Commentaires

Market update

US tsys higher, curve flatter for a second day, US 10Y touched a new low 1.65% (-3b.4bps) on avg volume in TY1 futures (290K). Tsys flat in Asia but rose in Europe on more warnings on Brexit vote, ex ECB president Trichet warning Brexit would be a ‘catastrophe’. The GBP is lower for a third day, implied vol on 1month GBP options spiking to 23%, European stocks down 2.3%, core European bonds higher led by longs with the German 10Y 0.027%. GOCs higher yet paring gains after much stronger than exp May employment : +13.8k vs 1.8k exp , unemployment rate at 6.9% vs 7.1% lowest since July 15. Provi spds reacting to ‘risk off’ & rally in govies, spds out another 1-1.5bps. Emera issued $500mln (upsized) in 7Y @ 202 along with their USD $3.25bln deal to finance Teco purchase. The CAD 7Y narrowed 7 bps on the break.

News headlines

• Stocks Retreat With Oil as Record-Low Bond Yields Point to Angst (Bloomberg) Caution prevails as the week draws to a close, with global stocks headed for their biggest two-day decline in a month and bond yields at record lows as investors gird themselves for potentially seismic events this month. The MSCI All-Country World Index pared its fourth weekly advance. Bonds rose, sending yields from Japan to Germany to all-time lows, before next week’s Federal Reserve meeting and Britain’s referendum on European Union membership later in the month. Rates on investment-grade corporate debt in euros were also near lows following purchases by the European Central Bank. Oil led commodities lower.
• Bund Brexit rally puts zero yield firmly in sight (Reuters) Europe’s benchmark government bond, the 10-year German Bund, had a zero yield firmly in its sights on Friday as worries about a potential British exit from the EU and weakened U.S. rate hike expectations extended the week’s global bond rally. Investors sought refuge in safe-haven assets amid festering concerns over the June 23 Brexit referendum, though the appeal of ultra-low borrowing costs and a ninth week of gains for oil in the last ten [O/R] kept world stocks positive for the week.
• Oil prices ease from 2016 highs on stronger dollar (Reuters) Oil prices fell on Friday, as a stronger dollar pulled crude off 2016 highs hit this week, although strong refinery demand and global supply disruptions lent support. Brent oil futures were trading at $51.15 per barrel at 5.10 a.m. ET, down 80 cents while U.S. West Texas Intermediate (WTI) futures were down 85 cents at $49.71 a barrel. Analysts said that a rebound in the dollar had dented oil prices by making fuel imports for countries using other currencies more expensive.
• Swiss franc hits eight-week high on safe-haven demand (Reuters) Worries that Britain could vote to leave the European Union in two weeks’ time spread across the currency market on Friday, with the safe-haven yen hitting an eight-week high as investors ditched riskier assets for safety. As a risk-off mood across markets drove down emerging-market currencies and sent yields on Japanese and German 10-year bonds to record lows, the safe-haven Swiss franc gained 0.3 percent to trade at 1.0878 francs per euro EURCHF=, its strongest since April 14.
• ECB Doesn’t Need New Stimulus to Hit Goal, Policy Maker Says (Bloomberg) The European Central Bank has pledged enough stimulus to return euro-area inflation to its goal, policy maker Bostjan Jazbec said, in a sign that officials may sit tight over the summer months. “At the current juncture, I’d firmly confirm that the measures work and that we can only look forward to responding to everything that comes to our table,” Jazbec, the Slovenian central-bank governor, said in an interview in Ljubljana on Thursday. “Of course, if you ask is there anything more we can do, my answer would always be yes. But is it needed today? No.”
• How Far Can Oil Rally? Options Investors Bet on Surge Above $100 (Bloomberg) Oil investors are buying contracts that will only pay out if crude rises well above $100 a barrel over the next four years — a clear sign some believe today’s bust is sowing the seeds of the next boom. The options deals, which brokers said bear the hallmarks of trades made by hedge funds, appear to be based on the belief that current low prices will generate a supply crunch as oil companies cut billions of dollars in spending on developing fields. The International Energy Agency forecasts that non-OPEC supply will suffer its biggest decline in more than two decades this year.
• Oil CEOs meet to plot new strategy as fissures within industry grow (FinancialPost) At a private meeting at the Calgary Petroleum Club last Friday, 150 or so oil and gas CEOs and other business leaders met to discuss the future of Canadian energy. Most of the companies represented were small players. The Canadian Association of Petroleum Producers, the large industry association that is seen as being dominated by the largest companies, was not invited.

