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11/03/2016

by admin | Mar 11, 2016 | comments

Market update

US tsys erasing earlier losses despite improving risk sentiment, US 10Y 1.926% (unch). Euro banks up 5%, crude higher on IEA report saying oil may have bottomed. German govt bonds higher led by longs with the bund curve another 2bps flatter as mkts react to stimulus measures from ECB. EU peripheral bonds in rally mode – Spanish 10Y set a new low yield 1.468% (-12bps), while iTraxx Europe is 11.7 bps lower @ 73bps. GOCs higher after weak Feb employment (-2.3k, unemp rate 7.3% vs 7.2%). Yest 10s30s flattened 2bps to 77 as 10s cheapened another 3 bps on the curve in a directional move. Best guess as to why longs are doing so well this week as opposed to last (10s30s widened to ~82bps in last week) – $800mln in long provi supply last week while this week corp/provi supply concentrated in 5s (RY/WFC) & 10s (Sask). TRP 10-20 bps wider on proposed acquisition of Columbia Pipeline (Baa2/BBB-) Provis 1bp tighter after 3bp rally yest , Ont 46 109/108, Ont 26 100.5/99.5.

News headlines

Shares bounce, euro fades after savage ECB reaction (Reuters) The euro steadied and European shares and bonds rebounded on Friday after being savaged on Thursday when the European Central Bank signaled it was unlikely to cut its negative interest rates further in the wake of a huge new stimulus plan. Markets were starting to focus on what they saw as the positive features of the ECB policy package, with surges to 2016 highs for both U.S. oil prices and China’s yuan also boosting confidence.
Treasuries Set for Third Weekly Decline on Fed Rate Outlook (Bloomberg) Treasury 10-year notes headed for a third weekly decline as speculation of higher interest rates this year from the Federal Reserve gathered momentum. With global stock markets and commodities showing signs of recovering from the slumps seen in the first two months of 2016, demand for the relative safety of U.S. sovereign debt has eased. Added to that, bets the Fed will stay on course for tighter policy are growing as the economy improves, further weighing on Treasuries and driving 10-year yields to their highest in more than a month. Treasuries have been the worst performers after Canadian bonds in the past month among global sovereign debt.
IEA Says Oil Price May Have Bottomed as High-Cost Producers Cut (Bloomberg) Oil prices may have passed their lowest point as shrinking supplies outside OPEC and disruptions inside the group erode the global surplus, the International Energy Agency said. Production outside the Organization of Petroleum Exporting Countries will decline by 750,000 barrels a day this year, or 150,000 barrels a day more than estimated last month, the agency said. Markets are also being supported by output losses in Iraq and Nigeria, and as Iran restores production more slowly than planned following the end of international sanctions, it said.
Calmer markets, positive data prime Fed to push ahead with rate rises (Reuters) Barely a month ago Federal Reserve Chair Janet Yellen cut an isolated figure in her semi-annual testimony to Congress, forced to defend the U.S. central bank’s data-dependent approach while around her stocks plunged and oil prices sagged. But a recent string of positive economic news has dragged markets back closer to the Fed’s overall outlook, allaying recession fears and suggesting the Fed will have more credibility at its meeting next week when it says further rate hikes this year remain firmly on the table.
China’s February New Credit Plunged From Prior Month Record (Bloomberg) China’s broadest measure of new credit dropped sharply after a record surge a month earlier. Aggregate financing was at 780.2 billion yuan ($120 billion) in February, according to a report from the People’s Bank of China on Friday, compared with the median forecast of 1.84 trillion yuan in a Bloomberg survey. New yuan loans were 726.6 billion yuan, compared to the median estimate of 1.2 trillion yuan.
Why Euro-Area Inflation Will Be Low for Years, According to Draghi (Bloomberg) The European Central Bank is coming to terms with the idea that its near-2 percent inflation goal won’t be materializing anytime soon. Bank staff downgraded their outlook to 0.1 percent headline inflation this year, forecasts released Thursday showed, with price pressures rising to 1.6 percent by 2018 — still short of policy makers’ goal. In their December projections, they expected to hit 1 percent this year and 1.6 percent in 2017.
K.’s Trade Deficit With European Union Widens to a Record (Bloomberg) Britain’s goods-trade gap with the European Union widened to a record, with exports in the last three months falling the lowest in more than six years. Data from the Office of National Statistics showed a deficit of 8.1 billion pounds in January and 23 billion pounds over the past three months. Both figures are the highest since the data began in 1998. Exports to the 28-nation bloc in the quarter through January declined to 32.7 billion pounds, the least since 2009.
Economists aren’t worried if household debts hit new high. (But are you?) (GlobeandMail) Statistics Canada is expected to report this morning that a key measure of household debt has hit yet another fresh high in Canada. But interest rates are at rock bottom, and are going to remain there, so economists aren’t overly concerned. Not only that, our net worth is on the rise as property values increase.

