Commentaires

Market update

US tsys slightly higher on light volume in TY futures (220K), US 10Y 1.70 (-0.5bps). Tsys pressured in Europe as stocks rose for a third day, German bunds lower & steeper in thin trade ahead of Brexit vote – latest poll shows ‘remain’ with a one point lead. Prices also weighed by 30Y bund auction – E820mln Aug 2046 reopening at 0.65% vs 0.88% in May. Fed gov Powell on CNBC saying Fed is ready for Brexit vote, can’t rely too much on one month’s job figures. GOCs slightly lower, underperforming tsys for a second day after yesterday’s 3bp cheapening – which could have something to do with today’s $3bln June 26 reopening – as the CTD for CGBs is now the June 25 bond (was 24s up until last month). The 10Y roll unch at 11.1/10.9. The roll is ~1bp cheaper than the last auction on April 20th, thou outright yields are 10bps lower. provis well bid to start with supply expected, Ont 26 93/92, ont 46 105/104. Alberta/Ont roll 2bps narrower from last Fri, now 16/15.

News headlines

• Stocks Trade Near Week High Before Brexit Vote; Commodities Gain (Bloomberg) Global equities traded near a one-week high and the pound approached its strongest level in five months a day before Britons vote on membership in the European Union. Oil and copper led gains in commodities. The MSCI All-Country World Index was little changed following three days of gains as bookmakers’ odds implied there’s only about a one-in-four chance that Britons will opt to leave the EU in Thursday’s referendum. Sterling rose against most of its 16 peers and shares in emerging markets advanced for a fourth day. Crude oil was set to close above $50 a barrel for the first time in almost two weeks.
• Janet Yellen Hints That Fed May Hold Back on Raising Interest Rates (NY Times) Weak economic growth in the United States could force the Federal Reserve to hold off on any imminent interest rate increases, the Federal Reserve chairwoman, Janet L. Yellen, told Congress on Tuesday. While Ms. Yellen said that the American economy’s long-term prospects remain favorable, she signaled that headwinds, including slower employment gains in recent months, weak productivity growth and the persistence of a sluggish pace of inflation have prompted the Fed to adopt a more cautious stance.
• Nervy global investors revisit 1930s playbook (Reuters) Global investors are once again dusting off studies of the 1930s as fears of protectionism, nationalism and a retreat of globalization, sharpened by this week’s Brexit referendum, escalate anew. With markets on tenterhooks over Thursday’s « too close to call » vote on Britain’s future in the European Union, the damage an exit vote would deal business activity and world commerce is amplified by the precarious state of the global economy and its inability to absorb any left-field political shocks.
• EU Bank Regulator Says Retail Bond Holdings May Affect Bail-Ins (Bloomberg) European Union officials newly charged with handling troubled banks would take account of the “public interest” before imposing losses on retail bondholders. Some weak banks may have sold bonds to vulnerable households, rather than big investors, which should be considered before the Single Resolution Board decides on a so-called bail-in, Vice Chairman Timo Loyttyniemi said at a Euromoney conference in London.
• Oil rises further above $50 on API report, braced for Brexit volatility (Reuters) Oil rose further above $50 a barrel on Wednesday supported by an industry report that showed a large drop in U.S. crude inventories and a boost in investor risk appetite ahead of Britain’s referendum on EU membership. U.S. crude inventories fell by 5.2 million barrels, the American Petroleum Institute (API) said on Tuesday, far more than analysts expected. Official stocks data is due later on Wednesday from the U.S. Department of Energy (DOE).
• Pound Resumes Rally as Odds Signal U.K. Will Vote to Stay in EU (Bloomberg) The pound climbed toward a five-month high versus the dollar as traders took cues from betting odds that point to the U.K. voting to stay in the European Union, rather than opinion polls showing the referendum is too close to call. A gauge of sterling against a basket of currencies rose toward its June 20 closing level, which was its strongest this month. With a day left before the referendum on Thursday, an index of betting odds compiled by Oddschecker put the vote to remain at 80 percent.
• Top U.S. regulators discuss possibility of Britain leaving EU – Treasury (Reuters) The heads of the U.S. financial regulatory agencies, including Treasury Secretary Jack Lew, conferred on Tuesday about the upcoming « Brexit » vote in a regularly scheduled meeting closed to both the public and the press, according to a statement from the Treasury Department. « During the executive session, the council discussed recent market developments, including the possibility of the United Kingdom’s separation from the European Union, » it said in a summary of the meeting

 Overnight markets                                                                                         

• Overview: US 10yr note futures are down 0% at 131-8, S&P 500 futures are up 0.11% at 2082.75, Crude oil futures are up 0.54% at $50.12, Gold futures are down -0.16% at $1270.5, DXY is down -0.28% at 93.751.