 Overnight markets 

• Overview: US 10yr note futures are up 0.1907% at 131-11, S&P 500 futures are down -0.59% at 2092.75, Crude oil futures are down -1.42% at $49.84, Gold futures are down -0.16% at $1270.7, DXY is up 0.3% at 94.231.

 US Economic Data 

• 10:00 AM: University of Michigan Sentiment, Jun P, est. 94.0 (prior 94.7)

Canadian Economic Data 

• 8:30 AM: Net Change in Employment, May, 13.8k, est. 1.8k (prior -2.1k)
  Unemployment Rate, May, 6.9%, est. 7.2% (prior 7.1%)

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 higher, curve flatter, on above avg volume in TY1 futures (306K), US 10Y below key resist 1.70%, now 1.676 (-3bps). Tsys rose in Asian session on Bank of Korea surprise 25bp rate cut, lower China CPI and strong 5Y JGB auction (bid/cover 4.66x – highest since 2014), USD higher while commodities are down , WTI down 0.80% below $51. Tsys continued to rise in Europe aided by big flattening move in German bunds as Euro stoxx are down 1.0%, German 10s/30s 3bps flatter – 12 bps over the past week. Concerns over bund scarcity as lower bund yields reduce the pool of eligible securities for ECB QE. UK 10Y gilt reached record low 1.22% as Brexit vote approaches – CITI saying yields could breach 1.0% in the event of Brexit on flight to quality, puts prob of yes vote 30-40%. GOCs higher led once again by 8-10Y sector with June 24/23 roll continues to compress and looks expensive (z-2.5) on 60 day basis. The long end lagging 10s30s 3bps steeper over the last week, the Can/US 10/30 box at 2 month highs. Toronto Hydro in the mkt with $200mln ~10Y (Aug 25 2026) at ~135 or 6bps over 10Y Hydro One (128?). Provis opening 1-2bps wider, PQ 26s 97.5/96.5 – issued yest @ 95.5. Ont 26 95/94 (93.5), Ont 46 106.5/106 (105). Rumours of long Toronto muni deal.

News headlines

• Stocks, Commodities End Winning Streaks as Growth Optimism Ebbs (Bloomberg) Weeklong rallies for global stocks and commodities ended as the outlook for economic growth rekindled investor caution. The MSCI All-Country World Index fell for the first time in six days after reaching a six-month high, and futures on the S&P 500 indicated the gauge will slip after closing close to a record high. The Bloomberg Commodity Index was set to end the longest run of gains since March, as oil and most precious metals fell. Bonds rose, with U.K. gilt yields declining to a record low. Emerging markets declined.
• BOK cuts rates to record low to offset weak exports, restructuring shipping (Reuters) South Korea’s central bank surprised markets by cutting interest rates to a record low 1.25 percent on Thursday, to cushion the economy against weak exports and the fallout from a massive restructuring of an ailing shipping industry. The 25 basis points reduction was the first cut since the Bank of Korea (BOK) last lowered rates in June 2015. Though low inflation is a source of concern, and a reason for lowering interest rates, some economists doubted whether the central bank could afford to cut again once an anticipated increase in U.S. interest rates finally takes place.
• Faltering risk appetite hits global stocks, sends Bund yields to record lows (Reuters) Global stocks retreated on Thursday, dragged down by lower European and Japanese equity markets, as appetite for riskier assets faltered, underpinning demand for safe-haven German Bunds whose yields hit record lows. The dollar hit a five-week low against the yen, hurt by falling Treasury yields amid waning expectations that the Federal Reserve will lift interest rates anytime soon. Those expectations saw German 10-year Bund yields hit a low of 0.034 percent, not far from negative territory in which $10 trillions worth of bonds globally already trade at.
• Oil prices soften on profit taking after hitting 2016 highs (Reuters) Oil prices edged lower on Thursday as traders took profits after three sessions of gains, though prices remained close to their highest this year thanks to a fall in U.S. crude inventories and supply disruptions. International Brent crude oil futures traded 13 cents a barrel lower at $52.38 a barrel at 0845 GMT, after setting a 2016 high of $52.86 a barrel earlier in the session. U.S. crude fell by 5 cents a barrel to $51.20 after also hitting a new 2016 high at $51.67.
• Futures down as oil falls; jobless claims data awaited (Reuters) U.S. stock index futures were lower on Thursday as a rally in oil prices ended, and ahead of weekly jobless claims data, the first labor report since dismal May payrolls numbers jolted markets last Friday. Oil fell nearly 1 percent as traders took profits after prices rose for three days in a row following a weakening dollar. The dollar has fallen since the monthly jobs report reduced the chances of an interest rate hike in the near term.
• China’s Factory-Gate Deflation Eases in Capacity-Cut Drive (Bloomberg) Deflationary pressures in China’s industries eased further in May, while consumer price gains continued to be subdued enough to offer the central bank scope for more easing if needed. Amid a drive by the Communist Party leadership to cut excess capacity, producer prices fell 2.8 percent, the least since late 2014 and less than the 3.2 percent decline economists had estimated in a Bloomberg survey. The consumer price index rose 2 percent from a year earlier, less than the median forecast of 2.2 percent.
• Markets may be too complacent over Brexit risk, BlackRock says (Reuters)  Financial markets, particularly equities, may be under-pricing the risk of Britain leaving the European Union, the world’s largest asset manager said on Thursday, two weeks before Britons vote in a referendum on EU membership. Owen Murfin, co-lead manager for global bond strategies at Blackrock BLK.N., said that markets appear to be treating the possibility of Brexit as a local event rather than a globally systemic risk.

