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Market update

US tsys lower this morning, in follow thru to Yellen’s comments Fri afternoon saying it was appropriate for the Fed to raise rates in the coming months. Flows relatively light according to MNI, volume in TY futures   Core Euro bonds lower, curves flatter, pressured by the rise in Asian stocks & surprise fall in German unemployment to a record low 6.1%.  Longer dated bunds supported by month duration buying as the Barclays Euro Tsy index extends 0.04yrs which while quite low (0.11yrs for US tsy index) is larger than normal due to ultra long supply from Spain & 30Y from Belgium. GOCs lower after Mar GDP came in -0.2% vs -0.1% exp. Long end of the curve continues to flatten, long rolls getting lifted – 45/26 @ 62, 37/33 @12.2. Provis opening unch this morn, provis well bid yest in quiet trading with Ont 10s & 30s lifted @93 & 103. Alberta/Ont 46 roll coming in since last week ~2bps now 18.5/17.5. Quebec/Ont rumoured supply this week. In corps bank supply possible as well as autos/reits etc..

News headlines

• US. Index Futures Are Little Changed as Focus Returns to Data (Bloomberg) U.S. stock-index futures were little changed before data that may indicate how ready the economy is for higher interest rates that could come as soon as next month. Westar Energy Inc. jumped 9.6 percent in early New York trading after accepting a cash and stock offer valued at $8.6 billion from Great Plains Energy Inc. Celator Pharmaceuticals Inc. soared 72 percent after agreeing to a $1.5 billion takeover bid from Jazz Pharmaceuticals Plc. Frontline Ltd. added 1.5 percent after the oil-tanker company posted better-than-estimated first-quarter net income.
• Treasuries Lose Their Lead Over Shares as Fed Moves Toward Shift (Bloomberg) Treasuries have lost their edge over stocks as the U.S. economy expands enough to push the Federal Reserve toward raising interest rates. U.S. government securities stagnated for a second month in May, leaving them little changed for the second quarter. The S&P 500 Index of shares has returned 2.3 percent since the end of March, based on data compiled by Bloomberg. The figures are a reversal from the first three months of the year, when Treasuries beat stocks. Treasuries fell Tuesday after being closed the previous day.
• Brent crude lower on strong Middle East oil output (Reuters) Brent crude prices fell on Tuesday on rising output from the Middle East and ahead of an OPEC meeting on Thursday, while U.S. crude edged higher as the summer driving season began. Brent crude oil futures LCOc1 were down 26 cents at $49.50 a barrel by 1056 GMT (6.56 a.m. ET), while U.S. West Texas Intermediate (WTI) crude oil futures CLc1 traded 9 cents higher at $49.42 a barrel. Iraq will supply 5 million barrels of extra crude to its international oil company partners in June, industry sources familiar with the issue said, joining other Middle East producers by lifting market share.
• Euro-Area Inflation Rate Stays Negative as ECB Mulls Outlook (Bloomberg) Euro-area consumer prices failed to increase for a fourth consecutive month, highlighting policy makers’ struggle to stoke inflation despite multiple rounds of stimulus. Prices fell 0.1 percent in May from a year earlier, the European Union’s statistics office in Luxembourg said on Tuesday. That’s in line with the median estimate in a Bloomberg survey of economists and follows a drop of minus 0.2 percent in April. The unemployment rate held at 10.2 percent last month, according to a separate Eurostat release.
• German Unemployment Rate Falls to Record Before ECB Meeting (Bloomberg) German unemployment declined more than economists estimated, pushing the jobless rate to the lowest level since reunification. The number of people out of work fell by a seasonally adjusted 11,000 to 2.695 million in May, data from the Federal Labor Agency in Nuremberg showed on Tuesday. The median estimate in a Bloomberg survey was for a decline of 5,000. The jobless rate dropped to 6.1 percent.
• CMHC trims its exposure to the housing market once again in first quarter (Bloomberg) Canada Mortgage and Housing Corp., the Crown corporation that controls a majority of the mortgage default insurance industry in the country, continues to reduce its exposure to the housing market. CMHC said its total insurance-in-force was $520 billion as at March 31, 2016, a $6 billion decrease from year-end 2015. It has a government limit of $600-billion but continues to reduce the amount it loans to banks.
• Lost Decade for Value Stocks Tests Faithful Who Say End is Nigh (Bloomberg) Hopes are high again for buying low. Exchange-traded funds that track value stocks, the ones trading cheapest to earnings and book value, have received $5.5 billion of fresh cash in 2016, data compiled by Bloomberg show. The inflows stand out in a market where money is being withdrawn from practically everything else. Growth stocks, enjoying the longest winning streak over value in history, have seen withdrawals of $6.2 billion.

