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03/06/2016

by admin | Jun 3, 2016 | comments

Market update

Tsys sharply higher yields ~5bps lower after very weak non-farm payrolls, ten year yields back to the lower end of three month range @1.73%, the short end seeing good volume50% odds of a rate hike in July. Core Euro bonds higher led by 30Y bunds after the Bundesbank cut its forecast for growth and inflation, the latter from 1.1% to 0.2% for this year and 1.5% from 2.0% for 2017, even as the central bank described the economy as ‘fairly robust’. The German 10Y traded below 0.10% for the first time since April 8th following the release of much weaker than expected Eurozone retail sales for April (unch vs 0.4% exp). Provis opening 1-1.5bps wider, giving back gains from yest impressive rally, spds are still ~3bps lower on the week, all in yields the lowest in a year.

News headlines

Stocks Upbeat Before Jobs Data as Crude Gains Boost Commodities (Bloomberg) From stocks to commodities, financial markets are heading toward the monthly U.S. payrolls report with a relative sense of optimism. Shares rose in Europe and Asia after the S&P 500 Index closed at a seven-month high on Thursday. Commodities neared a bull market as Brent crude exceeded $50 a barrel, copper advanced and soybeans led crops higher. New Zealand’s dollar and Indonesia’s rupiah led gains among 31 major currencies.
Brent crude oil holds above $50 on signs of rebalance (Reuters) Brent crude prices held around $50 a barrel on Friday on signs the market was moving back to more balanced supply and demand, and on an OPEC meeting viewed as supportive. “The worst was over,” Qatari energy minister Mohammed Al-Sada told reporters in Moscow. “The market is heading towards rebalancing.” The positive tone of the Organization of the Petroleum Exporting Countries (OPEC) meeting in Vienna on Thursday assuaged concerns over an intensified battle for market share between rivals Saudi Arabia and Iran.
Commodities Stand on Brink of Bull Market After Oil’s Recovery (Bloomberg) Commodities are nearing bull-market territory after rebounding from the lowest level in at least 25 years as oil prices rallied, complementing advances in recent weeks in soybeans and zinc. The Bloomberg Commodity Index, which tracks returns from 22 raw materials, climbed 0.6 percent to 87.24 by 3:32 p.m. in Singapore on Friday. The gauge bottomed at a closing low of 72.88 in January, and a finish above 87.45 would mark a 20 percent advance, meeting the common definition of a bull market. The measure is still about 50 percent below the high reached in 2011.
China May services growth cools to three-month low, hiring slows: Caixin PMI (Reuters) Growth in China’s services sector cooled to a three-month low in May as new business and hiring slowed, a private survey showed on Friday, echoing signs of fading momentum elsewhere in the economy. The Caixin/Markit services purchasing managers’ index (PMI) for May dropped to 51.2 from 51.8 in April. Readings above 50 indicate an expansion on a monthly basis, while readings below signal contraction.
Fed likely to avoid rate hike before Britain votes on leaving EU (Reuters) The U.S. Federal Reserve may be forced to delay a rate hike at its June meeting because of mounting concern over the economic fallout from Britain’s vote on whether to leave the European Union. The geopolitical risk likely will push any rate increase until at least July, despite apparent consensus among Fed officials that a hike is warranted by stronger U.S. growth and tight labor markets. The Fed’s June 14-15 rate-setting meeting comes just a week before the British vote on June 23. A “leave” vote is expected to roil financial markets, cause credit spreads to widen, trigger a rush into safe assets and bolster the dollar.
The G7 didn’t buy Trudeau’s big-deficit growth plan. Neither should we (Financial Post) Last week’s G7 meeting should give Prime Minister Trudeau ‎reason to reflect on his plan for deficit spending. He arrived in Japan determined to sell other leaders on the merits of budgetary deficits to grow the economy. But his peers weren’t buying. ‎The summit’s 14,000-word communiqué was silent on calls for more government spending. Why? Most of the other G7 leaders know that a “growth-friendly” agenda can’t be written in red ink. This is a powerful rejoinder to the Trudeau government’s plan to bolster the Canadian economy through deficit spending.
Valeant gets another default notice from bondholders (Reuters) Troubled Canadian drugmaker Valeant Pharmaceuticals International Inc (VRX.TO) said it received another notice of default from bondholders for the delay in filing its first-quarter report. However, the company reiterated that it would file the report with U.S. and Canadian regulators on or before June 10, ahead of a July 31 deadline. Valeant has lost more than half its value since mid-March, after it said a delay in the filing of its annual report could put it at risk of a default on its borrowings.

