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US tsys trading higher, curve slightly flatter US 10Y 1.817 (-1bp). Volume in TY futs below avg. Overnite S&P lowered the outlook for China to negative from stable to ‘reflect our expectation that the economic and financial risks …are increasing’. Yet China stocks closed higher, while Japanese equities fell. Core Euro bonds higher led by 10Y gilts despite upward revision to Q4 UK GDP thou the increase came about primarily from higher government spending. But euro bonds supported by weakness in equities with the stoxx down 1.0% towards key support at 3000. GOCs under pressure after Jan real GDP came in 0.6% vs 0.3% exp. Provis opening unch after closing firmer yest, QC & Ont supply still possible after yest Q26 deal which is a full 1.5bps better bid (100/99 vs 101.5).

News headlines

• Roller-coaster first quarter ends with shares, dollar under pressure (Reuters) World stocks fell for the first time in four days on Thursday, the final day of a roller-coaster first quarter that has hammered the dollar and the pound but has proven the best in decades for gold and bonds. European markets had a groggy morning with shares FTEU3 down 1 percent, the dollar hovering near a seven-week low versus the euro EUR= and oil LCOc1 volatile again after an extremely wild V-shaped ride so far this year.
• Oil prices slide as U.S. crude stocks hit record (Reuters) Oil futures fell on Thursday, with U.S. crude hitting its lowest price in more than two weeks as the country’s crude stocks reached yet another record high, renewing concerns about global oversupply. The increase in U.S. inventories came despite seasonal refinery utilisation hitting an 11-year high, while a rise in the dollar .DXY put further pressure on oil prices.
• China Rating Outlook Cut to Negative From Stable by S&P (Bloomberg) Standard & Poor’s has cut the outlook for China’s credit rating to negative from stable, saying the nation’s economic rebalancing is likely to proceed more slowly than the ratings firm had expected. The nation’s credit rating is AA- with a negative outlook, S&P said in a statement, which also affirmed the long-term and A-1+ short-term sovereign credit ratings.
• K. Economy Shows More Momentum; Current-Account Gap Widens (Bloomberg) The British economy ended 2015 with more momentum than previously estimated. Gross domestic product rose 0.6 percent in the fourth quarter instead of the 0.5 percent reported last month, the Office for National Statistics in London said on Thursday. There were upward revisions to services, industrial output and construction. GDP rose 0.4 percent in the third quarter.
• Euro zone inflation stays negative in March but ‘core’ prices rise (Reuters) The fall in euro area inflation slowed this month while core figures, which strip out volatile food and energy prices, accelerated, mildly positive news for the European Central Bank as it struggles to revive anaemic price growth. Annualised inflation picked up to -0.1 percent from -0.2 percent, in line with expectations, as rising food and services prices offset another big fall in energy costs, data from Eurostat showed.
• Wage Surge in Hot U.S. Labor Markets Sending Hopeful Sign to Fed (Bloomberg) With Minneapolis-St. Paul’s health-care industry booming, scientist Erin Nelson fielded more than 20 unsolicited calls in the past year asking her to consider switching jobs. She took one in September at a 40 percent raise. “Pay is becoming much more competitive,” said Nelson, 35, who designs research projects for medical-device companies. “It is a nice feeling to have job security, that there are jobs out there.”
• Bank of Canada warns economy’s recovery from oil shock will take more than two years (Financial Post) Canada will take more than two years to adjust fully to the drop in oil prices, a senior Bank of Canada official said on Wednesday, signaling no quick end to a shock that has roiled the economy. Deputy Governor Lynn Patterson said a simulation run by the bank suggested it would be several years before the economy found a new balance. The plunge in crude prices pushed the oil-exporting nation into a mild recession last year, prompting policymakers to cut interest rates twice, although the bank is expected to remain on hold next month.
• ‘Fragile five’: These OPEC producers are on the verge of collapse if oil prices don’t stabilize soon (Financial Post) The global oil price rout has left many oil producers reeling across the world. From Canada to Norway, Saudi Arabia to Russia, none of the world’s largest oil exporters have been spared from oil prices that declined 45 per cent last year alone. While some of the biggest producers will stumble along, five oil-producing economies are on the verge of collapse if oil prices do not stabilize soon, according to RBC Capital Markets.
• Argentine Senate approves deal to end debt dispute, re-enter markets (Reuters) Argentina’s Senate gave the green light to a landmark deal to repay creditors holding defaulted debt in the early hours of Thursday, marking the end of a 14-year legal battle that had made the country a global financial pariah. The deal, which had already been approved by the lower house of Congress, is the cornerstone of new President Mauricio Macri’s plan for revitalizing an economy hobbled by low investment, high inflation and precarious central bank reserves.
• Cara Operations Ltd, owner of Swiss Chalet, buys St-Hubert BBQ chicken chain for $537 million (Financial Post) Canada’s Cara Operations Ltd, owner of the Swiss Chalet casual dining chain and Harvey’s burger outlets, said on Thursday it would buy St-Hubert BBQ, one of Quebec’s largest casual dining chains, for $537 million. Toronto-based Cara, Canada’s largest operator of full-service restaurants, went public a year ago and had indicated it was looking to expand through acquisitions. Analysts had flagged privately held St-Hubert as one of the most likely targets for Cara, which is controlled by dealmaker Prem Watsa’s Fairfax Financial Holdings Ltd.

