Commentaires

Market update

US tsys slightly lower, above avg volume in TY1 futures (395k), with prices flat in Asia, lower in European trading and back to unch in NA trading. S&P stock futures are ~0.40% higher, European equities higher for a second day, the Stoxx at the highest ll since April 28th.  The USD index lower, crude up 1.1% above $49.00 – yesterday’s API report showed crude inventories fell 5.14 mln barrels last week, the biggest decline since Dec. Core Euro bonds higher despite higher stocks & better than exp German IFO sentiment, with duration extension trades going thru, short covering after E821mln German 30Y bond auction. Euro Peripheral bonds higher led by Greece after the Eurogroup agreed to release bailout funds to Greece The US auctions $34bln in 5Y notes at 1:00EST.  Yesterday’s 2Y note auction stopped 2bps thru @0.92%, with direct (end user) participation the highest in 3yrs at 32.5% vs 13% avg. GOCs are unch before BOC decision at 10:00 with no change expected in the o/n rate, while the statement could take on a more dovish tone in view of March’s large (4.2%) decline in non-energy exports, even as the real trade balance was in surplus. Provi spreads opening firm after closing tighter yest on stocks & well received long Alberta deal (124.5, now 122.5 bid). Supply is still expected prior to next week’s cpn pmt. Altalink (A/A) is in the mkt with a 10Y fixed at ~140. Utility spreads have not been immune to the selling pressure which has impacted the BBB sector disproportionately over the last three weeks as supply has begun to be a factor after a quiet April, with Banks expected to be in the mkt shortly post earnings as well.

News headlines

• Stocks Rally With Oil as Don’t Fear the Fed Is New Market Mantra (Bloomberg) Global equities rose to a two-week high amid increasing investor optimism that the world economy can withstand higher U.S. interest rates. Oil advanced and gold fell amid a retreat in the dollar. The MSCI All Country World Index climbed for a second day, European equities jumped, and futures signaled a higher opening for U.S. shares. Emerging-market stocks rose the most in six weeks, while South Korea’s won led currencies higher even as China set the yuan’s reference rate at the weakest level since 2011.
• Oil nudges $50 a barrel as investors bet on shrinking overhang (Reuters) Oil rose towards $50 a barrel on Wednesday for the first time in seven months, driven by expectations that shrinking supply will help erode any overhang of unwanted crude, particularly after industry data showed a sharp fall in U.S. inventories. A series of outages around the world, such as wildfires in Canada and a spate of violence in Nigeria’s oil-producing region, has helped cut global oil supply by nearly 4 million barrels per day this month.
• China Wants to Set Prices for the World’s Commodities (Bloomberg) China has put the world’s traditional financial centers on notice that it wants to develop its raw material markets as hubs for setting prices, seeking to marry the country’s commercial heft with a much greater say in determining how much commodities cost. “We’re facing a chance of a lifetime to become a global pricing center for commodities,” Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said at the Shanghai Futures Exchange’s annual conference in the city on Wednesday.
• China Said to Plan Asking U.S. on Timing of Fed Rate Hike (Bloomberg) Chinese officials plan to ask their American counterparts in annual talks next month about the chance of a Federal Reserve interest-rate increase in June, according to people familiar with the matter. The Chinese delegation will try to deduce whether a June or a July rate rise is more likely, as their nation’s policy makers prepare for the potential impact on financial markets and the yuan, the people said, asking not to be named as the discussions were private.
• Euro zone hails ‘breakthrough’ with Greece, IMF debt deal (Reuters) The euro zone gave Greece its firmest offer yet of debt relief in what finance ministers called a breakthrough deal that won a provisional commitment from the IMF to return to taking part in the bailout for Athens, heartening investors. After talks that lasted into the small hours of Wednesday, Eurogroup finance ministers gave a nod to releasing 10.3 billion euros ($11.5 billion) in new funds for Greece in recognition of painful fiscal reforms pushed through by Prime Minister Alexis Tsipras’s leftist-led coalition, subject to some final technical tweaks.
• Bank of Montreal hikes dividend but profit dips and bad loan provisions rise (Financial Post) The Bank of Montreal’s second quarter profit fell to $973 million, down three per cent from a year ago, as it took bigger provisions for credit losses and restructuring expenses. The bank reported $999 million of net income during the same quarter last year. The earnings amounted to $1.45 per share, down from $1.49 per share a year ago.
• Oilsands companies prepare to restart production as fire moves East (Financial Post) The threat posed by the wildfire that shut down 1.2 million barrels of daily oilsands production has not completely passed, but oilsands companies have begun sending crews back up to northern Alberta to prepare to restart their facilities. Teams from Suncor Energy Inc., Syncrude Canada Ltd., Athabasca Oil Corp. and ConocoPhillips Canada are either en route to, or on the ground at, oilsands projects around Fort McMurray preparing to start pumping oil once again.

