Comments

21/03/2016

by admin | Mar 21, 2016 | comments

Market update

Tsys opening lower in quiet trading due to Japanese market holiday, US 10Y 1.89 (+1bp). Tsys pressured by higher Euro stocks even as crude is ~1.0% lower at $39.00. Latest CFTC COT report showed specs adding to shorts in the ultralong (new record short), slightly reducing longs in the 10Y and adding to longs in the 30Y bond. Core Euro bonds higher, bunds higher led by the 5Y. Dovish comments from a couple of ECB members Villeroy & Coeure led to a rally in bunds with Coeure nothing the ECb has other tools at its disposal to fight low inflation. GOCs are trading lower, spds ~1bp tighter vs tsys – last week GOCs cheapened 5-7 bps vs tsys in the wake of a surprisingly dovish FOMC. Provi spds unch, Ont 46 106/105, Ont 25s 93/92 – the 10/30 box has steepened 4bps since the peak in spds late Feb as 10s have led the charge. Munis have lagged the rally in provis to a great extent, York 25s still ~30 bps over Onts hasn’t budged in two months.

News headlines

Global Market Volatility Falls to Two-Month Low; Oil Pares Drop (Bloomberg) Volatility across global financial markets is at a two-month low as signs central banks will continue to support asset prices settles investor nerves that frayed at the start of the year. Stocks and bond markets were little changed on Monday after a measure of global stocks posted the strongest close since Jan. 1 last week following five weeks of gains. The Shanghai Composite Index topped 3,000 for the first time in two months amid plans to loosen margin-lending curbs, South Africa’s rand fell on political turmoil and gains in Indian bonds sent yields to the lowest since 2013 on a government decision to cut rates on small savings plans.
S&P 500 Futures Little Changed After Equities Erase 2016 Losses (Bloomberg) U.S. stock-index futures were little changed as investors assessed a rally that turned equities positive for the year. Standard & Poor’s 500 Index contracts expiring in June added less than 0.1 percent to 2,038.5 at 7:11 a.m. in New York. A slower pace of rate increases signaled by the Federal Reserve helped the benchmark climb for a fifth week, its longest winning streak since November. Dow Jones Industrial Average futures gained 12 points to 17,504.
Oil prices stabilize after falling on higher U.S. rig count (Reuters) Oil prices recovered from early losses on Monday as the market digested news of a modest rise in U.S. drilling activity, though uncertainty lingered over the outcome of a meeting of the world’s major exporters next month to discuss freezing output. U.S. energy firms last week added one oil rig after 12 weeks of cuts, according to data from industry firm Baker Hughes. Oil rigs have fallen by two-thirds over the past year to their lowest since 2009, and this surprise addition suggested the drop-off in crude drilling may be stabilizing after the oil price’s 50-percent rally since February.
Fed’s Lacker Confident Inflation Poised to Rebound to 2% Target (Bloomberg) Federal Reserve Bank of Richmond President Jeffrey Lacker said that inflation will rise back to the U.S. central bank’s 2 percent target once energy prices stabilize and the dollar stops advancing. “I am reasonably confident that, barring subsequent shocks, inflation will move back to the FOMC’s 2 percent objective over the medium term,” Lacker said in remarks prepared for a speech at the Banque de France in Paris Monday, referring to the policy-setting Federal Open Market Committee.
China says it will fend off financial risks, communicate better with markets (Reuters) China has many policy tools at its disposal to fend off financial risks and will improve its communication with markets, Premier Li Keqiang said on Monday. Li told the visiting International Monetary Fund Managing Director Christine Lagarde that China will not rely on yuan depreciation to spur exports.
Sterling hit by British political row, yen inches higher (Reuters) Sterling was the big loser among major currencies on Monday, sinking more than half a percent on concerns that a split in the ruling Conservative Party is deepening ahead of June’s referendum on EU membership. With stock markets mixed, the safe-haven yen inched higher against the dollar, euro and commodity-linked currencies like the Australian and New Zealand dollars. The dollar index, which measures the U.S. currency’s broad strength against a basket of its peers, was roughly steady at 95.102 after falling by more than 1 percent for the third week running last week.
Greek Bailout Tranche Deal Eludes as Refugee Challenge Grows (Bloomberg) Greece and its creditors ended the latest round of talks on Sunday without reaching an agreement on the terms attached to the country’s bailout, as Europe’s most-indebted state faces the challenge of handling the continent’s biggest-ever wave of irregular migration. Work will continue over the Easter break and bailout monitors will return to Athens on April 2 with a view to concluding negotiations as soon as possible, a European Commission spokeswoman said in an e-mail.
Exclusive: China central bank to Fed: A little help, please? (Reuters) Confronted with a plunge in its stock markets last year, China’s central bank swiftly reached out to the U.S. Federal Reserve, asking it to share its play book for dealing with Wall Street’s “Black Monday” crash of 1987. The request came in a July 27 email from a People’s Bank of China official with a subject line: “Your urgent assistance is greatly appreciated!” In a message to a senior Fed staffer, the PBOC’s New York-based chief representative for the Americas, Song Xiangyan, pointed to the day’s 8.5 percent drop in Chinese stocks and said “my Governor would like to draw from your good experience.”
Valeant Pharmaceuticals International Inc naysayers say company can be saved, but it’s going to take some major changes (FinancialPost) It’s not easy to be a naysayer. Only a handful of short-sellers and analysts were ringing alarm bells when Valeant Pharmaceuticals International Inc. was in the midst of its rise to the top of the TSX. They were largely ignored at first.

