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16/03/2016

by admin | Mar 16, 2016 | comments

Market update

Tsys moving lower after core CPI came in stronger for Feb (0.3 vs 0.2), Housing Starts also above exp. Core Euro bonds higher overnite, strong rally in JGBs after BOJ Kuroda told the Japanese parliament that negative rates were possible, backtracking from stat ~$16.5bln of IG new issuance just in the last two days including Andarko, Ford but issuance likely to be fairly quiet today in front of the FOMC decision later this aft. GOCs slightly lower after 8:30 data, manufacturing sales 2.3% vs 0.5% exp. Provis opening unch, after ending 1-1.5bps wider yest, new CMB 5Y 52/51.

News headlines

Fed to Signal Worst Is Over, Hikes Coming: Decision-Day Guide (Bloomberg) This week, Federal Reserve Chair Janet Yellen and her colleagues have an opportunity to clarify where they stand on the outlook for interest rates. The message will probably be that plans for additional tightening have been postponed, but not for long. Fed officials are expected to reduce the number of rate hikes they see in 2016 and leave the target range for the federal funds rate unchanged at 0.25 percent to 0.5 percent after a two-day gathering of the Federal Open Market Committee in Washington. Here’s what to look for when the FOMC releases its post-meeting statement and updated forecasts at 2 p.m. Wednesday
Dollar Rallies Into Fed Meeting; Oil Rises, Stocks Are Stable (Bloomberg) The dollar extended its best run of gains in a month and oil rallied before the Federal Reserve’s policy review on Wednesday that may shed light on the timing of U.S. interest-rate increases. America’s currency climbed versus the yen after Bank of Japan Governor Haruhiko Kuroda said the Asian nation’s key rate could theoretically drop to minus 0.5 percent. It also climbed against the pound before the release of Britain’s annual budget. Oil rebounded to about $37 a barrel. Gains in German shares failed to hold up the Stoxx Europe 600 Index and U.S. equity-index futures were little changed as investors awaited signals on the health of the world’s biggest economy and whether the Fed will boost borrowing costs in the coming quarter.
Trudeau Said to Forgo Added Stimulus With C$30 Billion Deficit (Bloomberg) Prime Minister Justin Trudeau will post a deficit of about C$30 billion ($22.5 billion) in his first budget next week, signaling he won’t unveil additional initiatives to kick-start the economy, government officials said. The budget, to be released March 22 by Finance Minister Bill Morneau, will mainly comprise pledges made during and since last year’s election, two governmental officials said on condition they not be identified because the plans aren’t yet public.
Valeant Pharmaceuticals International Inc shares plunge after company reports Q4 loss, slashes 2016 revenue forecast (FinancialPost) When Valeant Pharmaceuticals International Inc. management said it was taking full responsibility for the company’s poor performance during its quarterly earnings call Tuesday morning, it probably wasn’t prepared to take the onus for wiping out more than half the stock’s value by market close.
K. Pay Growth Edges Up as Jobless Rate Stays at Decade Low (Bloomberg) U.K. unemployment held at its lowest rate for a decade and wage growth ticked higher as the labor market continued to improve. Wage growth excluding bonuses climbed to 2.2 percent in the three months through January, the Office for National Statistics said in London on Wednesday. Economists had forecast a pickup to 2.1 percent from 2 percent in the fourth quarter. Unemployment fell by 28,000, leaving the rate at 5.1 percent, the lowest since early 2006.
London Stock Exchange, Deutsche Boerse Agree on Merger (Bloomberg) Deutsche Boerse AG agreed to acquire London Stock Exchange Group Plc to create a giant in European trading, a deal that may kick off a bidding war as rivals look to scupper the agreement. While the companies declared it a merger of equals, Deutsche Boerse stockholders will get 54.4 percent of the enlarged group in the all-share agreement, and German boerse Chief Executive Officer Carsten Kengeter will run the enlarged business. The board will be equally split between directors from LSE and Deutsche Boerse. LSE’s market capitalization is $14.3 billion.
From Oil Curse to Cure? Why Rebound in Crude Won’t Bring Russian Rate Cut (Bloomberg) Goldman Sachs Group Inc. says Russian monetary policy is now little more than a function of oil prices. Here’s why a 12 percent gain in crude since the central bank last reviewed interest rates probably won’t sway policy makers when they meet on Friday. With the benchmark on hold at 11 percent since July, Governor Elvira Nabiullina is coming off a surprise warning in January that the Bank of Russia may tighten policy if inflation risks intensify. Slowing price growth may indeed be grounds for monetary easing, but not when inflation expectations have barely budged.

