Commentaires

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

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 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

•  There is no major economic data Today

Canadian Economic Data

• Teranet/National Bank HP Index was at a level of 178.40 higher than prior month
• Teranet/National Bank HPI YoY growth 6.5%, up 5.9% from prior year
• Teranet/National Bank HPI YoY growth 6.5%, up 5.9% from prior year

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 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