Overnight markets

Overview: US 10yr note futures are down -0.0243% at 128-20, S&P 500 futures are up 0.85% at 1996.25, Crude oil futures are up 1.69% at $38.48, Gold futures are down -0.39% at $1267.8, DXY is up 0.45% at 96.5.

US Economic Data

Import Price Index MoM growth was -0.3% weaker than expected by the analysts and up 0.7% from prior month

Canadian Economic Data

Unemployment Rate number came in at a level of 7.3% weaker than expected, and up 0.1% from prior month
Net Change in Employment number came in at a level of -2.3k, missing the estimate by 12.3k

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

10/03/2016

by admin | Mar 10, 2016 | comments

Market update

US tsys trading slightly higher along with core EGBs after ECB surprised with QE extension along with 10bp cut to deposit facility. ECB will expand monthly asset purchased to E80bln. Euro slammed in the wake of decision, down 1.2% close to 1.08 support. Bunds rising back to pre ECB levels, peripheral curves sharply flatter on QE expansion – Spanish 10Y new low 1.39% down 16bps. European equities surging ~3.0% led by rally in bank shares. In Canada GOCs back to unch after brief pullback post ECB, 10s another ~2bps weaker on the curve on top of yesterday’s 5bp pounding on post BOC bear steepening. The 10Y roll took the brunt of the selling action yest flattening almost a full bp to trade under 9bps for the first time since July. Corporate issuers taking advantage of quiet conditions in provis (QC, Alberta blackout) – Royal came with $2.5bln in 5Y dep notes @134 which broke 2bps tighter. Merrill Lynch issued ~$901mln in 5Y NHA MBS @88.

