than the young. The bill would require insurers to cover so-called pre-existing conditions, but would allow them to add a 30% surcharge to premiums if people go without insurance for too long.

Iraq, Angola Signal Willingness to Extend OPEC Oil Output Cuts (Bloomberg) The Middle East producer cut the pricing for some of its April oil sales to Asia, surprising customers who were expecting an increase that was signaled by the structure of the market. That shows it’s trying to lure buyers toward its lighter and less sulfurous crude varieties at a time when similar-quality grades are rushing to the region from the Americas, Europe and Africa.

Australia Holds Rates as Sydney Housing Poses Stability Risk (Bloomberg) Australia kept interest rates unchanged Tuesday as risks from Sydney’s soaring property prices outweighed subdued inflation. Reserve Bank of Australia Governor Philip Lowe and his board left the cash rate at 1.5 percent following strong growth and trade performances in the final three months of last year. The decision was expected by all 29 economists surveyed by Bloomberg.

Overnight markets 

Overview: US 10yr note futures are down -0.088% at 123-16, S&P 500 futures are down -0.16% at 2371.75, Crude oil futures are up 0.79% at $53.62, Gold futures are down -0.41% at $1220.5, DXY is up 0.17% at 101.81, CAD/USD is down -0.03%at.7458.

US Economic Data

Canadian Economic Data

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

Market Update

Tsys bid in NA trading, yields 1-2bps lower with the 10Y 2.465 (-1.5bps) as S&P futures move lower, crude -0.56%, gold futures +6. Core Euro bonds mixed – 10Y bund yields ~3bps lower @ 0.32% despite better Construction & retail PMIs, while gilt 10Y yield 1bp higher @ 1.192%. FTQ bid in tsys as congress will investigate Trump’s wiretap claims. Weakness in gilts on more uncertainty over French election – Alain Juppe will not run for pres, raising likelihood of Le Pen win, thou l.t. French yields are barely 1-2bps higher mostly in the long end.  The latest CFTC COT report showed the largest divergence on the outlook for 10Y rates since 2012 with large specs extending record net short positions (327k) while asset manager net long rose to the highest in a year based on data for Feb 28th.  GOCs higher, outperforming tsys across the curve. Monetary policy divergence a big factor in last week’s 12 bp narrowing in 5s (84bps thru tsys) with Yellen signalling a March hike is in the cards while the BOC statement was decidedly dovish looking past the uptick in inflation. The BOC auctions $3.3bln in 3Y bonds (March 20s) with the Mar20/2Y roll trading up @ 14.4 this morning.  Provis  0.5bps wider ,  domestic bank supply rumoured, Molson Coors in the US mkt with $1bln in 2Y & 3Y notes IPT t+ 75/80, 85/90 which translates into GOC +60, GOC + 83. The CAD TAP 2.75 20 are G-103 or 20 back of US issue.

News headlines 

Yellen Says March Hike ‘Likely Appropriate’ If Progress Persists (Bloomberg) Federal Reserve Chair Janet Yellen capped a week of rising expectations about an imminent interest-rate increase by explicitly supporting a hike in mid-March if U.S. economic progress persists. “At our meeting later this month, the Committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate,” Yellen said in the text of a speech Friday at the Executives’ Club of Chicago.

Dollar Bulls Despair as March Fed Hike Looks Like It’s Baked In (Bloomberg) The heightened confidence about March may actually spell trouble for dollar bulls in coming days — there’s little in the way of fresh incentives to buy more of the U.S. currency right away, after it surged to an almost six-week high last week. Fed speakers are now in a blackout period until their March 14-15 meeting, and for major economic data, traders have to wait for February jobs figures to be released March 10.

China Eases Fiscal Stance to Meet Slower 2016 Growth Target (Bloomberg) China unveiled a record fiscal deficit and pledged to accelerate the restructuring of its bloated state-owned industries while still setting a weaker growth target for this year. Premier Li Keqiang announced a 6.5 percent to 7 percent expansion goal Saturday, down from an objective of about 7 percent last year and the first range the government has offered since 1995. The government also abandoned its trade target, underscoring the degree of uncertainty about prospects for global growth. The details were given in Li’s work report at the annual meeting of the ceremonial legislature in Beijing. The plan reflected the government’s determination to maintain growth and put off confronting its debt — now nearly 250 percent of gross domestic product. The report also cited downward pressure on the economy against a backdrop of weaker global growth.

Deutsche Bank shares drop on capital hike plan (GlobeandMail) Shares in Deutsche Bank fell almost 7 per cent in early trading on Monday after the lender announced an €8-billion ($8.48-billion) capital increase that Chief Executive John Cryan had previously declared a last resort. The capital hike is its fourth since 2010. Together with a partial listing of the asset-management unit and a sale of other assets, the move should take its core capital ratio – a key measure for regulators – above 13 per cent from 11.9 per cent at end-2016. Germany’s biggest lender, weighed down by litigation costs and writedowns, has fallen behind Wall Street rivals. It has spent the last 18 months trimming its portfolio, throwing out bad clients and trying to get its technology into shape.

PSA targets Opel turnaround as GM exits Europe (Reuters) France’s PSA Group has agreed to buy Opel from General Motors in a deal valuing the business at 2.2 billion euros ($2.3 billion), creating a new European car giant to challenge market leader Volkswagen. The maker of Peugeot and Citroen cars vowed to return Opel and its British Vauxhall brand to profit, targeting an operating margin of 2 percent within three years and 6 percent by 2026 underpinned by 1.7 billion euros in joint cost savings.

Standard Life, Aberdeen agree to $13.5-billion merger (GlobeandMail) Standard Life is to buy Aberdeen Asset Management in an £11-billion ($13.5-billion) all-share deal that should save £200-million a year in costs, pushing rivals to follow suit as fund managers’ margins sag. The merger, creating Britain’s biggest money manager with £660-billion in assets, values Aberdeen around £3.8-billion based on its closing share price on Friday. The tie-up follows an industry shift towards rivals providing low-cost index-tracking products and away from so-called active investment management, which charges customers higher fees.

Greece desperate for growth strategy as public mood darkens (TheGuardian) In the long and winding road of Greek debt drama, disappointment and hope have been the alternating emotions that every government has faced. With the nation’s crisis no nearer to being resolved than when it erupted seven years ago, negotiations with creditors at another critical juncture and Europe engulfed in uncertainty, the need for hope has never been greater.

Funds expect Saudi Aramco to be valued around $1-1.5 trillion (Reuters) Fund managers and institutional investors expect oil giant Saudi Aramco to have a market capitalization of $1 trillion to $1.5 trillion when it sells shares to the public next year, a survey by regional investment bank EFG Hermes showed on Monday. The valuation of Aramco IPO-ARMO.SE, the world’s biggest oil firm, has been the focus of intense speculation since the Saudi government last year announced plans to sell up to 5 percent of it and list the shares in Riyadh and at least one foreign stock exchange.

Overnight markets 

Overview: US 10yr note futures are up 0.089% at 123-22, S&P 500 futures are down -0.31% at 2373.75, Crude oil futures are down -0.23% at $53.21, Gold futures are up 0.57% at $1233.5, DXY is down -0.06% at 101.48, CAD/USD is up 0.08% at 0.747.

US Economic Data

Canadian Economic Data

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