Comments

Market Update

Tsys trading lower, near bottom of overnight range on moderate vol in TY futures, US 10Y 2.50%. Equities higher in Europe, S&P futures slightly neg (-0.2%), crude unch. Fed chair Yellen speaking at 1:00pm, Lacker & Evans before that.  Core Euro bonds mixed, bund yields 1-4bps higher, 10Y 0.35% (+4bps). Gilts outperforming bunds & tsys on surprise decline in Feb UK service PMI to a six month low, 53.8 from 55.5. GOCs lower, spds unch vs tsys despite the pullback in the US – which may just be a pause after 12-15bps of outperformance just this week driven by the belly of the GOC curve with 5s @85bps thru the most expensive since Dec. Long end also doing well this week with 10s30s 2bps flatter. Provis better bid this morning, Ont 48s 84/83 after closing 1bp tighter yest. PQ issued longs yest @87 now 86/85 or 2/1 vs Onts.

News headlines 

Futures dip ahead of Yellen’s speech (Reuters) U.S. stock index futures were down for the second straight day since January on Friday, ahead of Federal Reserve Chair Janet Yellen’s speech, which is expected to give further clarity on the possibility of an interest rate hike later this month. Yellen is set to speak at 1:00 p.m. ET (1800 GMT) at the Executives Club of Chicago. Her speech comes after several other Fed officials this week stoked market expectations for a March rate hike.

A Fit U.S. Shale Industry Challenges OPEC Once Again (Bloomberg) When the who’s who of the oil industry met a year ago in Houston, Saudi Arabia’s energy minister had harsh words for U.S. shale drillers struggling with the worst price crash in a generation. “Lower costs, borrow cash or liquidate,” said Ali Naimi, who managed the world’s largest oil-exporting business for more than two decades.

Euro zone private sector business growth near six-year high (Reuters) Euro zone private sector business activity rose at its quickest pace in nearly six years in February, accelerating across all major economies with job creation reaching its fastest in almost a decade, surveys showed on Friday. The data, which came alongside news on Thursday that euro zone inflation had just surpassed the European Central Bank’s target, could pose a challenge to policymakers in how to explain leaving monetary policy unchanged even as the economy picks up sharply.

U.K. Economy May Be Heading for a Slowdown as Services Weaken (Bloomberg) The U.K. may be heading for its weakest growth in a year, possibly heralding the start of a Brexit-induced slowdown. IHS Markit’s gauges for manufacturing and the dominant services sector fell in February, with both readings coming in below economists’ median forecasts. While the construction index rose, that wasn’t enough to stop the composite Purchasing Managers Index falling to a six-month low of 53.8 from 55.5.

Quebec Eyes More Foreign Bond Sales as Local Market Gets Crowded (Bloomberg) Quebec may issue more bonds in foreign currencies as the federal government and other provinces crowd the Canadian debt market. “It’s probably a share of our activity that’s bound to increase in coming years,’’ Finance Minister Carlos Leitao said in an interview in Montreal Thursday. “There’s going to be a lot of Canadian products in the market, so to see what’s going on abroad is never a bad idea.’’

Climate change will have ‘pervasive effects’ on economy, Bank of Canada deputy governor says (TheGlobeAndMail)  Canada’s economy is already taking a hit from global warming, including more frequent droughts and forest fires plus a burst of carbon-tax-induced inflation, a top Bank of Canada official says. “Climate change and actions to address it will have material and pervasive effects on Canada’s economy and financial system,” deputy governor Timothy Lane said in a speech in Montreal Thursday.

Overnight markets 

Overview: US 10yr note futures are down -0.038% at 123-15, S&P 500 futures are down -0.16% at 2378.25, Crude oil futures are up 0.44% at $52.84, Gold futures are down -0.32% at $1229, DXY is down -0.39% at 101.8, CAD/USD is up 0.01% at 0.7467.

US Economic Data

Canadian Economic Data

There is no major economic news.