Overnight markets

Overview: US 10yr note futures are down -0.2173% at 129-4, S&P 500 futures are down -0.09% at 2035.75, Crude oil futures are up 0.23% at $39.53, Gold futures are down -0.76% at $1244.8, DXY is up 0.07% at 95.152.

US Economic Data

Chicago Fed Nat Activity Index was at a level of -0.29, missing the estimate and down from the previous period
Existing Home Sales will be relased at 10:00 AM
Existing Home Sales MoM variation will be released at 10:00 AM

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

18/03/2016

by admin | Mar 18, 2016 | comments

Market update

Tsys opening slightly higher, giving up most of the early gains from the Tokyo session, US 10Y 1.89 (-1bp). Core Euro bonds higher, flatter yey fading as crude (40.88 +1.6%), Euro stocks rise (40.88 +1.6%). The USD index recovering somewhat (0.25%) after a fed induced 2.0% slide over the last two days. EUR lower on comments from ECB Praet that the ECB could continue to cut the deposit rate if necessary. Strong buying of tsys from Asian comm banks and yen funded buying of two year notes in 2s & longs according to MNI. Ten year JGBs surged after the BOJ’s ‘rinban’ (security purchase) operation, with the 10Y yield ~8bps lower at -0.1% or below the official BOJ deposit rate. Yields on JGBs have tumbled since Jan29th negative rate announcement and the 2s30s curve has flattened 40bps to the narrowest in at least 13yrs. Light calendar today with only Michigan Sentiment but several Fed speakers including NY Fed Pres Dudley at 9:00am. Another heavy week of corporate issuance in the US with ~$30bln priced, yet spds continue to grind tighter – 40 bps since Feb 20th high of 221 based on BB US IG index. GOCs lower after Jan retail sales rose 2.1% vs 0.6% exp, rebounding from Dec 2.1% decline (rev from -2.2%). Ex-autos particularly strong 1.2% vs 0.4%. CPI lower than exp 0.2% vs 0.4% exp. Quebec budget yest confirmed balanced budget for this FY and for the next 5 yrs, borrowings will drop to $14bln this FY from $15.5bln net of prefinancings.

