Commentaires

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

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

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 

• MBA Mortgage Applications growth was 0.2%, and up from prior month.
• Wholesale Inventories MoM growth will be released at 10:00 AM.
• Wholesale Trades Sales MoM growth will be released at 10:00 AM.

Canadian Economic Data 

• Bank of Canada Rate Decision will be released at 10:00 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

Tsys sharply higher, curve ~3bps flatter with longs leading (2.643 -6.4bps) and the US 10Y 1.85 (-6bps).  European equities unch after being down 1.6% as euro bank stocks surged in just a few minutes ~7:00am. Gold & crude higher. Tsys bid right out the gate in Asia on weak China trade data and huge rally in thirty year JGBs – the largest one-day drop in yields since 2013 (22bps) after the MOF auctioned Y800bln in 30Y bonds with a coupon of 0.8% down from 1.4% on Feb 9th and a strong bid/cov of 4.21 (3.04). Latest JPM US Tsy Client Survey showed the most shorts since Feb 1st.  GOCs higher, curve ~4bps flatter with 10s ~4.5bps better on the curve, provis starting out bit wider as cda yields are ~6bps lower out the curve. Quebec officially in blackout with budget March 17th.

News headlines

• China Reality Check Dashes Stocks Rally as Commodities Decline (Bloomberg) Global stocks dropped as a slump in Chinese exports dragged commodities prices lower and brought equities’ five-day winning streak to a halt. Japanese government bonds surged in a haven-asset rally that also lifted the yen, gold and Treasuries. The Stoxx Europe 600 Index extended its decline from a five-week high as investors sold equities that had led the recent rebound, while Brent crude slid after closing on Monday above $40 a barrel for the first time this year
• Treasuries Rally as Japan Yields Extend Record Low on Safety Bid (Bloomberg) Treasuries gained with Japanese bonds, whose 10-year yields extended their push below zero, as stock-market declines drove demand for the relative safety of sovereign debt. The world’s two biggest bond markets advanced after official data showed Chinese exports tumbled and Japan’s economy contracted, sending stocks in the region lower.
• German Industrial Production Surges by Most Since 2009 (Bloomberg) German industrial production jumped by the most in more than six years in January, in a sign that strong domestic demand may be helping to underpin output even as external trade cools. Production, adjusted for seasonal swings, climbed 3.3 percent from the prior month after retreating a revised 0.3 percent in December, data from the Economy Ministry in Berlin showed on Tuesday.
• Carney’s `Brexit’ Stance Under Fire as BOE Accused of Bias (Bloomberg) Mark Carney was accused of jeopardizing the Bank of England’s credibility in the European Union debate as he faced a fiery line of questioning from U.K. legislators. While the BOE governor has spent months trying to avoid the political battle — a task lawmaker Andrew Tyrie compared to bomb disposal — some members of the Treasury Committee said BOE statements including an October report and a letter published Tuesday supported the government’s bid to keep Britain in the bloc. They questioned whether the central bank had overstated the positives.
• Oil edges lower after Kuwait dents hopes for output freeze (Reuters) Oil prices edged lower on Tuesday after Kuwait said it would only agree to an output freeze if all major producers take part and Goldman Sachs analysts poured cold water over the prospects for a sustained rally.
• Iron Ore’s Rally Stalls as Goldman to Citigroup Forecast Retreat (Bloomberg) Iron ore’s rally stalled on Tuesday after a record 19 percent advance a day earlier as banks from Goldman Sachs Group Inc. to Citigroup Inc. together with some of the largest miners said that the surge wasn’t likely to endure. Ore with 62 percent content delivered to Qingdao dropped 0.2 percent to $63.63 a dry metric ton, Metal Bulletin Ltd. data showed. The decline was preceded in Asia by a fall in bellwether futures in Singapore, which lost as much as 12 percent.

Overnight markets

• Overview: US 10yr note futures are up 0.3636% at 129-13, S&P 500 futures are down -0.3% at 1993, Crude oil futures are up 0.55% at $38.11, Gold futures are up 0.73% at $1273.2, DXY is up 0.04% at 97.107.

US Economic Data 

• NFIB Small Business Optimism came in at a level of 92.9, weaker than expected and down from prior month.

Canadian Economic Data 

• Housing Starts number came in at a level of 212.6k, beating the estimate by 23K and up by 47.5k from prior month.
• Building Permits MoM growth was -9.8%, weaker 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