Overnight markets

Overview: US 10yr note futures are down -0.1704% at 128-6, S&P 500 futures are down -0.35% at 1999.5, Crude oil futures are up 1.43% at $36.86, Gold futures are down -0.17% at $1228.9, DXY is up 0.32% at 96.941.

US Economic Data

MBA Mortgage Applications variation was -3.3%, down 3.5% from prior month
Housing Starts number came in at a level of 1178k better than expected and up 58k from prior month.
Housing Starts MoM growth was 5.2% beating the estimate by 0.6% and 9% from prior month
Building Permits number came in at a level of 1167k weaker than expected, and down 37k from prior month
Building Permits MoM variation was -3.1% worse than the estimate and down from prior month
CPI MoM variation was -0.2% as expected and down 0.2% form prior month
CPI Ex Food and Energy MoM growth was 0.3% beating the estimate and at the same level than prior month
CPI YoY growth was 1.0% better than expected and down 0.4% from prior year
CPI Ex Food and Energy YoY growth was 2.3%, beating the analyst estimate and up 0.1% from prior year
Industrial Production MoM will be released at 9:15 AM
Capacity Utilization number will be released at 9:15 AM
FOMC Rate Decision will be released at 2:00 PM

Canadian Economic Data

Manufacturing Sales MoM growth was 2.3% beating the estimate by 1.8% and up 1.1% 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

15/03/2016

by admin | Mar 16, 2016 | comments

Market update

US tsys trading higher, flatter, US 10Y 1.92 (-4bps) after weaker Feb retail sales/PPI. crude lower (36.47 -1.9%), USD index is higher except against the yen, which rose the most in a week vs the USD (0.84%). The BOJ refrained from additional stimulus yet downgraded of economic growth and inflation. Core Euro bonds mixed, UK gilts higher with traders attributing outperformance to Barclays rsch expecting lower gilt issuance in fiscal 2016/17 (MNI). Latest JPM Treasury Client Survey showed the most net shorts since Jan25th. GOCs rallying with tsys post PPI/retail sales. CMB 5Y pricing this morn in the context of 50bps (now 52/51).