News headlines

Japan 10-Year Yield Drops to Record, Below Negative Deposit Rate (Bloomberg) Investors at home and abroad can’t get enough 10-year Japanese government bonds, driving the yield to an unprecedented minus 0.135 percent. Yields sank across the curve Friday after the Bank of Japan’s operation to buy long-term debt met the lowest investor participation on record, spurring what Bank of America Merrill Lynch strategist Shuichi Ohsaki called “panic buying.” The yield on the benchmark 2026 notes sank as much as 8 1/2 basis points Friday to below the minus 0.1 percent deposit rate introduced by the central bank last month, while that on 20-year securities tumbled more than 10 basis points to an unprecedented 0.29 percent.
Oil hits 2016 high above $42 on production and demand outlook (Reuters) Oil rose above $42 a barrel on Friday, hitting its highest this year and extending a rally into a fourth week on expectations of a production freeze by major exporters, stronger seasonal demand and dollar weakness. Brent crude’s front-month contract LCOc1 was up 59 cents at $42.13 a barrel by 1113 GMT, having touched a 2016 high of $42.31. U.S. crude CLc1 gained 64 cents to $40.84 a barrel after rising as high as $40.93. The benchmark had jumped by 4.5 percent to close the previous session at $40.20.
Merkel Dodges Draghi Call for Clarity With Bank Union Swerve (Bloomberg) European Central Bank President Mario Draghi pushed European Union leaders for clarity on the future of the euro on Thursday. But Germany still chose to skirt a critical area of disagreement with its partners. During a closed-door session in Brussels, Draghi told EU leaders that the most important thing they could do would be to set out a clear path forward for the monetary union, according to two officials familiar with deliberations.
Dow’s Freakish Bounce Makes Investors Whole, Can’t Erase Doubts (Bloomberg) Just as fast as U.S. stocks tumbled in what was the worst-ever start to a year, they have staged one of the biggest turnarounds in history — and yet all anyone seems to focus on are the negatives. An advance of 0.9 percent in the 119-year-old Dow Jones Industrial Average Thursday wiped out a year-to-date decline that swelled to as much as 10 percent in February, making investors whole 11 weeks into a year that was shaping up to be a disaster. It’s the fastest that a retreat of 10 percent or more has ever been reversed this early in a year, data compiled by Bloomberg show.
Justin Trudeau’s Message to Wall Street: I Am Not My Father (Bloomberg) Canada Prime Minister Justin Trudeau sought to reassure Wall Street investors he’ll remain cautious on spending as he prepares to push the nation deeper into deficit, distancing himself from another deficit-spending leader: his father Pierre. Trudeau says his new Liberal government isn’t looking to flood the economy with money now beyond what was promised in last year’s election campaign, saying he needs to be responsible and keep the budget gap under control.
BofA Joins JPMorgan, Capital One in Expanding Share Buybacks (Bloomberg) Bank of America Corp. said its board approved the repurchase of as much as $800 million in shares, joining JPMorgan Chase & Co. and Capital One Financial Corp. this year in returning more capital to shareholders. Bank of America’s repurchases are in addition to the $4 billion announced a year ago, the Charlotte, North Carolina-based company said Friday in a regulatory filing. The latest buyback is to offset share dilution that would otherwise result from incentive-compensation awards, according to the filing.
TransCanada Corp to overhaul its business in US$13B acquisition of Columbia Pipeline Group (FinancialPost) TransCanada Corp. proved rumours of its interest in Columbia Pipeline Group true on Thursday when it announced a US$13-billion deal to buy the Texas-based natural gas pipeline firm.
Valeant Pharmaceuticals International Inc creditors prepare to slam company with tougher demands in face of possible default: sources (FinancialPost) Creditors of Valeant Pharmaceuticals International, which has been in violation of lender agreements since Wednesday, are beginning to demand new terms that could further pressure the drugmaker’s business model, according to three people familiar with the matter.
More Hedge Funds Shuttered Than Opened During 2015 Turmoil (Bloomberg) Hedge-fund shutdowns outnumbered startups last year for the first time since 2009, according to data firm Hedge Fund Research, as the global industry contracted amid market volatility. In the last quarter, 305 funds closed compared with 257 a year earlier, taking the total for the year to 979. Startups totaled 968, the Chicago-based company said in a report on Thursday. In 2009, hedge-fund closures totaled 1,023 and 784 opened.
The U.S. Is Exporting Its Oil Everywhere (Bloomberg) Three months since the U.S. lifted a 40-year ban on oil exports, American crude is flowing to virtually every corner of the market and reshaping the world’s energy map. Overseas sales, which started on Dec. 31 with a small cargo aboard the Theo T tanker, have been picking up speed. Oil companies including Exxon Mobil Corp and China Petroleum and Chemical Corp have joined independent traders such as Vitol Group and Trafigura Pte in exporting American crude.

Overnight markets

Overview: US 10yr note futures are up 0.1331% at 129-9, S&P 500 futures are up 0.31% at 2036.5, Crude oil futures are up 2.04% at $41.02, Gold futures are down -1.17% at $1250.2, DXY is up 0.16% at 94.916.

US Economic Data

University of Michigan Sentiment will be released at 10:00 AM

Canadian Economic Data

Retail Sales MoM growth was 2.1%, stronger than expected by the analysts and up from prior month
Retail Sales Ex Auto MoM growth was 1.2%, better than the estimate and up from prior month
CPI NSA MoM growth was 0.2%, weaker than expected by the analysts and at the same level than prior month
CPI YoY growth was 1.9%, worse than the estimate and down form prior year
CPI Core MoM growth was 0.5%, as expected by the analysts and up from prior month
CPI Core YoY growth was 1.9%, weaker than the estimate and down form prior year

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

17/03/2016

by admin | Mar 17, 2016 | comments

Market update

Tsys higher, following thru on yest Fed inspired rally, US 10Y 1.88 (-3bps) & cpn curve unch. Prices off the highs after better than exp Phili Fed index (12.4 vs -1.5) marked by improvements in both new orders and shipments. Yest the Fed chose to downplay the rise in core inflation, recovery in commodity prices, focusing instead on international developments. The ‘dot plots’ continue to be readjusted downwards with each successive meeting. After yesterday’s bull steepening mkts are pricing in ~65% odds of one rate hike by Dec. GOCs higher, spds unch vs tsys, curve 1bp steeper with longs underperforming, 10s30s 4bps wider since yest aft. Provis well bid, long Onts 107.5/107, QC48/Ont46 3/2.8 continues to ratchet tighter. Quebec budget this aft, rumours of MP and possible l.t. muni issue.

