Comments

Market Update

US tsys trading higher, yields ~3bps lower, 10Y 2.44%.  Euro govt bonds sharply higher led by 10Y gilts 8bps lower @ 1.36% after the BOE voted to leave rates unch, upgraded its forecast for growth for the second time since Brexit and now sees inflation above the 2.0% target sooner than in its Nov forecast. EGBS, tsys benefitting from dovish FOMC yest & FTQ bid after latest Trump tweets on Iran.  Yesterday saw tsy prices rally after the FOMC statement with few substantive changes thou the Fed did mention that inflation ‘will rise to 2% instead of is ‘expected to rise…” The Fed decided to ignore the upward trend in survey based expectations of inflation as measured by 10Y TIPs as market based indicators such as core PCE & CPI are well below the Fed’s 2.0% target. Importantly there was no mention of reduction in the balance sheet, the statement reiterating existing policy to reinvest principal from its agency & tsy holdings. GOCs higher, curve 1.5bps flatter led by 10Y @1.73%, with the BOC scheduled to auction $3.9bln in new 2Y May 19s at noon. The WI roll is quoted at 5.9/5.8 (vs Feb 19s) which implies a yield of ~0.818% and represents 18.5% of the 2s/5s curve and is consistent with  the ~2.3bp steepening in the benchmark 2Y roll (Feb19/Nov18) since the last auction on Jan 11th. Yet viewed against a 2s/5s curve which has narrowed 2 bps since the last 2Y auction the WI & benchmark 2Y rolls would appear attractive. Provis well bid, Ont 26s trading up at 76.5 – the province’s borrowing program for the current FY is complete after yest $2.5bln USD 5Y deal. Quebec/Ont 10Y spd steady at 2bps.

News headlines 

Dollar Falls as Fed Path Assessed; Stocks Retreat: Markets Wrap (Bloomberg) The dollar slumped against most of its major peers after the Federal Reserve gave dollar bulls little to be optimistic about after the worst January in 30 years. Global equities slid as investors scrutinized mixed earnings from corporate heavyweights.

BOE Sees Stronger Growth as Some Officials Flag Inflation Unease (Bloomberg) The Bank of England upgraded its forecasts for the economy for the second time since the Brexit vote and revealed that some policy makers have become more concerned about accelerating inflation.

Oil up as OPEC cuts outweigh rise in U.S. stocks (Reuters) Oil prices rose on Thursday as evidence that OPEC and other big exporters were cutting production outweighed a sharp rise in U.S. crude and gasoline stockpiles. Brent crude was up 50 cents at $57.30 a barrel by 1145 GMT after settling up $1.22 in the previous session. U.S. light crude gained 30 cents to $54.18 after climbing by $1.07 on Wednesday.

Yellen Eyes Commercial Real-Estate Froth as Fed Weighs ’17 Risks (Bloomberg) A decade after the U.S. housing market collapsed, Federal Reserve officials are watching rising apartment towers as the next potential asset-price bubble, which could add to the debate about the pace of interest-rate hikes this year.

Quebec regulator floats binary-option ban, citing rampant scams (TheGlobeandMail) Quebec’s securities regulator is proposing to ban the sale of short-term binary options to the general public, saying the securities are being used in scams. The Autorité des marchés financiers said Wednesday that it is proposing an outright ban after issuing several warnings to the public about the risks of investing in binary options and seeing fraud continue to emerge.

BCE Inc hikes dividend after earnings climb 30 per cent (Financial Post) BCE Inc. says its common share dividend will be increased by 5.1 per cent this year, starting with the first quarterly payment on April 15, following an improved profit in the fourth quarter and 2016 as a whole. The Montreal-based company, which owns Bell Canada, Bell Aliant and media companies including CTV, says its net income attributable to common shareholders was $657 million in the fourth quarter or 75 cents per share.

Overnight markets 

Overview: US 10yr note futures are up 0.2262% at 124-20, S&P 500 futures are down -0.24% at 2269, Crude oil futures are up 0.45% at $54.12, Gold futures are up 1.58% at $1227.4, DXY is down -0.36% at 99.286, CAD/USD is down -0.44% at 0.7697.

US Economic Data

Canadian Economic Data 

There is no major economic data 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

Market Update

Tsys  lower trading at the low end of o/n range , yields 2-3 bps higher 10Y 2.484%  after ADP came in +246K vs 168K exp. FOMC decision at 2pm, no change expected and there is no news conf yet statement will be closely watched for clues as to timing of future rate hikes. Core European bonds lower, pressured by rise in peripheral yields led by Spain & Italy.  GOCs lower , spds -12 bps wider vs tsys as prices react more to pressure in EU bonds. Provis  unch to start focus on Ontario 5Y global.