Overnight markets

• Overview: US 10yr note futures are down -0.2771% at 129-11, S&P 500 futures are up 0.14% at 2100.25, Crude oil futures are up 0.57% at $49.61, Gold futures are down -0.16% at $1214.7, DXY is up 0.01% at 95.531.

US Economic Data 

•  8:30 AM: Personal Income, April, 0.4%, est. 0.4% (prior 0.4%)
  Personal Spending, April, 1.0%, est. 0.7% (prior 0.1%, revised 0.0%)
  PCE Core, m/m, April, 0.2%, est. 0.2% (prior 0.1%)
  PCE Core, y/y, April, 1.6%, est. 1.6% (prior 1.6%)
•  9:45 AM : Chicago Purchasing Manager, May, est. 50.5 (prior 50.4)
• 10:00 AM: Consumer Confidence Index, May, est. 96.3 (prior 94.2)
• 10:30 AM: Dallas Fed Manufacturing Activity, May, est. -8.0 (prior -13.9)

 Canadian Economic Data 

• 8:30 AM: Industrial  Product Price, m/m, April, -0.5%, est. 0.4% (Prior -0.6%)
  •      Raw Material Price Index, m/m,  April, 0.7%, est. 1.1% (Prior 4.5%)

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

Tsy futures down on light volume due to Memorial Day holiday, TY1 129-08 (-14) on volume of 108k (280k qavg) . Core Euro govt bonds lower , steeper  – supply in the Eurozone this week est at E24bln vs E3.5bln last week, skewed towards the long end according to MNI.  Month end extensons for Europe are higher than avg due to ultra long end supply from Spain & 30Y Belgium. Barclays Euro Treasury index 0.04 yrs – small yet higher than avg, while the CITI &MS EGB duration wil increase 0.09yrs.  In the US the Barclays US Tsy Index rises 0.13yrs., the Agg 0.10yrs. The USD index is higher, stock futures higher after odds of a rate increase by July more than doubled in the wake of Yellen’s remarks on Friday and Q1 GDP cam ein ahead of expectations. GOCs are lower, yields 2bps higher in the 8-10 yr sector, the front month for CGBs is the Sep contract (144.22), with the CTD now the Can 2.25/25. Provis openin unch, supply unlikely yet Ont 10Y rumoured for this week. Issuance picked up last week with fixed & FRN supply totalling $3.7bln including 2 tranche from Union Gas (A/BBB+) – 10Y @ 147, 30Y @ 181 – both 2-3bps tighter than guidance with UOP for repayment of short term and upcoming debt. The bonds immediately went 3bps tighter on the break. We were active in the 10Y.