News headlines

Oil rallies towards $41, near 2016 high, on producer meeting (Reuters) Oil rose towards $41 a barrel on Thursday, trading close to a 2016 high, bolstered by a plan among some of the world’s biggest producers to meet next month to discuss supporting the market. OPEC and non-OPEC producers including the top two exporters, Saudi Arabia and Russia, will hold talks on April 17 in Qatar over a plan to freeze output, increasing the likelihood of the first global supply deal in 15 years.
Norway Cuts Rate and Signals More Easing Ahead Amid Oil Plunge (Bloomberg) Norway’s central bank cut its benchmark interest rate to a record low and signaled it’s prepared to ease policy further to ward off a recession in western Europe’s biggest crude oil producer. The overnight deposit rate was lowered by 25 basis points to 0.50 percent, the Oslo-based central bank said on Thursday. The decision was predicted by 18 of 20 economists surveyed by Bloomberg. The bank predicted that its rate will bottom at 0.2 percent in the first quarter next year.
Swiss Keep Franc Intervention Threat Alive as Rates Left on Hold (Bloomberg) Switzerland’s central bank held interest rates at a record low and repeated its pledge to intervene in currency markets, a threat President Thomas Jordan has used to keep the franc from strengthening. Describing the nation’s currency as “significantly overvalued,” the Swiss National Bank kept its deposit rate at minus 0.75 percent on Thursday, as expected by all economists in a Bloomberg survey. It cut both its growth and inflation forecast for 2016 and now sees prices dropping 0.8 percent this year.
Bank of England keeps rates steady, says sterling hit by EU vote (Reuters) Bank of England policymakers said sterling had been dealt a big hit by uncertainty in the run-up to the referendum on EU membership and that growth could slow, after voting unanimously to keep rates steady. The central bank said the upcoming vote on June 23 could delay some spending decisions, though it said recent indicators suggested growth would keep the same momentum this quarter as it had at the end of last year.
Australian dollar scales 8-month peak as unemployment rate falls (Reuters) Australia’s jobless rate took a surprising drop in February even as employment all but stalled, a mixed bag that left the outlook clouded but did seem to lessen the chance of a cut in interest rates in the near term. Thursday’s report from the Australian Bureau of Statistics showed unemployment fell to 5.8 percent in February, when analysts had expected it to stay at 6.0 percent.
Dollar at Five-Month Low as Commodities, Emerging Markets Jump (Bloomberg) The dollar sank to a five-month low, commodities gained with emerging markets, and government bonds advanced as central banks from the U.S. to Norway indicated a willingness to keep monetary policy accommodative. Developed-market stocks sank on concern that the stimulus is failing to boost growth and corporate earnings.
Canadian dollar hits 77¢ with ‘good reasons to rise and shine today’ (GlobeandMail) The Canadian dollar cracked the 77-cent mark today, carrying on the dramatic run from the Fed-induced weakness of the U.S. currency yesterday. The loonie is now up by about 9 cents from its January depths, at a five-month high, having been driven up over the past several weeks by more stable oil prices and the outlook for monetary policy in Canada and the United States.
Yellen steers Fed with cautious hand, despite hints of inflation (Reuters) Federal Reserve policymakers urging caution over interest rate hikes have gained the upper hand in the central bank’s internal debate, but the risk for the U.S. economy is that they are wrong to downplay a recent rise in inflation.

Overnight markets

Overview: US 10yr note futures are up 0.2789% at 129-7, S&P 500 futures are down -0.26% at 2012, Crude oil futures are up 1.43% at $39.01, Gold futures are up 2.99% at $1266.6, DXY is down -0.91% at 95.022.

US Economic Data

Current Account Balance number came in at a level of $-125.3b better than expected by the analyst and down from prior month
Initial Jobless Claims number came in at a level of 265k as expected and up from prior week
Philadelphia Fed Business number came in at a level of 12.4 beating the analyst estimate by 13.9 points.
Leading Index will be released at 10:00 AM

Canadian Economic Data