Overnight markets 

• Overview: US 10yr note futures are up 0.024% at 130-2, S&P 500 futures are up 0.02% at 2055.75, Crude oil futures are up 0.52% at $38.52, Gold futures are up 0.57% at $1235.6, DXY is down -0.41% at 94.452.

 US Economic Data 

• Initial Jobless Claims number came in at a level of 276k, stronger than expected and up 9k from prior month
• Continuing Claims number was at a level of 2173k, weaker than expected and down from prior month
• Chicago Purchasing Manager will be released at 9:45 AM   

Canadian Economic Data 

• GDP MoM growth was 0.6%, stronger than expected and up from prior month
• GDP YoY growth was 1.5%, stronger than expected and up from prior month

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

US tsys mixed, curve steeper after ADP came in above exp. (200 vs 195), and before US$28bln 7Y auction at 1:00PM. Core Euro bonds slightly lower, German regional inflation came in higher than exp.  Yellen basically took a Fed rate hike in April off the table with her dovish testimony yesterday – consistent with the FOMC statement two weeks ago yet after a round of  more hawkish testimony from the likes of Bullard & Williams. GOCs opening lower with 10s ~2bp weaker on the curve. Provis opening 1bp tighter on ‘risk on’, after closing 1.5bps wider yest on the strong rally in GOCs. Supply is likely today, we expect the 10Y sector as it looks attractive on an all in yield basis and considering the steepening in 10s30s.

News headlines

• Cautious Yellen drives world stocks near 2016 peaks (Reuters) World stocks climbed near the highest levels this year on Wednesday as investors rowed back expectations for how fast and how far U.S. interest rates might rise, bruising the dollar and boosting sovereign bonds. Wall Street ESc1 was set to build on Tuesday’s gains, which saw the S&P 500 recorded its highest close of the year after Federal Reserve Chair Janet Yellen urged caution on further rate hikes in the world’s largest economy amid calls from some policymakers for faster action.
• Oil prices rise with riskier assets on weak dollar (Reuters) Oil futures edged up on Wednesday to near $40 per barrel as a weaker dollar spurred interest in riskier assets and the International Energy Agency said expectations for a deluge of oil from Iran were misplaced. Brent futures LCOc1 climbed 46 cents to $39.60 a barrel as of 1000 GMT after settling down $1.13 in the previous session Brent futures LCOc1 climbed 46 cents to $39.60 a barrel as of 1000 GMT after settling down $1.13 in the previous session
• Chinese economy shifting to new pace of growth: president (Reuters) Chinese President Xi Jinping said on Wednesday his country’s economy was at a new normal and shifting to a slower pace of growth than in the past. “The world economy is in the current situation going through a time of deep modifications and the situation is complicated and unstable,” he told a Czech-Chinese business forum in Prague in comments broadcast through a Czech interpreter.
• Japan factory output down the most since 2011, recession feared (Reuters) Japan’s factory output in February fell the most since 2011 when a devastating earthquake ruptured the supply chain, stoking fears of another recession and renewing pressure on policymakers to take evasive action. The data followed passage of the fiscal 2016 budget on Tuesday, paving the way for Prime Minister Shinzo Abe to announce a new fiscal stimulus or drop the planned 2017 hike in sales tax after first quarter economic growth data due on May 18 is published.
• Fed’s Kaplan says central bank should raise rates gradually and cautiously (Reuters) Dallas Federal Reserve President Robert Kaplan said on Tuesday he expects the U.S. economy to prove resilient this year but that the nation’s central bank should proceed gradually and cautiously in raising rates. “We will … power through, but there are issues over the horizon that have some downward impact on GDP, and will affect unemployment and inflation,” Kaplan said before an audience in Austin, Texas.
• Canada ranks No. 2 among 10 countries for cost competitiveness: report (GlobeAndMail) Accounting giant KPMG says Canada has proven to be second most competitive market in a comparison test of 10 leading industrial countries. In its report, KPMG says Canada lags only behind Mexico when it comes to how little businesses have to pay for labour, facilities, transportation and taxes. The report, which compared the competitiveness of a number of western countries along with Australia and Japan, found that a high U.S. dollar has helped Canada stay affordable despite rising office real estate costs and lower federal tax credits.
• DBRS cautiously optimistic about Canada’s big banks (GlobeAndMail) Credit-rating agency DBRS Ltd. delivered an upbeat assessment of Canada’s big banks, arguing that the geographic diversity of their operations will help them navigate a weak Canadian economy and a struggling energy sector. Four weeks after the Big Six reported their fiscal first-quarter results, amid fears of an oncoming recession and surging loan losses tied to oil and gas producers, DBRS offered a note of cautious optimism even as the price of oil remains below $40 (U.S.) a barrel.
• Why Canadian LNG projects are inching forward despite low prices, sagging interest (FinancialPost) Canada’s nascent LNG export industry continues to inch forward, despite low commodity prices and speculation of sagging interest in the country’s natural gas resources. Two projects — on the West Coast, the other on the East Coast — provided some good news this week for a Canadian liquefied natural gas industry that has been weakened over the past year as major companies slashed capex budgets and liquefied natural gas prices fell in tandem with crude oil prices over the past year.
• Bitcoin Technology’s Next Big Test: Trillion-Dollar Repo Market. (WSJ) Blockchain, the virtual currency’s digital ledger application, to be tested on repo transactions. Depository Trust & Clearing Corp., a firm at the center of Wall Street’s trading infrastructure, is about to give the technology behind bitcoin a big test: seeing whether it can be used to bolster the $2.6 trillion repo market. DTCC said in a statement Tuesday that it will begin testing an application of blockchain, the digital ledger originally used to track ownership and payments of the cryptocurrency bitcoin, to help smooth over problems in the crucial but increasingly illiquid corner of short-term lending markets known as repurchase agreements, or “repos.”