Overnight markets

Overview: US 10yr note futures are up 0.7098% at 130-26, S&P 500 futures are down -0.44% at 2094.5, Crude oil futures are down -1.04% at $48.66, Gold futures are up 2.2% at $1239.3, DXY is down -1.04% at 94.571.

US Economic Data

8:30 AM: Change in Nonfarm Payrolls, May, 38k, est. 160k (prior 160k, revised 123k)
- Change in Manufacturing Payrolls, May, -10k, est. -2k (prior 4k, revised 2k)
- Unemployment Rate, May, 4.7%, est. 4.9% (prior 5.0%)
- Average Hourly Earnings, m/m, 0.2%, est. 0.2% (prior 0.3%, revised 0.4%)
- Average Hourly Earnings, m/m, 2.5%, est. 2.5% (prior 2.5%)
9:45 AM: Markit US Services PMI, May F, est. 51.4 (prior 51.2)
- Markit US Composite PMI, May F, (prior 50.8)
10:00 AM: ISM Non-Manf. Composite, May, est. 55.3 (prior 55.7)
- Factory Orders, April, est. 1.9% (prior 1.1%)

Canadian Economic Data

8:30 AM : Labor Productivity, q/q, 1 Q, est. 0.4% (prior 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

02/06/2016

by admin | Jun 2, 2016 | comments

Market update

US tsys little changed after ADP, initial claims with the former on consensus @ 173k. yields ~1bp lower, US 10Y 1.83, volume in TY futures below avg. (235k). ECB left mon policy unchanged, Draghi press conference expected to go into more detail on corp bond purchases scheduled to start next week. Global stocks mostly higher, except the Nikkei which fell 2.3% as Abe failed to detail any new stimulus measures apart from delaying consumption tax increase. Crude slightly lower @ $49.00, Saudi Arabia commenting that prices on the way up, disagreements remain over quotas with Iran. GOCs slightly higher, provi spds another 0.5bps tighter after rallying into the close yest ~2bps. Supply form Ont/Q/Alta likely given June cash flows.

News headlines

World stocks hold near one-week low (Reuters) World stocks hovered just off one-week lows on Thursday, dragged down by an earlier 2 percent slump in Japan and lackluster European markets, while concerns over Britain’s future in the EU continued to weigh on sterling. Futures prices signaled a flat to weaker Wall Street open. While European bourses inched into positive territory, gains were capped by investors’ reluctance to take big positions before a meeting of the European Central Bank followed by a 1230 GMT (8.30 a.m. ET) press conference by ECB President Mario Draghi
Euro zone producer prices fall unexpectedly in April (Reuters) Euro zone producer prices fell unexpectedly in April, registering the steepest annual decline in more than six years due to sharply lower energy costs, data from the European Union’s statistics office Eurostat showed on Thursday. Eurostat said prices at factory gates in the 19 countries sharing the euro currency dropped by 0.3 percent month-on-month for a 4.4 percent year-on-year decline, the latter the greatest decline since November 2009.
Dollar set to rise in coming year, Fed in driver’s seat: poll (Reuters) The U.S. dollar is set to rise over the coming year on revived expectations the Federal Reserve will follow through with an interest rate hike this summer, a Reuters poll showed, but only a slight majority say the rally will be “significant.” In recent weeks, better-than-expected data out of the U.S. have helped Fed officials, including Chair Janet Yellen, to talk the markets into pricing in a rate hike as early as July and pushed the dollar up against major currencies.
China’s yuan to weaken further as U.S. dollar rallies, economy cools: Reuters poll (Reuters) The Chinese yuan is expected to weaken around 2.5 percent over the coming year as the dollar rallies on expectations of U.S. interest rate hikes and as China’s central bank sets lower mid-points for its mostly-managed currency, a Reuters poll found. The yuan posted its second-biggest monthly fall on record against the dollar in May, highlighting Beijing’s willingness to allow its currency to weaken and reflecting a resurgent dollar as Federal Reserve policymakers put the prospect of a rate hike on the table as early as this month.
Saudi Arabia’s Gesture for OPEC Unity Meets Iranian Resistance (Bloomberg) Saudi Arabia faced resistance from Iran to proposals to restore a production target scrapped at OPEC’s last meeting in December as efforts to build unity were undermined by persistent divisions within the producer group. While Saudi Arabia signaled on Wednesday it’s ready to consider a surprise deal with fellow OPEC members, attempting to mend divisions that had grown so wide many dubbed the organization as good as dead, Iran opposes a group production target.
Canadian auto sales slip in May, led by 16.5% drop at GM Canada (Financial Post) Canadian auto sales fell in May for the first time in five months, led by a 16.5 per cent drop at General Motors Canada. Light vehicle sales declined 1.6 per cent in May, the first drop since December 2015, but are still up 5.6 per cent year-to-date, according to data compiled by DesRosiers Automotive Consultants. This year’s May had fewer selling days and one less weekend than it did in 2015.
Euro zone inflation likely to rise, could yet fall – PIMCO (Reuters) Inflation in the euro zone is likely to rise gradually but there is a chance that it has not yet touched its low point, Andrew Balls, global fixed income chief investment officer with investment firm PIMCO, said on Thursday. “Our baseline is that we will see a gradual drift higher in inflation, but I don’t think we’ve necessarily seen the low. In the event of a shock there’s a real problem. You start from a bad position,” Balls told reporters.