Overnight markets 

• Overview: US 10yr note futures are down -0.1206% at 129-13, S&P 500 futures are up 0.35% at 2082.25, Crude oil futures are up 1.28% at $49.24, Gold futures are down -0.59% at $1224.9, DXY is down -0.04% at 95.534. 

US Economic Data 

• 9:00 AM: FHFA House Price Index, m/m, March, est. 0.50% (prior 0.40%)
• 9:45 AM: Markit US Services PMI, May, est. 53.0 (prior 52.8)
  •      Markit US Composite PMI, (prior 52.4)

 Canadian Economic Data 

• 10:00 AM: Bank of Canada Rate Decision, May, est. 0.50% (prior 0.50%)

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 lower, US 10Y 1.844 (+1bp), curve flatter, avg volume in TY1 futs (270k). More hawkish Fedspeak, this time from Fed Harker who stated he could ‘easily see two or three rate hikes this year’. Core Euro bonds higher, bund curve flatter despite better than exp ZEW.  The US auction $26bln in 2Y notes at 1:00 with 2Y yields the highest since mid-March and with the highest auction yield (0.925) since Dec. Spec positioning is fairly short the 2Y (based on latest COT report -121k contracts) yet with the Fed sounding hawkish the short pos could head higher; primary dealers are the longest the 2-3Y sector since Nov 2015.  GOCs lower in line with tsys, provis 0.5bps wider, long Alberta deal still expected, Alb/Ont 46 19bid.

News headlines

• Asian stocks near 11-week lows, dollar bounces on Fed rate view (Reuters) Asian shares stumbled to near 2-1/2-month lows on Tuesday and the U.S. dollar pared some of its recent losses as investors worried about the likelihood of a U.S. interest rate increase in coming weeks. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slid 0.5 percent, taking its losses to more than 7 percent so far this month and nearing its lowest levels since March 9.
• Oil falls for fifth day as focus returns to growing exports (Reuters) Oil fell for a fifth consecutive day on Tuesday on rising production from major exporters, and as the dollar strengthened. Brent futures LCOc1 had declined 25 cents to $48.10 a barrel by 1051 GMT, after closing down 37 cents in the previous session.
• Dollar Rally Gathers Pace, Commodities Drop on Fed; Pound Jumps (Bloomberg) The dollar rallied and crude oil fell with gold as speculation mounted that the Federal Reserve will raise interest rates as early as next month. The pound jumped and European stocks gained. The U.S. currency touched its strongest level in eight weeks against the euro, while Australia’s dollar and the Malaysia’s ringgit were among the biggest losers, as the prospect of higher interest rates boosted demand for the greenback.
• Valeant Pharmaceuticals Inc to lower debt by more than $1.5 billion this year by selling non-core assets, new CEO tells investors (Financial Post) Valeant Pharmaceuticals Inc plans to lower its debt by at least $1.5 billion this year, Chief Executive Joseph Papa said on Monday during his first large meeting with investors since taking the top job three weeks ago. Valeant has about $30 billion in debt and has had to appease creditors, who had the option of forcing early payment of some loans and bonds after Valeant missed deadlines for filing financial records with regulators and triggering default notices.
• Thousands of oilsands workers are losing pay while Fort McMurray fires shut sites (Financial Post) While wages are continuing for many employees of oilsands companies forced off the job by Fort McMurray wildfires, thousands of tradespeople hired by contractors are off the payroll. “It’s certainly an economic hardship. People have bills to pay, people make plans around when they expect the work will take place,” Warren Fraleigh, executive director of the Building Trades of Alberta, said Friday.
• The Hedge Fund That Couldn’t Stay Open Long Enough for a Big Payday (Bloomberg) Toby Dodson waited six months for his bet against a fragile Portuguese bank to pay off. But before the reckoning, word came down from his hedge fund bosses at Achievement Asset Management in Chicago: get ready to clear out your desk and unwind your trades, we’re shutting down. They’d lost too much on U.S. energy companies and so became one of the 979 firms to announce their closure last year.

Overnight markets

• Overview: US 10yr note futures are down -0.0723% at 129-21, S&P 500 futures are up 0.55% at 2056.5, Crude oil futures are up 0.71% at $48.42, Gold futures are down -1.02% at $1238.7, DXY is up 0.25% at 95.468.

US Economic Data 

• 10:00 AM: Richmond Fed Manufacturing Index, May,  est. 8 (prior 14)
  • New Home Sales, April, est. 523k (prior 511k)
  • New Home Sales, m/m, est. 2.3% (prior -1.5%)

 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 opening lower, yields 1-2 bps higher ,10Y 1.863%.  Tsys opened higher in Asia yet fell thru the rest o/n session as European equities stabilize at six week lows, and reports of foreign CB selling tsys (MNI). Low volume in TY futures (264k). Selling in UK gilts also pressured tsys as speculation the Uk will remain in the union.  GOCs lower, prices off the lows afterApr CPI came in 0.3% vs 0.4% exp, Mar retail sales -1.0% vs -0.6% exp. Provis opening heavier, Ont longs trading down at 105, 10s unch @ 94/93. Long Alberta rumoured yet unlikely given early close. Alberta was downgraded by S&P yest afternoon citing budgetary shortfall & high debt burden. Alb/Ont 46 roll holding firm so far at 19. HQ issued $1bln new May 19s yest @ 51 – seemed to be a bit of a struggle given the size and liquidity concerns.