News headlines

• Gold Sinks as Dollar Gets Boost From Yellen; European Bonds Fall (Bloomberg) The Fed factor dominated global markets, battering gold, bonds and emerging-market assets, while lifting the dollar. Bullion fell for a ninth day in its longest losing streak in a year after Federal Reserve Chair Janet Yellen said an interest-rate increase is likely in coming months. The dollar strengthened against all but four of its 16 major peers. Treasury 10-year futures slid the most in almost two weeks, German bunds declined and emerging-market currencies headed toward the worst month since August. European stocks swung between gains and losses, with trading volumes less than half the daily average amid market closures in the U.S. and U.K.
• Yellen Hawkish Turn Sees Treasury Futures Tumble on Memorial Day (Reuters) Treasury 10-year futures contracts fell by the most in more than one week after Federal Reserve Chair Janet Yellen said Friday improvement in the U.S. economy would warrant raising interest rates in the coming months. Ten-year Treasury futures contracts for September delivery slid 14/32, or $4.38 per $1,000 face amount, to 129 9/32 as of 12:21 p.m. in London, based on electronic trading at the Chicago Board of Trade. It was the biggest decline since May 18.
• Oil Pessimists Exit Market as Supplies Seen Closer to Balance (Bloomberg) The oil market doomsayers are beginning to capitulate. Speculators reduced bets on falling prices to the lowest level in 11 months as oil briefly breached $50 a barrel on signs supplies are coming into balance. Crude climbed 7.4 percent this month in New York amid lower U.S. production and unplanned disruptions in Canada and Nigeria. Prices are up almost 90 percent since February. Money managers’ short position in U.S. benchmark crude reached the least since June, according to data from the Commodity Futures Trading Commission.
• Suncor Energy Inc resumes oilsands operations after fire shutdown, enabling thousands to return to work (Financial Post) Suncor Energy Inc. restarted oil-sands operations in the Regional Municipality of Wood Buffalo, an area in Canada that includes wildfire-ravaged Fort McMurray. It’s a move that enables thousands to return to work. Suncor and other oil-sands operators took offline this month more than 1 million barrels a day of output, as wildfires spread in the region and forced evacuations and the shutdown of pipelines and power supplies.
• Japan’s Abe to delay sales tax hike until 2019: government source (Reuters) Japanese Prime Minister Shinzo Abe plans to delay an increase in sales tax by two and a half years, a government official said on Sunday, as the economy sputters and Abe prepares for a national election. Abe told Finance Minister Taro Aso and the secretary general of his ruling Liberal Democratic Party, Sadakazu Tanigaki, on Saturday of his plan to propose delaying the tax hike for a second time, until October 2019, said the official, who was briefed on the meeting.
• French growth brisker than first thought in first quarter (Reuters) The French economy grew a stronger-then-expected 0.6 percent in the first quarter, official data showed on Monday, driven by a surge in consumer spending and a pick-up in business investment. The brisker growth figures, which augured well for the government’s 1.5 percent target for the full year, were the latest positive developments for the euro zone’s second-largest economy, where unemployment has finally started to decline and consumers are more optimistic despite strikes and protests.
• Greece tells lenders it can’t implement some extra demands – letter (Reuters) Greece has told its European and International Monetary Fund creditors it cannot implement some of the extra changes sought in exchange for fresh bailout loans, three sources close to the talks said on Monday. The move, if confirmed, could further delay the disbursement of the bailout funds which Athens badly needs to pay off IMF loans in June and European Central Bank bonds maturing in July and increasing state arrears.

Overnight markets

• Overview: US 10yr note futures are down -0.3614% at 129-8, S&P 500 futures are up 0.21% at 2101.75, Crude oil futures are down -0.18% at $49.24, Gold futures are down -0.58% at $1209.6, DXY is up 0.2% at 95.711.

US Economic Data 

• There is no major economic for today

 Canadian Economic Data 

• 8:30 AM: Industrial  Product Price, m/m, April, -0.5%, est. 0.4% (Prior -0.6%)
  • Raw Material Price Index, m/m,  April, 0.7%, est. 1.1% (Prior 4.5%)

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 in range bound o/n session, US 10Y 1.83%, 2s10s ~1bp flatter. Core Euro govt bonds higher & flatter on month end duration buying (MNI). The ECB is scheduled to start its corporate bond purchase plan on June 6th  – Euro denominated IG yields have fallen ~40% YTD, far outpacing the 15% drop in US IG yields. Crude off 1% @ $49.00, USD higher, S&P futures flat. Fed chair Yellen speaks at 1:15PM yet is not expected to address mon policy, the US has an early close for the memorial day holiday Monday. Volatility in tsys, as measured by the MOVE index @ 66 is close to recent lows, despite a record $192bln in US IG priced so far in May. Including tsy supply the issuance figure rises to $320bln. All three US tsy auctions this week (2/5/7Y) stopped thru with yesterday’s 7Y auction showing the highest end user demand since Aug 2015.  GOCs slightly lower , 5s30s ~1.5bps flatter, longs well bid going into m/e extension/coupon pmt.  Provi spds unch, QC 48 issue yest @105 105.5/105, while front end spds unch to 0.5bps tighter. TD in the mkt with 1Y FRN @3MO COR + 17bps.