 Overnight markets 

• Overview: US 10yr note futures are up 0.2148% at 131-6, S&P 500 futures are down -0.37% at 2101.25, Crude oil futures are down -1.15% at $50.64, Gold futures are down -0.11% at $1260.9, DXY is up 0.32% at 93.891.

 US Economic Data 

• 8:30 AM: Initial Jobless Claims, June 4, 264k ,est. 270k (prior 267k, revised 268k)
  Continuing Claims, May 28, 2095k, est. 2171k (prior 2172k)
• 9:45 AM: Bloomberg Consumer Comfort, June 5, (prior 43.2)
• 10:00 AM: Wholesale Inventories, m/m, April , est. 0.1% (prior 0.1%)

Canadian Economic Data 

• 8:30 AM: Capacity Utilization Rate, 1Q, 81.4%, est. 81.3% (prior 81.3%, revised 80.9%)
  New Housing Price Index, m/m, April, 0.3%, est. 0.2% (prior 0.2%)
  New Housing Price Index, y/y, April, 2.1%, est. 2.1% (prior 2.0%)

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 another low volume o/n trade, US 10Y 1.72%. German 10Y bund yield fell to a record low 0.033% on flight to quality bid after mid-morning Bloomberg report of unsafe Chinese interception of US aircraft. Bunds succumbed to profit taking on surge in UK April Industrial Prod. Rising 2.0% vs 0.0% exp, while manuf output rose 2.3% vs -0.1% forecast. ECB corporate bond purchase prgm officialy started with buying of utilities & telecom. Tsys sideways in Asia despite better China exports, prices pressured in Europe on UK data as well as rise in crude above $51, better stocks. The US auctions $20bln in 10Y notes at 1:00PM – last month’s $23bln 10Y auction stopped 1bp thru and indirect bidder part rose to a record 73% while primary dealers were awarded a record low 14.7%. GOCs opening slightly higher led by the 8-10Y sector. Provis starting weaker, Onts trading down 0.5bps across the curve -65.5/92.5/103.5 -selling vs corp deals a factor last couples of days, yest $1.2bln NWRP 3 part long deal pushed 10s/30s ~2bps wider and weighed on Ont 46/26 roll. Ontario issuing 3Y global – $1bln US pricing this aft @ MS +31/33.