Overnight markets

Overview: US 10yr note futures are up 0.0603% at 129-20, S&P 500 futures are down -0.13% at 2095.25, Crude oil futures are down -0.2% at $48.91, Gold futures are up 0.19% at $1217, DXY is down -0.13% at 95.334.

US Economic Data

8:15 AM: ADP Employment Change, May, 173k, est. 173k (prior 156k, revised 166k)
8:30 AM: Initial Jobless Claims, May 28, 267k, est. 270k (prior 268k)
Continuing Claims, May 21, 2172k, est. 2150k (prior 2163k, revised 2160k)

Canadian Economic Data

There is no major economic data for today

Disclosure and Disclaimer

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

01/06/2016

by admin | Jun 1, 2016 | comments

Market update

US tsys higher with 10Y 1.823 (-2bps) before Ism Man at 10:00. German bunds higher, flatter on lower crude and ‘risk off’ following the latest OECD economic outlook. The OECD warned over risk from ‘Brexit’, cutting its forecast for 207 & 18 by 0.5% and 2019 by 1.5%. UK gilts are higher led by the 5Y, short sterling strip 5-8 ticks following OECD report. GOCs are unch, long RRB at noon, reopening of the 1.25 Dec 2047 bond for $700mln. L.t. breakevens have fallen 10bps since reaching highs in April at ~165 bps, basically matching weakness in US bkevens despite firmness in crude over the period, 2044 bkevens are 152/153 this morning, with the 47/44 roll at 0.7bps. Positive carry for the next couple of months favors real yield steepeners however – i.e. s.t. RRB 21s have a much better carry profile over the next two months (~6bps) than 44s/47s. Provi spreads 1bp wider, Ont 46s 104/103 (103 at issue yest ) , of note long ontario yields are at new lows for the year, the lowest sine last August – spds have remained firm going into the June extension/cpn pmt even as cdas have rallied. TD is in the market with a 5Y C$ covered bond at ~97 bps or ~3bps thru their March 21 dep notes.