News headlines

• Stocks Rebound From Six-Week Low as Oil Advances, Yen Retreats (Bloomberg) Financial markets stabilized after being buffeted this week by speculation the Federal Reserve is moving closer to raising interest rates. Global shares rebounded from a six-week low as crude and commodity prices recovered, while the yen weakened on reduced demand for haven assets.
• Dudley Says June-July Fed Hike Reasonable If Data on Track (Bloomberg) The Federal Reserve is moving closer to raising interest rates at one of its next two meetings and the fact this message is getting through to financial markets is welcome news, said New York Fed President William Dudley. “If I’m convinced that my own forecast is on track, then I think a tightening in the summer, the June-July time frame, is a reasonable expectation,” Dudley told reporters Thursday in New York.
• Lacking new ideas, G7 to agree on ‘go-your-own-way’ approach (Reuters) A rift on fiscal policy and currencies is likely to set the stage for G7 advanced economies to agree on a « go-your-own-way » response to address risks hindering global economic growth at their finance leaders’ gathering on Friday. As years of aggressive money printing stretch the limits of monetary policy, the G7 policy response to anemic inflation and subdued growth has become increasingly splintered.
• Japan’s Aso tells G7 FX stability vital, no competitive devaluations (Reuters) Japanese Finance Minister Taro Aso said on Friday he told his Group of Seven counterparts that currency stability is of utmost importance and that excess volatility and disorderly currency moves could harm economies. Aso told reporters in Sendai, northern Japan, where he is chairing a meeting of G7 finance ministers and central bankers, that he had voiced opposition to « competitive devaluation of currencies. »
• Snubbed by West, Russia rolls out red carpet for Asian leaders (Reuters) The Kremlin has seized on the visit by southeast Asian leaders for a summit as an opportunity to show Russia still has friends on the international stage, despite being cold-shouldered by the West over the conflict in Ukraine. Russia has had few chances to host major international gatherings since Western sanctions were imposed, so there has been considerable fanfare around this week’s summit with members of the Association of South-East Asian Nations (ASEAN).
• Alberta’s Wildfires Couldn’t Have Come at a Worse Time for the Local Economy (Bloomberg) The wildfires raging in Alberta are destined to go down as the most expensive natural disaster in Canada’s history, doing monumental damage to property and the environment in the process. These blazes may have also caused harm to the province’s nascent economic green shoots .
• S&P downgrades Alberta rating; cites fiscal uncertainty, debt (Reuters) S&P lowered its debt rating for Alberta To ‘AA’ From ‘AA+’ on Thursday, the latest ratings agency to downgrade the Canadian province that has struggled with the impact of tumbling oil prices. The agency, which kept its negative outlook on Alberta, said the downgrade reflects the province’s very weak budgetary performance and high debt burden, which it expects to « increase rapidly » over the next three fiscal years.
• Valeant Gets Notice of Default From Bondholders on Late 10-Q (Bloomberg) Valeant Pharmaceuticals International Inc. received a notice of default from some of its bondholders because of a delay in filing its first-quarter financial results, the company said Thursday. The notice from creditors started the clock on a 60-day grace period, giving Valeant until July 18 before the bondholders can demand immediate repayment if the company hasn’t filed the statement.

Overnight markets 

• Overview: US 10yr note futures are down -0.0482% at 129-20, S&P 500 futures are up 0.29% at 2044.75, Crude oil futures are down -0.44% at $47.95, Gold futures are up 0.19% at $1257.2, DXY is up 0% at 95.29.

US Economic Data 

• 10:00 AM: Existing Home Sales, April, est. 5.40m (prior 5.33m)
  • Existing Home Sales, m/m, est. 1.3% (prior 5.1%)

 Canadian Economic Data 

• 8:30 AM : Retail Sales. m/m, March, -1.0%, est. -0.6% (prior 0.4%, revised 0.6%)
  • Retail Sales Ex Auto, m/m, March, -0.3%, est. -0.4% (prior 0.2%, revised 0.3%)
  • CPI NSA, m/m, April, 0.3%, est. 0.3% (prior 0.6%)
  • CPI, y/y, April, 1.7%, est. 1.7%, (prior 1.3%)
  • CPI Core, m/m, April, 0.2%, est. 0.1% (prior 0.7%)
  • CPI Core, y/y, April, 2.2%, est. 2.0% (prior 2.1%)

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