News headlines

ECB cuts rates, expands asset-buying program to boost economy (Reuters) The European Central Bank cut interest rates on Thursday to boost the euro zone economy, surprising financial markets by dropping its main refinancing rate to zero from 0.05 percent. It also expanded its quantitative easing asset-buying program to 80 billion euros a month from 60 billion euros and cut its deposit rate to -0.4 percent from -0.3 percent, charging banks more to keep their money with the ECB.
Fed’s Next Rate Move Splits Economists Looking Past March FOMC (Bloomberg) The great American jobs machine keeps humming and inflation is finally stirring to life. Still, economists are split over how aggressively the Federal Reserve will signal its next interest-rate move when policy makers meet on March 15-16. Economists surveyed by Bloomberg see the central bank holding rates unchanged next week and 55 percent predict the Fed will also echo the language of its January statement that officials were “assessing” global economic and financial developments. That would be viewed as signaling less likelihood of a hike at their April meeting.
It’s All About Food: The IMF’s Advice to Defeat India Inflation (Bloomberg) India’s biggest enemy in the war on inflation is food, according to the International Monetary Fund. Central bank Governor Raghuram Rajan will have little room to lower one of Asia’s highest interest rates unless Prime Minister Narendra Modi boosts food supply, according to a new book published by the IMF. Rising incomes, stagnant crop production growth and poor management of buffer stocks have spurred food inflation in the world’s second-most populous country, it said.
China Inflation Fastest Since Mid-2014 as Food Prices Jump (Bloomberg) China’s consumer price rose the most since mid-2014 in February as food costs jumped amid the week-long Lunar New Year holidays, where millions binge on roast pork, duck, seafood and vegetables. The consumer-price index rose 2.3 percent in February from a year earlier, up from 1.8 percent in January, as food prices surged 7.3 percent. Raising question marks over the durability of that pickup, non-food prices moderated from a month earlier to a 1 percent increase and services inflation slowed.
How Global Investors Turn Negative Japan Yields Into Big Returns (Bloomberg) Record-low negative yields are no deterrent to overseas demand for Japanese government bonds. In fact, they’re an incentive. The discount offered to dollar holders to borrow yen for five years in the swap market reached a record 102.5 basis points this week, as the Bank of Japan’s Jan. 29 decision to switch to interest rates below zero widened a divergence from U.S. monetary policy. Calculations on returns for investors using such funding show the fixed coupon equivalent for owning five-year JGBs was 2.3 percent on Thursday, despite a yield of minus 0.16 percent on the debt.
Brazil Central Bank Says Must Monitor Economy Before Next Move (Bloomberg) Brazil’s central bank said domestic and global uncertainties require further monitoring but could improve conditions for the convergence of inflation toward the target in 2017. Policy makers, led by their President Alexandre Tombini, kept the key rate unchanged at 14.25 percent last week for the fifth straight meeting, matching the median forecast of analysts surveyed by Bloomberg. Two of the eight board members — Tony Volpon and Sidnei Correa Marques — voted for a half-point increase to 14.75 percent for the third consecutive meeting, as inflation remains in the double digits.
Brazil’s Retail Sales Drop More Than Expected in January (Bloomberg) Brazil’s retail sales fell twice as much as forecast in January as double-digit inflation and rising joblessness take a toll on consumers’ purchasing power. Sales fell 1.5 percent after a 2.7 percent drop in December, the national statistics agency said Thursday. That was more than all but one prediction from 39 economists, whose median forecast was for a 0.7 percent decline. Sales fell 10.3 percent over the past 12 months.
Canada’s high-grade corporate bonds emerge from volatility as a buy (GlobeAndMail) Canada’s investment-grade corporate debt has taken a beating this year. Now, it’s starting to look like a buying opportunity. An index of high-grade corporate bonds issued in Canadian dollars has posted a negative return of 0.375 per cent since Dec. 31, on track for the worst first quarter since 2003, according to Merrill Lynch indexes. The extra yield that lenders are demanding over government bonds to hold the debt touched the highest level since the financial crisis last week.

Overnight markets

Overview: US 10yr note futures are down -0.0726% at 128-31, S&P 500 futures are up 0.62% at 1992, Crude oil futures are down -0.13% at $38.24, Gold futures are down -0.39% at $1252.5, DXY is up 1.02% at 98.164.

US Economic Data

Initial Jobless Claims number came in at a level of 259k, beating the estimate by 16k and down from prior week
Continuing Claims number came in at a level of 2225k, beating the estimate by 25k and down 32k from prior week

Canadian Economic Data

Capacity Utilization Rate was 81.1%, worse than expected by the analysts and down 0.5% from the previous period.
New Housing Price Index MoM growth was 0.1%, missing the estimate by 0.1% and at the same level than prior month.
New Housing Price Index YoY growth was 1.8%, top expectation and up 0.2% from 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

09/03/2016

by admin | Mar 9, 2016 | comments

Market update

Tsys lower, curve 2bps steeper, US 10Y 1.875 (+4.6bps) prices almost completely reversing yesterday’s gains. German govt bonds lower led by 10Y with profit taking ahead of ECB meeting according to MNI, spike higher in Euro/Swiss pointed to as evidence as well. Long term JGB yields 20bps higher also reversing Tuesday’s auction inspired rally. GOCs lower before BOC where we expect no change in rates – there is no press conference so mkts will wait for Poloz speech tomorrow in Ottawa for further clues. It’s a mixed picture for sure since the Jan decision yet with CPI having reached 2% target much earlier than forecast (early 2017) while prices for oil and other commodities have rebounded. Provis opening better bid , Ont 46 113/112.5, Qc/Ont 26 roll 3/2.5 (traded up at 2 yest). Wells fargo issued CAD $1bln in 5Y maple yest @ GOC + 155 (157.6) which looked fialry priced considering the outstanding WFC 3.04 Jan 21 were either side of 150 yest, so a small concession given maple liquidity when overall liquidity is fialry nonexistent to begin with.