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 lower again this morning, follow thru from Wednesday’s ‘risk on’ related selloff, the 10Y 2.48 (+2.5bps), prices at the lows of the session after a surprise drop in claims (-19k) to 225k the lowest since .  Core Euro bonds seeing some steepening pressure, German bund curve ~5bps steeper, Eurozone inflation reached 2.0% (as exp) for the first time in four years in Feb. Fed gov Brainard in a speech last night advocated removal of accommodation soon, veering away from her usual dovish outlook , saying the US economy ‘appears to be in transition’. Current mkt expectations are ~80% for a rate hike at the March meeting from 30% two weeks ago.  GOCs slightly lower, lagging the decline in tsys by ~1bp, 10s outperforming on the curve after Dec GDP camein as exp 0.3% (2.0% y/y vs 1.7% exp) The BOC auctions $3.0bln in June 27s at noon with roll unch 11.6/11.5., relatively stable in contrast to the steady widening in the 10Y roll of late which for us makes it difficult to get to excited about the June 27s with 10Y yields close to the middle of the 20bp rnage 1.60-1.80%. Provis closed beter bid yest Alberta in blackout now, Ont/QC pre funded to great extent.

News headlines

Dollar rises, global stocks hold highs on March Fed rate hike bets (Reuters) European stocks held near 15-month highs and the dollar strengthened against other top global currencies on Thursday on growing expectations that the U.S. central bank will raise interest rates later this month.

Euro-Area Inflation Hits 2 Percent as ECB Debates Policy (Bloomberg) Euro-area inflation accelerated to the fastest pace since January 2013, providing fresh arguments to those calling for an exit from the European Central Bank’s monetary stimulus program.

Oil down on record U.S. crude stocks, flat Russian output (Reuters) Oil prices fell on Thursday after U.S. crude stocks hit an all-time high and official data showed Russian oil production unchanged in February, with no further cuts to tighten the market and drain global oversupply.

Data-Dependent Yellen Running Out of Reasons to Hold Rates Still (Bloomberg) By most real indicators, the U.S. economy is not too hot or cold, yet financial markets are betting that a core group of Federal Reserve officials who set interest rates are suddenly raring to go.

Valeant’s new bonus math puts debt holders in driver’s seat (TheGlobeAndMail)  Valeant Pharmaceuticals International Inc. shareholders, slide over: Debt holders are driving the bus. The drug maker has changed how it calculates executive cash bonuses. Their incentives are no longer tied to adjusted earnings per share, which were used as an executive incentive when the company was a market darling. The bonuses will now be pegged to Ebitda – earnings before interest, taxes, depreciation and amortization – which, as it happens, is also a metric watched by its creditors.

TD wraps up Canda’s bank earnings parade with another beat and dividend hike (Financial Post) Toronto-Dominion Bank reported quarterly earnings ahead of market expectations, helped by a strong performance by its retail banking businesses in the United States and Canada.

Overnight markets 

Overview: US 10yr note futures are down -0.063% at 123-21, S&P 500 futures are down 0% at 2393.5, Crude oil futures are down -1.58% at $52.98, Gold futures are down -0.81% at $1239.9, DXY is up 0.27% at 102.05, CAD/USD is up 0.24% at 0.7486.