 US Economic Data

• 9:00AM: FHFA House Price Index, m/m, April,  est. 0.6% (prior -0.7%)
• 10:00AM: Existing Home Sales, May,  est. 5.55m (prior 5.45m)
  •        Existing Home Sales, m/m,  May, est. 1.8% (prior 1.7%)

 Canadian Economic Data

•  8:30AM: Retail Sales, m/m, April, 0.9 %, est. 0.8% (prior -1.0%, revised -0.8%)
  •      Retail Sales Ex Auto, m/m, April, 1.3%,  est. 0.7% (prior -0.3%, revised -0.1%)

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 slightly higher despite higher Euro stocks & bond yields, US 10Y 1.685%.  Risk of Brexit continues to slide, while better than expected German ZEW index weighed on bunds, part the long end with 2s30s ~3.5bps steeper and the 10Y bund 0.067% – a two week high. With the eco calendar bare, tsy prices will be dictated by Fed chair Yellen’s testimony at 10:00am in front of the Senate Banking Committee.  The US will auction $34bln in 5Y notes at 1:00PM after a weak 2Y yesterday (0.2bps tail b/c 2.72x and lowest direct bidders since jan 15). Despite recent cheapening the 5Y at 1.17% is still 20bps below levels of the last auction on May 25th.  GOCs opening lower, 5s30s curve 1.5bps steeper. Provis unch after closing 2bps better yest with Ont & Que possible today after Mani 10Y yest ($800mln with $500mln carve out 5Y 109.5), Ont 10/30 steeper as 10s led the rally 11.6/11.4.

News headlines

• Stocks Gain With Pound as Dollar Falls Before Yellen’s Testimony (Bloomberg) Investors took a positive cue from the latest polls on Britain’s referendum over European Union membership, with global stocks advancing and the pound extending the biggest rally since 2008. The dollar weakened before Federal Reserve Chair Janet Yellen speaks on monetary policy. Sterling strengthened for a third day even as separate opinion polls showed leads for both the “Remain” and “Leave” campaigns two days before the vote.
• Oil prices slip after rally as market turns cautious (Reuters) Oil prices fell on Tuesday after a strong two-day rally abated amid volatility fed in part by a vote later this week in Britain that will determine whether the country will leave the European Union. A one-month ceasefire between the government and Nigerian militants whose attacks have curtailed the country’s crude oil exports also added a bearish signal to a market that had firmed on the back of supply disruptions. Brent crude August futures LCOc1 were trading at $50.05 at 1100 GMT, down 60 cents a barrel. The contract has risen by more than 6 percent since Thursday’s settlement, after dropping 10 percent in six previous sessions.
• Yellen makes ‘uncertainty’ new mantra as market doubts Fed view (Reuters) The U.S. Federal Reserve’s dwindling confidence in its own outlook and resulting confusion among investors are creating a policy problem that may require chief Janet Yellen to lay out her own views more forcefully. The Fed chair’s next communications test comes on Tuesday and Wednesday during her semi-annual testimony to U.S. lawmakers, less than a week after the central bank kept interest rates unchanged near record lows and lowered its projections for hikes in 2017 and 2018.
• ECB Set to Test Attraction of Paying Banks to Take Its Money (Bloomberg) The European Central Bank is about to find out how attractive its offer to pay lenders to lend really is. Starting tomorrow, euro-area banks can bid for a four-year loan from the ECB at an interest rate that begins at zero and could ultimately be negative. The net take-up, after institutions repay their borrowings from an earlier and less-generous program, is likely to be 50 billion euros ($57 billion), according to a Bloomberg survey of economists. The result of the operation, the first of four, will be published on Friday.
• Brexit Vote in Balance in Polls as Soros Warns of Pound Plunge (Bloomberg) Britain’s referendum on European Union membership remained too close to call two days before the vote, with separate polls showing leads for both sides and billionaire investor George Soros warning of a slump in the pound should voters back a so-called Brexit. A YouGov poll of 1,652 voters for the Times newspaper published late Monday showed “Leave” at 44 percent and 42 percent for “Remain,” while a survey of 800 people by ORB for the Daily Telegraph had “Remain” at 53 percent and “Leave” at 46 percent once “don’t knows” were stripped out.
• Housing crash in Canada could cost mortgage lenders almost $12 billion, Moody’s warns (FinancialPost) There are “systemic vulnerabilities” in the Canadian mortgage market that would be exposed if the country were hit by a U.S.-style housing meltdown, according to a report from Moody’s Investors Service. A crisis on that scale could result in combined losses of more than $17 billion for the Canadian banks and mortgage insurers, with house prices falling by as much as 35 per cent, the ratings agency said in the report, published Monday.
• Russia doesn’t merit rating stabilization yet – Moody’s (Reuters) The steadying of Russia’s economy does not yet merit a stabilization of its sovereign rating outlook, credit rating agency Moody’s said on Tuesday. « We have a negative outlook which reflects Russia’s ongoing challenges, including – despite a recent recovery – an environment of subdued commodity prices relative to pre-crisis, » Moody’s top European sovereign analyst Dietmar Hornung told the Reuters Global Markets Forum.