News headlines

European Stocks Advance With Commodities as Euro, Gold Weaken (Bloomberg) Stocks traders put declines in Asia behind them as European markets rose with U.S. index futures and commodities. Government bonds fell, gold slid and the euro weakened. European shares advanced for the first time in three days on speculation the region’s central bank will ramp up monetary stimulus on Thursday.
Treasuries Fall With Japanese Bonds as Low Yields Erode Demand (Bloomberg) U.S. and Japanese government bonds fell as record-low yields in the Asian nation curbed demand for sovereign debt before a sale of 10-year Treasury notes. The move is a reversal from Tuesday, when Japan ignited a global bond surge as its benchmark 10-year yield slid to an unprecedented minus 0.1 percent. A technical indicator showed the rally reached overbought levels. The 14-day relative-strength index for Japan’s 10-year yields dropped to 29, below the threshold of 30 some traders see as a sign a security has moved too fast.
Iron Ore Drops Back After `Surprising Blip’ That Notched Record (Bloomberg) Iron ore dropped on Wednesday, eroding Monday’s record surge, amid a revival in concern that global supply is outpacing demand. Ore with 62 percent content delivered to Qingdao fell 8.8 percent to $58.02 a dry metric ton, according to e-mailed data from Metal Bulletin Ltd. The price dipped 0.2 percent on Tuesday after Monday’s 19 percent rally to the highest since June. The retreat was preceded by losses on futures in Singapore and China.
Euro dragged down before ECB meeting, hits one-week low vs. yen (Reuters) The euro fell to a one-week low against the yen and dropped below $1.10 on Wednesday, before a meeting of the European Central Bank, which is expected to take interest rates deeper into negative territory and ease monetary policy yet more. The ECB is expected to cut the deposit rate by 10 basis points to -0.40 percent, announce more asset purchases and possibly introduce tiered interest rates like the Bank of Japan in a bid to boost inflation.
Futures rise as crude prices rebound (Reuters) U.S. stock index futures were higher on Wednesday, tracking a rise in oil prices, even as investors remained wary of weakness in the global economy, led by China. Benchmark Brent rose above $40 a barrel in anticipation that the world’s largest exporters would agree to freeze production and help reduce a massive oversupply. Crude prices, which have been a major influence on stocks this year, have rallied sharply in recent days. However, industry watchers remain skeptical of a sustained recovery due to the glut.
Canada Dollar Near 4-Month High Before Bank of Canada Statement (Bloomberg) The Canadian dollar was near a four-month high before the Bank of Canada announces its policy decision. All 26 economists in a Bloomberg survey expect the central bank to leave its rate at 0.5 percent after cutting it twice last year to help the economy weather a collapse in oil prices. With crude prices still less than half their average during the past decade, the central bank has said it’s counting on non-commodity exports to pick up the slack and noted the help a weaker currency provides by making the country’s goods more competitive abroad.
Imperial Oil sells Esso gas stations for $2.8-billion (TheGlobeAndMail) Imperial Oil Ltd. has reached a deal to sell 497 Esso-brand retail gas stations to five fuel distributors for $2.8-billion, as the company seeks to focus on its expanding oil sands and refining businesses. Quebec-based Alimentation Couche-Tard Inc. will purchase 279 retail stations from Imperial in Ontario and Quebec for roughly $1.7-billion, the company said late on Tuesday. 7-Eleven Canada Inc. will pick up sites in Alberta and British Columbia. The other distributors involved in the deal include Parkland Fuel Corp., Harnois Groupe pétrolier and Wilson Fuel Co. Ltd.
Exclusive: Saudi Arabia seeks $6-8 billion bank loan to shore up state coffers (Reuters) Saudi Arabia is seeking a bank loan of between $6 billion and $8 billion, sources familiar with the matter told Reuters, in what would be the first significant foreign borrowing by the kingdom’s government for over a decade. Riyadh has asked lenders to submit proposals to extend it a five-year U.S. dollar loan of that size, with an option to increase it, the sources said, to help plug a record budget deficit caused by low oil prices.

Overnight markets

Overview: US 10yr note futures are down -0.3016% at 129-4, S&P 500 futures are up 0.43% at 1989.5, Crude oil futures are up 1.34% at $36.99, Gold futures are down -0.7% at $1254, DXY is up 0.33% at 97.526.

US Economic Data