News headlines        

Futures rise on Apple rally; Fed meeting in focus (Reuters) U.S. stock index futures rose on Wednesday, in an upbeat start to February, buoyed by strong earnings from Apple, while investors awaited the Federal Reserve’s decision on interest rates.

Oil edges further above $55 on Russia, OPEC cuts (Reuters) Oil edged further above $55 a barrel on Wednesday supported by signs that Russia and OPEC producers are delivering on promised supply reductions, although a report showing a large rise in U.S. crude inventories limited gains.

China January factory activity expands for sixth month at modest pace but risks loom (Reuters) China’s manufacturing sector expanded for the sixth month in a row in January as the world’s second-largest economy continued to benefit from record bank lending and a construction boom.

Fed’s message on portfolio trimming: prepare, don’t fret (Reuters) Federal Reserve policymakers are putting markets on notice that the central bank’s $4.5 trillion balance sheet is back on the agenda in an apparent effort to give investors time to prepare for changes rather than to signal any action is imminent.

BoC looks to overhaul ‘off track’ forecasting tools, Poloz says (TheGlobeAndMail)  The Bank of Canada has launched a multiyear effort to overhaul the sophisticated computer models it uses to forecast the economy after they failed to foreshadow the deep and persistent aftershocks of the global financial crisis. Governor Stephen Poloz acknowledged Tuesday that its forecasting tools have been pushed “persistently off track” in the decade since the 2007-09 crisis, leading to missed targets on inflation and other indicators.

Apple defies Wall Street with strong revival in iPhone sales. (Reuters) Apple Inc reclaimed the throne as the world’s top smartphone seller for the first time in five years on Tuesday, beating out rival Samsung in units shipped for the holiday quarter and boosting revenues with a strong showing for its new, top-of-the-line iPhone 7 Plus. The iPhone sales numbers, and a profit of almost $18 billion, both handily beat Wall Street expectations, sending its shares up 3 percent in after-hours trading.

Overnight markets 

Overview: US 10yr note futures are down -0.2511% at 124-5, S&P 500 futures are up 0.26% at 2280.5, Crude oil futures are up 0.89% at $53.28, Gold futures are down -0.26% at $1208.2, DXY is up 0.24% at 99.746, CAD/USD is up 0.34% at 0.7648.

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

US tsys trading higher, yields 1-1.5bps lower 10Y 2.477% . Prices fell in Europe after rising initially in Asia on news that Trump had fired his AG, as well as month end buying as the estimated extension in the BB Barclays Tsy Index is 0.07yrs.  Yet gains evaporated on strength in EU CPI, Spanish CPI . GOCS coming under pressure after Nov GDP came in above exp 0.4% vs 0.3% exp, led by a 1.4% rebound in manufacturing. Ontarios getting lifted across the curve on screen, Ont 26s @ 80.5, Ont 48s @92 after closing slightly tighter yest. Ont 26 81.5/81, QC/Ont 26 2/1 back to 3 mnth narrows. Perphiral spds another 0.5bps tighter yest led by Alta, MP.

News headlines

Bonds Slump as Inflation Tilts Bets Toward Stocks: Markets Wrap (Bloomberg) European bonds fell and stocks rose as inflation data prompted investors to switch into assets that may benefit from a regional economic revival. Gold advanced as Donald Trump’s firing of the U.S. acting attorney general added to concern over the unpredictability of decisions in the new administration.

German Unemployment Falls to Record Low as Economy Gathers Pace (Bloomberg) German unemployment fell to a record low in January in a sign that Europe’s largest economy is gathering momentum. The jobless rate declined to 5.9 percent, the lowest level since reunification, as the number of people out of work slid by a seasonally adjusted 26,000 to 2.61 million, data from the Federal Labor Agency in Nuremberg showed on Tuesday

BOJ upgrades growth forecasts, warns of risks to inflation outlook (Reuters) The Bank of Japan raised its growth projections on Tuesday but warned that prospects for hitting its 2 percent inflation target remained uncertain, suggesting policy makers were wary about Corporate Japan’s willingness to lift wages seen as vital to boosting domestic demand.

Euro-Area Inflation Surges to 1.8%, Intensifying ECB Debate (Bloomberg) Euro-area inflation accelerated more than forecast to effectively reach the European Central Bank’s goal, which may intensify a debate among policy makers about their long-running stimulus programs.

Euro jumps after ‘grossly undervalued’ comment from Trump advisor (Reuters) The euro jumped against the dollar on Tuesday after U.S. President Donald Trump’s trade advisor told the Financial Times that Germany was benefiting from a “grossly undervalued” euro.

Overnight markets

Overview: US 10yr note futures are down -0.0126% at 124-7, S&P 500 futures are down -0.21% at 2271.25, Crude oil futures are up 0.67% at $52.98, Gold futures are up 0.94% at $1207.3, DXY is down -0.44% at 99.985, CAD/USD is down -0.59% at 0.7667.                                                                                  

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