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 sharply lower yields 3-5 bps higher wit the 10Y 2.435% (+4.3bps). Tsys fell to the lows of the o/n range after strong German CPI data and have accelerated lower despite less than expected Jan core PCE (1.9% y/y vs 2.0%).  Selling started late yesterday aft on hawkish comments from Fed Dudley & Williams , March rate hike prob rising to 80% from 50%, volumes on the TU (2Y) future ~4x avg after fedspeak. Selling in TY futures accelerating overnight as equity futures rose on Trump risk on rally, outlines of $1trln infrastructure spending. Bunds weaker, the 10Y bund contract worst day since Jan 25th on heavy volume. GOCs lowers on par the decline in tsys. Yesterday aft saw index buyers come in and push spreads 5-7 bps tighter as the US sold off on hawkish fed, with 10s30s 1.5bps flatter @ 71.5 as solid bid emerged for longs post 4:00pm. This morning longs outperforming on the selloff, 10s30s 70/69 and off the run long rolls getting lifted (37/33s, 29/26). BOC at 10:00am, expected to retain cautious tone despite signs the economic rebound is gaining momentum, inflation pressures building thou mostly due to strength in energy prices. The BOC auctions $3.0bln in reopened June 27s tommorrow with the J27/10Y roll 11.7/11.6 fairly steady even as the 10Y roll (26/25) has widened considerably (3bps) over the past three months. 10Y absolute yields back to the middle of the range 1.60-1.80% after the move yest & this morn. Provis ended month end yest better bid  , 2 deals Alberta 10s & mani longs.

News headlines 

Focus Turns to Fed as Dollar Gains, Bonds Drop: Markets Wrap (Bloomberg) Investors moved on from President Donald Trump’s address to Congress, shifting their focus to the timing of a U.S. rate increase as the dollar strengthened, stocks advanced and bonds fell. Robust factory data from China spurred gains in metal prices. The Bloomberg Dollar Spot Index climbed the most in a month, the yield on 10-year Treasuries rose to a week-high and European banking stocks surged after odds jumped for a Federal Reserve rate increase this month. Shares of commodity producers found support from a report indicating improving health for Chinese manufacturing which also helped prices for raw material exports.

In speech, Trump tries to turn from divisive to deal-maker (Reuters) U.S. President Donald Trump showed a different side in his first address to Congress. This Trump was part deal-maker, part salesman, asking for unity and trying to repackage his populist message in more palatable terms

Oil inches up as OPEC sticks to output pledges (Reuters) Oil edged higher on Wednesday as investors took heart from strict OPEC compliance with its pledge to cut output, although evidence of increasing U.S. production capped gains. The Organization of the Petroleum Exporting Countries reduced its oil output for a second month in February, a Reuters survey found, showing the exporter group has boosted already strong compliance to around 94 percent.

China February official manufacturing PMI rises to 51.6, beats forecasts (Reuters) Activity in China’s manufacturing sector expanded faster than expected in February, an official survey showed on Wednesday. The official Purchasing Managers’ Index (PMI) rose to a three-month high of 51.6 in February, compared with the previous month’s 51.3, and above the 50-point mark that separates growth from contraction on a monthly basis.

German inflation hits 4-1/2 year high in February (Reuters) German inflation accelerated further in February, reaching its highest level in four-and-a-half years and surpassing the European Central Bank’s price stability target of just under 2 percent, preliminary data showed on Wednesday. German consumer prices, harmonized to compare with other European countries (HICP), rose by 2.2 percent on the year after an increase of 1.9 percent in January, the Federal Statistics Office said.

Fed officials jolt market with talk of pending interest rate hike (TheGlobeAndMail) A handful of Federal Reserve policy makers on Tuesday jolted markets into higher expectations for a March U.S. interest rate increase, with comments that suggested rate-setters are worried about waiting too long in the face of pending economic stimulus from Washington.

National Bank’s profit handily beats estimates (TheGlobeAndMail) National Bank of Canada reported a better-than-expected quarterly profit on Wednesday, largely boosted by its wealth management and personal and commercial businesses. Canada’s sixth-largest bank said net income in its personal banking and commercial business rose 18.3 per cent to $213-million, helped by higher personal mortgage lending.

Overnight markets 

Overview: US 10yr note futures are down -0.727% at 123-22, S&P 500 futures are up 0.74% at 2380.25, Crude oil futures are up 0.3% at $54.17, Gold futures are down -1.05% at $1240.7, DXY is up 0.77% at 101.9, CAD/USD is up 0.2% at 0.7503.

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