News headlines

• Bonds, Commodities, Emerging Markets All Buoyed by Central Banks (Bloomberg) Bonds rose with commodities and emerging markets on speculation that central banks will persist with policies that support financial markets. The European Central Bank began buying corporate bonds to expand its monetary stimulus, helping drive average yields on investment-grade corporate debt below 1 percent. Germany’s 10-year bund yields, already at a record-low, approached zero. Emerging markets equities and currencies rose for a fifth day, boosted by Chinese trade data, while commodities gained for a sixth day, the longest run in three months, as oil climbed to a 10-month high and metals advanced. European stocks declined after their biggest gain in two weeks.
• World Bank cuts global growth forecast on weak demand, commodity prices (Reuters) The World Bank slashed its 2016 global growth forecast on Wednesday to 2.4 percent from the 2.9 percent estimated in January due to stubbornly low commodity prices, sluggish demand in advanced economies, weak trade and diminishing capital flows. Commodity-exporting emerging market countries have struggled to adapt to lower prices for oil, metals, and other commodities, accounting for half of the downward revision, the multilateral lender said in its latest Global Economic Prospects report.
• Oil hits eight-month high on disruptions, Chinese demand (Reuters) Oil prices jumped to their highest level in eight months on Wednesday, rising for a third consecutive session on supply disruptions in Nigeria and strong Chinese demand data. There was also a larger-than-expected drop in U.S. crude inventories on Tuesday, indicating an easing of the global supply glut. A weak dollar, which hit a five-week trough against a basket of currencies on Wednesday, also boosted prices.
• Japan’s GDP Grows More Than Initial Reading in 1st Quarter (Bloomberg) Japan’s economy grew slightly more than the government initially reported for the first quarter, helped by a fractional revision in private consumption and business investment that dropped less than first thought. Gross domestic product expanded by an annualized 1.9 percent in the three months ended March 31, more than a preliminary reading of 1.7 percent, according to revised data from the Cabinet Office released on Wednesday. The median estimate of economists surveyed by Bloomberg was for a 1.9 percent increase.
• China Exports Stabilize as Imports Hint at Improving Demand (Bloomberg) China’s exports stabilized in May, with a weakening currency giving some support to growth in the world’s biggest trading nation, while imports signaled improvement in domestic demand. Overseas shipments fell 4.1 percent in dollar terms from a year earlier, the customs administration said Wednesday. Imports slipped 0.4 percent — the smallest drop since late 2014 — to leave a trade surplus of $50 billion. Reflecting a weaker yuan, both exports and imports fared better when measured in local currency terms. Stocks pared losses in Shanghai.
• IEA Cuts Gas Use Outlook Again as Glut Seen to End of Decade (Bloomberg) While oil markets will start re-balancing after a slump next year, an oversupply in natural gas won’t disappear until the end of the decade, the International Energy Agency said, slashing its gas demand outlook for a fourth straight year. Global consumption will expand by 1.5 percent annually from 2015 through 2021, down from last year’s forecast of 2 percent growth from 2014 through 2020 and a 2.5 gain over the prior six years, the Paris-based agency said Wednesday in its Medium-Term Gas Market Report. The slowdown will be driven by weaker use in the U.S. and Japan as the fuel struggles to compete against booming renewables and “very cheap” coal in power generation.
• Brexit Contagion Is Spreading Across the EU, Pew Study Finds (Bloomberg) Opposition to the European Union is growing across the bloc, suggesting that anti-EU sentiment extends much further than traditionally skeptical Britain. As the U.K. gears up for a referendum on whether to remain in the club of nations it joined in 1973, a survey of more than 10,000 people across Europe showed that voters from Italy and Poland to Greece and Sweden have lost faith in the EU. People in France — one of the six founding countries — now see the bloc less favorably even than those in the U.K., as the euro-area debt crisis and refugee influx take their toll.

 Overnight markets 

• Overview: US 10yr note futures are down -0.0477% at 130-29, S&P 500 futures are up 0.18% at 2114, Crude oil futures are up 1.51% at $51.12, Gold futures are up 0.85% at $1257.6, DXY is down -0.27% at 93.577.

 US Economic Data 

• 10:00 AM : JOLTS Job Openings, April, est. 5675 (prior 5757)

Canadian Economic Data 

• 8:15 AM: Housing Starts, May, 188.6k, est. 189.0k (prior 191.5k, revised 191.4k)
• 8:30 AM: Building Permits, m/m, April, -0.3%, est. 1.5% (prior -7.0%, revised -6.3%)

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