News headlines

Bank of Japan Holds Fire on Stimulus, Negative Rate Unchanged (Bloomberg) The Bank of Japan refrained from bolstering its record monetary stimulus as policy makers gauge the impact of the negative interest-rate strategy they adopted in January. Governor Haruhiko Kuroda and his board kept the target for increasing the monetary base unchanged, and left their benchmark rate at minus 0.1 percent, as forecast by 35 of 40 economists surveyed by Bloomberg. The central bank said it will add easing if necessary while the language in its statement Tuesday indicates a downgrade in its assessment of the economy.
Global Stocks Fall, Yen Jumps as Commodities Decline (Bloomberg) Global stocks dropped as the biggest two-day slide in commodity prices in a month reminded investors of the financial-market turmoil that marked the start of this year. The Australian and Canadian dollars weakened and the yen jumped the most in a week. Benchmark share gauges in Europe and Asia retreated from their highest closes since January, while U.S. stock index futures declined with Federal Reserve policy makers set to begin a two-day meeting. The yen strengthened against all 31 major peers as the Bank of Japan refrained from adding to record monetary stimulus at a review on Tuesday.
Near-Record Cash `Comfort’ for Canada Oil Firms Amid Price Rout (Bloomberg) Canada’s biggest oil producers are sitting on a near-record pile of cash, giving them the resources to keep investing and manage debt while weathering the worst price rout in a generation. The five largest oil producers including Suncor Energy Inc. and Cenovus Energy Inc. have a combined C$8.5 billion ($6.4 billion) in cash and cash equivalents, an increase of 7.6 percent from a year earlier and more than twice the levels seen during 2009 downturn. The figures, which are little changed from a record C$9 billion in 2014, don’t include the proceeds from Imperial Oil Ltd.’s recent sale of its Esso-brand gas stations for C$2.8 billion.
Oil price collapse could cost CMHC $7 billion a year in lost profits (Financial Post) Low oil prices could cost Canada’s federally owned mortgage insurer $7 billion a year in lost profits, though the organization’s top executive said Monday the oil price collapse will not drain its capital to unsustainable levels. The head of the Canada Mortgage and Housing Corp. said his organization has stress-tested the effects of sustained US$35 per barrel oil prices and the result is massive foregone profits for the Crown corporation.
China Drafts Rules for Tobin Tax on Currency Transactions (Bloomberg) China’s central bank has drafted rules for a tax on foreign-exchange transactions that would help curb currency speculation, according to people with knowledge of the matter. The initial rate of the so-called Tobin tax may be kept at zero to allow authorities time to refine the rules, said the people, who asked not to be identified as the discussions are private. The tax is not designed to disrupt hedging and other foreign-exchange transactions undertaken by companies, they said.
S. Investors Have Capitulated on Europe at the Worst Possible Time (Bloomberg) U.S. investors in European shares have capitulated at the worst possible time. They pulled $1.6 billion from the iShares MSCI Eurozone ETF in the past five weeks, including the biggest withdrawals since 2014. But the outflows gained traction just as the region’s shares bottomed in mid-February, with traders missing out on a 15 percent rally for the Euro Stoxx 50 Index since then. The skepticism may be traceable to December, when investors who piled into the fund were stung as stocks fell 20 percent over two months.

Overnight markets

Overview: US 10yr note futures are up 0.2677% at 128-25, S&P 500 futures are down -0.56% at 1998, Crude oil futures are down -2.5% at $36.25, Gold futures are down -0.7% at $1236.4, DXY is down -0.13% at 96.501.

US Economic Data

Retail Sales Advance MoM growth was -0.1%, better than expected and up 0.3% from prior month
Retail Sales Ex Auto MoM growth was -0.1%, better than expected and up 0.3% from prior month
Retail Sales Ex Auto and Gas growth was 0.3%, better than expected and up 0.4% from prior month
PPI Final Demand MoM growth was -0.2%, as expected and down 0.3% from prior month
PPI Ex Food and Energy MoM growth was 0.0%, worse than expected and down 0.4% from prior month
PPI Final Demand YoY growth was 0.0%, missing the estimate and up 0.2% from prior year
PPI Ex Food and Energy YoY growth was 1.2%, as expected and up 0.6% from prior year
Empire Manufacturing Survey was 0.62, stronger than expected and up 17.26 from prior month
Total Net TIC Flows will be released at 4:00 PM
Net Long-term TIC Flows will be released at 4:00 PM

Canadian Economic Data

Existing Home Sales MoM growth will be released at 9:00 AM

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

14/03/2016

by admin | Mar 14, 2016 | comments

Market update

US tsys trading slightly higher at NY open, 10Y edging closer to 2.0% support from Jan 29th @ 1.98 (-1bp). Ten yr futures in narrow 4 tick range on light, way below avg volume (189k). Light calendar today in the US but Tues thru Fri action packed with retail sales , FOMC & CPI.USD higher except vs JPY, Nikkei up 1.74% on surge in machine orders in Jan, up 15% vs 1.9%. Crude off 2.8% @ 37.42 as Iran said it would raise output and not join output Saudi led output freeze. German 10Y bunds higher, curve flatter a third day since ECB QE ann last Thurs. The latter also helping to propel EU periph bonds higher – Italy 10Y new low @ 1.30%. GOCs higher, curve unch. Friday’s price action unusual given Cda/US cheapened (i.e. Cda underperformed) ~5bps in 10s after weak employment report. But better buying in provis sent spds another 5 bps tighter or 10bps on week. In corps we’ve seen some switching out of deposit notes into NVCC, buying of telco/reits outright.