News headlines

• Stocks Reach Three-Week High in Yellen Countdown as Oil Falls (Bloomberg) Global equities were headed for the highest close in three weeks and the dollar rose versus most peers as investors waited to see whether comments from Federal Reserve Chair Janet Yellen would disrupt the calm that’s settled over financial markets. Stocks were poised for the steepest weekly advance in more than a month as financial risks around the world eased. Oil slipped after touching $50 a barrel this week for the first time in at least six months and iron ore rebounded.
• World Leaders Tangle Over Growth Recipe Amid Rising Risk (Bloomberg) World leaders meeting in Japan tangled over how to push the global economy toward growth amid an array of risks including geopolitical tensions, a slowdown in China and Britain’s potential exit from the European Union. The Group of Seven industrial nations — the U.S., Japan, Germany, the U.K, France, Italy and Canada — sought a coordinated approach at a summit in central Japan amid discord over the best policy mix of fiscal spending, monetary stimulus or structural reforms.
• Dollar Faces Yellen Hurdle on Path to Biggest Gain in 16 Months (Bloomberg) The dollar’s best month in more than a year faces one last barrier: Janet Yellen speaks on Friday and any hint that interest-rate hikes will be delayed could spur a reversal for the greenback. A gauge of the currency against 10 major peers gained 3.1 percent this month after a string of the Federal Reserve Chair’s colleagues signaled their willingness to tighten policy as soon as next month.
• Japan consumer prices fall for second month, keep pressure on BOJ (Reuters) Japan’s core consumer prices fell for the second straight month in April as weak consumption discouraged firms from raising prices, stoking fears of deflation and keeping pressure on the central bank to do more to hit its ambitious inflation target. A separate index calculated by the Bank of Japan also showed consumer inflation slowing to a near one-year low, casting doubt on its argument that underlying price trend is improving steadily thanks to its massive stimulus program.
• Battle Inside OPEC Eases as Saudi Oil Strategy Finally Pays Off (Bloomberg) Saudi Arabia has been fighting with fellow OPEC members since the oil rout started two years ago. For the first time next week, it can argue convincingly that its strategy of squeezing rival producers is succeeding. By stifling high-cost suppliers, the Saudi approach has now almost eradicated the global oversupply, spurring a price rally of 80 percent to above $50 since January. All but one of 27 analysts surveyed by Bloomberg said the Organization of Petroleum Exporting Countries will stick with the strategy rather than set output limits when ministers gather in Vienna on June 2.
• Global funds raise cash, bond holdings on Brexit, Fed fears (Reuters) Global investors have raised their holdings of cash and bonds, citing fears about potential shock waves from a Brexit vote rippling beyond Britain and the increased likelihood of a rise in U.S. interest rates this summer. Fund managers polled by Reuters in the United States, Europe, Britain and Japan raised cash allocations to 6 percent in May, the highest level since January when global equity markets were in free-fall. They also increased their bond exposure to 37.8 percent from 37.6 percent in April.
• Valeant rejected joint takeover bid from Takeda, TPG in spring: source (Reuters) Valeant Pharmaceuticals International Inc (VRX.TO) received a joint takeover offer from Japan’s Takeda Pharmaceutical Co Ltd (4502.T) and TPG Capital Management LP [TPG.UL] this spring that the Canadian drugmaker rejected, according to a source familiar with the matter. The offer was made a few weeks before Joseph Papa took over as Valeant’s new chief executive in April last week, the source told Reuters.

Overnight markets

• Overview: US 10yr note futures are down -0.0361% at 129-27, S&P 500 futures are up 0.01% at 2090, Crude oil futures are down -1.39% at $48.79, Gold futures are down -0.25% at $1219.6, DXY is up 0.25% at 95.403.                                                                                                                

 US Economic Data 

• 8:30 AM:  GDP Annualized, q/q, 1 Q, 0.8%, est. 0.9% (prior 0.5%)
  • Personal Consumption, 1 Q,  1.9%, est. 2.1% (prior 1.9%)
  • GDP Price Index, 1 Q,  0.6%, est. 0.7% (prior 0.7%)
  • Core PCE, q/q, 1 Q, 2.1%, est. 2.1% (prior 2.1%)
• 10:00 AM : University of Michigan Sentiment,  est. 95.4  (prior 95.8)

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