Overnight markets 

• Overview: US 10yr note futures are down -0.0841% at 129-29, S&P 500 futures are up 0.55% at 2058.75, Crude oil futures are up 2.38% at $39.19, Gold futures are down -0.19% at $1235.1, DXY is down -0.2% at 94.969.

US Economic Data 

• MBA Mortgage Applications variation was -1.0% and up from prior week.
• ADP Employment Change number came in at a level of 200k, better than expected and down from prior month

 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

US tsys higher, curve flatter, US 10Y 1.87% (-2bps). Core European bonds higher, in catchup mode after holiday yest. Fed chair Yellen to speak at 12:20 EST and 1:00PM $34bln 5Y auction. Light data calendar today but heats up the rest of the week with ISM man & jobs report Friday. S&P  futs at the low of the session after early morning weakness after SF Fed Willieams reiterated he sees gradual rate hikes. GOCs higher , spds ~1bp wider vs tsys,muted reaction to lower raw materials/IPPI data. Provis starting the day better offered, after finishing 0.5bps wider in light trade yest.

News headlines

• Crude Oil Extends Declines, Weighing on Stocks as Bonds Advance (Bloomberg) Oil led commodities lower, pulling down the currencies of raw-material producing nations and helping lift government bonds. Futures on the Standard & Poor’s 500 Index retreated as crude slipped through $39 a barrel in New York in a fourth day of losses. Euro-area sovereign securities climbed as lower energy prices dimmed the outlook for inflation and the European Central Bank prepared to increase its asset-purchase plan by 20 billion euros ($22 billion) a month in April. Treasuries advanced before a speech from Federal Reserve Chair Janet Yellen and several key pieces of economic data this week culminating in payrolls figures.
• Dollar Pares Drop Before Yellen’s Speech and Confidence Report (Bloomberg) A gauge of the dollar pared its biggest one-day decline in more than a week as the market awaited a speech by Federal Reserve Chair Janet Yellen that may provide more clarity about how she sees the economy. The U.S currency gained versus half of its 16 major peers before a report on Tuesday which economists forecast will show consumer confidence improved in March.
• Bank of England Raises Buffer Rate as Stability Risks Grow (Bloomberg) The Bank of England said banks should begin building up capital earmarked to support lending when the economy turns down, as the outlook for U.K. financial stability worsens. The BOE’s Financial Policy Committee raised the countercyclical capital buffer rate for U.K. exposures to 0.5 percent of risk-weighted assets from zero, becoming binding from March 29 next year. The buffer applies to U.K. banks and building societies, as well as to branches of other European Union banks that lend into the country.
• Abe Says Japanese Government Will Front-Load Budget Spending (Bloomberg) The best way to boost the economy is to quickly implement the existing budget for the next fiscal year, Prime Minister Shinzo Abe said Tuesday, rejecting speculation he would announce a supplementary spending package. Speaking after the parliament passed a record 96.7 trillion yen ($850 billion) in outlays for the 12 months starting April 1, Abe brushed off suggestions from some members of the ruling party that the government may announce another 10 trillion yen of fiscal stimulus.
• Fed’s Williams urges U.S. central bank to stay on track with rate rises (Reuters) The U.S. economy remains on track for a gradual path of rate hikes and fears over the impact of a slowing global economy and bouts of financial volatility are overdone, San Francisco Federal Reserve President John Williams said on Tuesday. “Others’ economic fates do not spell our own,” Williams said in prepared remarks before an audience at the National University of Singapore. “My view is essentially, let’s just stay on track. Let’s not get sidelined by the noise and distraction commentary can sometimes cause.”