News headlines

Stocks Rally Wins Fans as Central Banks Lift Credit: Oil Drops (Bloomberg) Investors are gaining confidence that March’s rally in equities and credit markets has further to run. The Stoxx Europe 600 Index and the MSCI Asia Pacific Index were on course for the highest closes in two months. Shares in Egypt extended the longest rally since December after the country’s central bank devalued its currency, and thawing credit markets enabled UBS Group AG to hold the first sale of the riskiest type of bank debt in Europe for two months.
Fed to sit tight on rates at March meet, hint at hikes to come (Reuters) The Federal Reserve won’t raise interest rates this week, but will likely make clear that as long as U.S. inflation and jobs continue to strengthen, economic weakness overseas won’t stop rates from rising fairly soon. That will be a big change from the last time the Fed met, when uncertainty over the impact of slower growth in China and Europe drove policymakers to signal it would stay on hold until it could make a better call on the outlook.
Oil back below $40 as Iran dashes hopes for quick deal on output (Reuters) Oil fell around 3 percent on Monday after Iran dashed hopes of a coordinated production freeze any time soon, returning bearish sentiment to the market over a supply glut that has sent prices crashing. Global benchmark Brent crude futures LCOc1 fell back below $40 a barrel, trading at $39.20 at 1157 GMT, down $1.19 on Friday’s close. Brent hit a 12-year low of $27.10 in January.
China’s ‘easy’ home financing could raise property bubble risk (Reuters) Alarm that parts of China’s housing market are overheating, raised at the ongoing annual parliament meeting, highlights concern about unregulated, online-based financing that can fuel a property bubble. Officials vowed to crack down on players in the property business illegally lending home-buyers the money to make downpayments.
The Effects of a Month of Negative Rates in Japan (Bloomberg) The Bank of Japan shocked markets in January with negative rates. The policy had immediate effects on financial markets, even before it actually started on February 16. Although most analysts don’t expect a change on Tuesday, they are expecting the central bank eventually to cut the rate further.
Indian WPI Falls More Than Estimated Before Rajan’s Rate Review (Bloomberg) India’s wholesale prices fell more than estimated ahead of benchmark consumer data due later on Monday, as investors assess whether central bank Governor Raghuram Rajan will lower interest rates after the government stuck with a plan to narrow the budget deficit. Wholesale prices declined 0.91 percent in February from a year earlier after a 0.90 percent decrease in January, the Commerce Ministry said in a statement on Monday. The median of 30 estimates in a Bloomberg survey of economists had predicted a 0.19 percent decline. A separate survey shows consumer-price inflation easing to 5.51 percent from 5.69 percent.
Egypt Adopts More Flexible Exchange Rate After Devaluation (Bloomberg) The Egyptian central bank surprisingly devalued the pound by almost 13 percent and said it will adopt a “more flexible exchange rate” policy, steps that seek to ease a foreign-currency shortage hampering growth in the most populous Arab country. Stocks rallied. The decisions will achieve “exchange-rate levels that reflect the strength and real value of the local currency in a short period of time,” the central bank, led by Governor Tarek Amer, said in a statement on Monday. The regulator earlier sold $198.1 million to local lenders at 8.85 pounds per dollar. That compares with a previous exchange rate of 7.73 pounds.
Will Canada join the negative interest rate club? (Financial Post) There are currently five countries or regions in the negative rate club, and Citigroup expects more will join the fray. Perhaps even Canada. With the European Central Bank cutting its deposit rate by 10 basis points to negative 0.4 per cent last week, it cemented its place in the group alongside Switzerland, Sweden, Denmark and Japan. The economic benefit of looser monetary policy eventually runs out of steam, and recent data supports the notion that things are fading. Yet Citigroup analysts insist that it is too early to declare that negative interest rates aren’t still helping.

Overnight markets

Overview: US 10yr note futures are up 0.0852% at 128-15, S&P 500 futures are down -0.26% at 2005.25, Crude oil futures are down -2.73% at $37.45, Gold futures are down -0.21% at $1256.7, DXY is up 0.25% at 96.411.

US Economic Data