News headlines

S. Stock-Index Futures Drop After S&P 500’s Third Monthly Gain (Bloomberg) U.S. stock-index futures fell, after S&P 500 capped its longest monthly rally since 2014, as investors awaited a report that may show manufacturing grew at a slower pace in the world’s biggest economy. Contracts on the S&P 500 expiring in June lost 0.4 percent to 2,087.25 at 7:21 a.m. in New York. The benchmark closed little changed yesterday, capping its longest stretch of monthly advances since June 2014. Dow Jones Industrial Average futures dropped 69 points, also 0.4 percent, to 17,705 today.
Oil falls as OPEC expected to shun any output curbs (Reuters) Oil prices fell on Wednesday on expectations of OPEC inaction on output as its focus stays on retaining market share, while concerns about China’s economy weighed on the demand outlook. Brent crude LCOc1 was at $49.19 per barrel at 1116 GMT (7.16 a.m. ET), down 70 cents. It earlier fell more than $1 to the day’s low of $48.86. U.S. crude futures CLc1 were down 74 cents at $48.36 a barrel.
China’s factories steadying but weak, hopes for quick recovery fade (Reuters) China’s manufacturing activity showed signs of steadying in May but remained weak amid soft demand at home and abroad, suggesting the world’s second-largest economy is still struggling to regain traction. A rebound in March had raised hopes that China’s economy was reviving, breathing life into global financial and commodity markets, but analysts said the soggy activity readings and weak April data suggest no quick recovery is in sight.
Saudis Said to Seek Restoration of OPEC Unity After Doha Failure (Bloomberg) Saudi Arabia will use this week’s OPEC meeting to repair relationships with fellow producers after the failure of an April accord to freeze crude output in Doha, according to people familiar the matter. Saudi Arabia’s Minister of Energy Khalid Al-Falih will reassure other members his nation won’t flood the oil market and may be open to the reintroduction of an overall production target for the group, the people said, asking not to be identified because information is not public. There’s no indication that Saudi Arabia is seeking to change current production volumes, they said.
Japan PM delays sales tax hike, puts fiscal reform on back burner (Reuters) Japanese Prime Minister Shinzo Abe announced on Wednesday his widely expected decision to delay a scheduled sales tax increase by two-and-a-half years, putting his plans for fiscal reforms on the back burner due to growing signs of weakness in the economy. While the decision may help Abe win votes at an upper house election on July 10, it could fan doubts about his plans to curb Japan’s huge public debt and fund ballooning social welfare costs of a fast-ageing population.
OECD cuts Canada’s outlook, warns Brexit, refugee crisis threaten global growth (Financial Post) The Organization for Economic Cooperation and Development is increasingly pessimistic about the global economy and is warning that the “low-growth trap” will continue if governments don’t change tack on spending and trade. Overall, the OECD is forecasting global growth of three per cent this year and 3.3 per cent next year. Both are down 0.3 percentage point from its November outlook. It’s estimating Canada’s gross domestic product will grow by 1.7 per cent this year and 2.2 per cent in 2017. That’s down from the OECD’s November estimate of 2.0 per cent growth in Canadian GDP in 2016 and 2.3 per cent in 2017.
Bombardier offered C Series stake for a ‘song,’ Airbus executive says (GlobeAndMail) Bombardier Inc. offered rival Airbus Group SE an investment in its C Series plane program for a “song,” Airbus sales chief John Leahy said, as he provided a glimpse into talks that broke down last October after they were leaked to the media. Speaking on Monday to a group of reporters at an Airbus event in Hamburg, Germany, Mr. Leahy said Airbus seriously considered the offer, according to an
Chinese State-Run Bank Reveals Details of Yuan Fixing Mechanism (Bloomberg) A Chinese state-run bank has revealed the inner workings of the yuan’s reference rate mechanism, including details on the lenders that provide prices as well as how the system was tweaked following market turmoil in January. The 14 contributors, which must consider the previous day’s yuan closing price price, have to take into account movements in baskets of currencies and have the leeway to consider the effects of client supply and demand, said Sun Wei, deputy general manager of financial markets at China Citic Bank Corp., a unit of China’s largest state-run financial conglomerate. He added that the People’s Bank of China spoke with lenders in February before standardizing the system.

Overnight markets

Overview: US 10yr note futures are up 0.1205% at 129-27, S&P 500 futures are down -0.44% at 2085.75, Crude oil futures are down -1.36% at $48.43, Gold futures are up 0.19% at $1219.8, DXY is down -0.5% at 95.413.

US Economic Data

9:45 AM: Markit US Manufacturing PMI, May F, est. 50.5 (prior 50.5)
10:00 AM: ISM Manufacturing, May, est. 50.3 (prior 50.8)
- ISM Price Paid, May, est. 58.5 (prior 59.0)
- ISM New Orders, May, (prior 55.8)
- Construction Spending, m/m, April, est. 0.6% (prior 0.3%)
14:00 AM: US Federal Reserve Releases Beige Book

Canadian Economic Data