 Overnight markets                                                                     

• Overview: US 10yr note futures are down 0% at 131-15, S&P 500 futures are up 0.22% at 2078.75, Crude oil futures are down -1.94% at $48.41, Gold futures are down -1.18% at $1276.9, DXY is up 0.09% at 93.694.                                                                                                                                                                                                                                                                

US Economic Data

• There is no major economic data for today

 Canadian Economic Data

• There is no major economic data 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 sharply lower led by the 10Y with the curve ~2bps steeper, US 10Y 1.67 (+6bps) as remain side seen gaining in latest Brexit polling, the GBP . Euro stocks ~3.0% higher, core Euro bonds lower led by 10Y gilts (+9bps) while EU peripheral spds tighter vs Germany. The latest CFTC COT report for June 14th showed large specs unwinding shorts in the front end in front of last week’s FOMC and this week’s Brexit vote. GOCs are opening lower, led by 10s which are ~4bps cheaper on the curve vs 2s & longs, spds 1-2bps wider vs tsys. Provis 2bps tighter in ‘risk on’ move, Ont 26 95/94, Ont 46 106/105.

News headlines

• Stocks Surge With Pound as Brexit Chances Decline; Naira Weakens (Bloomberg) Global equities rallied and the pound strengthened the most since 2008 on signs the campaign for the U.K. to stay in the European Union was gaining momentum. The yen declined with U.S. Treasuries and gold as haven demand eased. The Stoxx Europe 600 Index headed for its biggest gain since August and emerging-market shares advanced for a second day. Sterling jumped after a poll showed the campaign for the U.K. to remain in the EU leading by three percentage points before the referendum on Thursday. Spanish and Italian bonds gained and credit risk fell the most since March.
• Oil rallies as fears over Brexit abate (Reuters) Oil rallied on Monday, lifted by a wave of investor confidence and a weaker dollar after polls showed a diminishing chance that Britain may vote to leave the European Union later this week. August Brent crude futures were up 85 cents at $50.02 a barrel by 5.55 a.m. ET, set for a gain of 6 percent in two trading days. NYMEX crude for July delivery, which expires on Tuesday, was up 80 cents at $48.78 a barrel.
• Sterling rallies as Brexit worries ebb, yen drops (Reuters) Sterling jumped nearly 2 percent against a trade-weighted basket of currencies on Monday after opinion polls swung in favor of the campaign for Britain to stay in the European Union, boosting risk sentiment and sending the safe-haven yen tumbling. The implied probability of a « Remain » vote in Thursday’s referendum rose to around 78 percent after falling as low as 60 percent last Thursday, according to odds from gambling website Betfair.
• Japan’s exports drop for 8th month in a row in May (MarketWatch) Japanese exports fell for the eighth straight month in May, buffeted by the strong yen and slowing global growth. Merchandise exports decreased 11.3% from a year earlier to Y5.091 trillion ($49 billion) last month, after falling 10.1% in the previous month, according to data released Monday by the finance ministry. Economists surveyed by The Wall Street Journal had expected a 10.4% decrease. The data underlines how Prime Minister Shinzo Abe’s growth policy has lost momentum in the face of moderating global demand and the yen’s resurgence to its highest level in over a year and a half against the dollar. A stronger yen reduces the value of repatriated profits and undermines Japan’s export competitiveness.
• German trade body lowers export forecast: ‘Brexit is poison’ (Reuters) German exports will grow less than expected this year due to external risks, including a British exit from the European Union and uncertainties ahead of elections in the United States and France, the head of the BGA trade association said on Monday. Britain votes on Thursday on whether to stay in the 28-member bloc, a choice with far-reaching consequences for politics, the economy, defence and diplomacy on the continent.
• Factbox: Bank of England risks being caught in Brexit cross-currents (Reuters) The Bank of England could be pulled in very different directions if British voters take the historic step of leaving the European Union in Thursday’s referendum. The Bank, along with most private economists, has warned that a Brexit vote would deliver a shock to Britain’s economy. The BoE could attempt to soften the hit by cutting interest rates from their current record low of 0.5 percent.
• Couche-Tard acquires assets of Premium 7 network in Estonia (GlobeAndMail) Alimentation Couche-Tard Inc. continues its growth trajectory in Europe with a deal to buy 23 convenience stores and fuel stations in Estonia. Laval, Que.-based Couche-Tard said on Monday it has struck an agreement to acquire the majority of the assets operated under the Premium 7 brand from Sevenoil Est OU and its affiliates. The purchase price was not disclosed. The agreement follows on other European acquisitions, including a deal late last year to buy the Topaz chain in Ireland and a deal prior to that to buy Royal Dutch Shell PLC’s retail and other businesses in Denmark.

 Overnight markets                                                                   

• Overview: US 10yr note futures are down -0.237% at 131-18, S&P 500 futures are up 1.29% at 2085.5, Crude oil futures are up 2.21% at $49.04, Gold futures are down -0.67% at $1286.1, DXY is down -0.66% at 93.58.

US Economic Data

• There is no major economic data for today

Canadian Economic Data 

• 8:30 AM:  Whole Trade Sales, m/m, April,  0.1% est. 0.5% (prior -1.0% revised at -0.8%)

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