• China March official factory PMI: activity seen contracting at slower pace (Reuters) Activity in China’s manufacturing sector likely shrank for an eight straight month in March, but at a slower pace than in February as a reviving property market gave a much-needed boost to sales of steel and other construction materials, economists polled by Reuters said. The official manufacturing Purchasing Managers’ Index (PMI) is expected to rise to 49.3 in March from 49.0 a month earlier, according to a median forecast of 32 economists in a Reuters poll. February’s reading was the weakest since November 2011.
• Automakers Expanding in China May Soon Face Weakening Demand (NYTimes) The new $1.3 billion Cadillac factory on the outskirts of Shanghai is a shrine to modern manufacturing, the kind of facility that automakers all over the world dream of building but can seldom afford. Hundreds of robots bend, arch and twist to assemble the body of Cadillac’s new flagship CT6. Lasers seal the car’s lightweight aluminum exterior using techniques that the carmaker, General Motors, has only just introduced in the United States.
• Financial sector confidence about UK economy drops sharply (TheGuardian) Fears over the UK’s faltering economic outlook have been underlined by a survey showing a sharp drop in confidence among financial services firms, against the backdrop of the Chinese slowdown and the EU referendum. Optimism among companies in the UK’s financial sector has fallen at the fastest rate since 2011, reflecting a backdrop of tumultuous markets and worries about a global economic slowdown. The downbeat outlook from one of the UK’s key sectors – which accounts for around 10% of GDP – will add to fears that the economy will slow this year amid global pressures and domestic challenges. The survey also indicated that banks in the UK are preparing to cut more jobs.
• OECD’s Gurria Calls for Demand-Side Measures to Spur Inflation (Bloomberg) A shift away from supply-side measures toward those that foster demand is needed to better address global worries about deflation, the Organization for Economic Cooperation and Development’s secretary general said. “A lack of demand means you have to do something on the other side — we’ve been focusing on the supply side for many years,” Angel Gurria said in an interview with Tom Keene and Francine Lacqua on Bloomberg Surveillance on Tuesday. “We should be worried about deflation.”
• Yahoo sets April 11 deadline for preliminary bids: WSJ (Reuters) Yahoo Inc (YHOO.O) has set an April 11 deadline to submit preliminary bids for its web business and Asian assets, The Wall Street Journal reported on Monday, citing sources. Yahoo asked bidders details regarding financing, conditions or approvals that would have to be met on their end, and what key assumptions they would be making by deciding to move forward with a deal, the Journal said, citing a letter sent to possible bidders.
• Buffett boosts Berkshire’s Wells Fargo stake to 10 percent (Reuters) Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) on Monday said it has increased its ownership stake in Wells Fargo & Co (WFC.N) to 10 percent, a level that could mean increased federal scrutiny over the investment. Berkshire owns 506.3 million shares of Wells Fargo, worth about $24.7 billion, mainly through subsidiaries, according to filings with the U.S. Securities and Exchange Commission. The ownership stake has risen from 6.5 percent at the end of 2009 and 9.8 percent as of Dec. 31, according to Buffett.

 Overnight markets 

• Overview: US 10yr note futures are up 0.1449% at 129-19, S&P 500 futures are down -0.26% at 2022.75, Crude oil futures are down -2.59% at $38.37, Gold futures are down 0% at $1222, DXY is down -0.08% at 95.869.

US Economic Data 

• S&P / Case-Shiller US HPI MoM Sa will be released at 9:00 AM
• S&P / Case-Shiller 20-City Index NSA will be released at 9:00 AM
• S&P / Case-Shiller Composite-20 YoY NSA will be released at 9:00 AM
• Consumer Confidence Index will be released at 10:00 AM

Canadian Economic Data 

• Industrial Product Price MoM variation was -1.1%, worse than expected and down from prior month
• Raw Materials Price Index MoM variation was -2.6%, worse than expected and down from prior month

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