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Market update

US tsys trading higher, yields ~2bps lower & curve unch, US 10Y 1.705. Ten yr futs higher since European trading as global equities weaker (Euro stocks -2.0%), USD higher and crude down $1.00 @ 0.75. Fed Fischer said March rate hike not off the table, lower gas prices supporting consumer spending, but admits ‘we simply don’t know what FOMC will do in March. Tsy auctions $34bln in 5Y notes this aft so a modest concession may be needed considering that barely 50% odds of a rate hike are priced in all year (jan 5Y auction cleared ~1.5bps cheap to the WI). In Canada GOCs are higher, lagging tsys ~1bp. Provis opening with risk off tone after supply yest (Alb longs, O led spds ~2bps wider at the close.

News headlines

• Lew Says Don’t Expect `Crisis Response’ From Group of 20 Meeting (Bloomberg) U.S. Treasury Secretary Jacob J. Lew downplayed expectations for an emergency response to global market turbulence when Group of 20 finance chiefs and central bankers meet this week in China, calling on nations to do more to boost demand without pursuing unfair currency policies.
• Fischer says no Fed plan to move to negative interest rates (Reuters) Federal Reserve Vice Chairman Stanley Fischer said there is no plan to use negative rates in the United States, though the matter is under study.
• Global Stocks Extend Losses With Oil as Brexit Risk Roils Pound (Bloomberg) Global equities extended declines as a sliding oil price weighed on industry groups from banks to commodity producers and dragged down emerging markets.
• Carney: Bank of England could cut interest rates to zero, but not below (TheGuardian) The Bank of England could cut interest rates to zero, but will seek to avoid following Sweden, Denmark and the eurozone by setting negative rates to bolster growth and inflation.
• Brazil Credit Ratings Cut to Junk by Moody’s (Bloomberg) Brazil’s sovereign rating was cut to junk by Moody’s Investors Service, the last of the major ratings companies to strip the country of its investment grade as President Dilma Rousseff struggles to shore up fiscal accounts amid deepening political turmoil.
• Global shares fall sharply with oil prices, yen in demand (Reuters) Shares fell sharply on Wednesday as oil prices dropped after Saudi Arabia effectively ruled out output cuts by major producers, lifting investor appetite for low-risk assets such as the Japanese yen and gold.
• Some of Canada’s largest companies facing Ontario land-transfer tax hit worth millions (Financial Post) The Ontario government is threatening to go as far back as 1989 to target commercial entities, including two of Canada’s largest companies, that have been avoiding land-transfer taxes through what is now a disputed legal loophole, according to a ministry notice sent out this month.

Overnight markets 

• Overview: US 10yr note futures are up 0.3222% at 131-12, S&P 500 futures are down -0.85% at 1899.75, Crude oil futures are down -3.14% at $30.87, Gold futures are up 1.84% at $1245.1, DXY is up 0.14% at 97.62.

 US Economic Data 

• MBA Mortgage Applications growth was released at -0.043%, down from the prior month
• Markit US Services PMI will be released at 9:45 AM
• Markit US Composite PMI will be released at 9:45 AM
• New Home Sales will be released at 10:00 AM
• New Home Sales MoM growth will be released at 10:00 AM

Canadian Economic Data 

• There is no major economic data 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

Market update

US tsys lower opening, curve ~1bp steeper, US 10Y 1.78 (+3bps). Tsys pressured in Asia on the back of heavy selling early on ~30K TY1 contracts, with the ten yr falling as low as 1.72% before rising back to ~1.79 in NA open.   News overnite included weak earnings from BHP & Standard Chartered, weaker German IFO and lower crude and a lower CNY fixing. Yet a heavy corp supply calenday as well as this aft 2Y auction may account for some of the weakness in tsys, even as the tsy curve is steeper. Latest JPM Tsy Client Survey showed increase in both longs & shorts with neutral pos fairly close to 1y avg. GOCs are lower led by 10s which are ~4bps cheaper on the curve so far.. Provis opening unch after late day selling yest post BHP earnings, possibly some profit taking as issuance widely expected (MP, NF, BCMFA , QC26 reopen…). BMO Q1 beat est $1.75 vs $1.72, National also beat $1.17 vs $1.15.

News headlines

• Risk rally fades as stocks, oil slip back into the red (Reuters) The recent recovery in riskier assets fizzled out on Tuesday, with a fall in stocks, oil and the value of China’s yuan currency boosting investor demand for safer assets such as the Japanese yen, government bonds and gold. Oil fell more than 2 percent and the main European stock indices fell as much as 1 percent, giving back some of their recent gains: oil rose more than 5 percent on Monday and world stocks recorded their biggest rise last week since early October.
• Earliest Chinese Data Signal Slowdown Hasn’t Bottomed Out Yet (Bloomberg) The first indicators for China’s economy this month signal its slowdown hasn’t bottomed out yet, highlighting the case for continued stimulus as the nation prepares to host finance chiefs and central bankers from the Group of 20 later this week. Private gauges of manufacturing and services fell to new lows, a reading of business confidence slipped, and interest in small and medium sized businesses deteriorated, the readings show. If confirmed in official data for February that starts to roll out from March 1, such weakness would suggest a slowdown in the nation’s old growth drivers may be deepening.
• The Trickle of U.S. Oil Exports Is Already Shifting Global Power (Bloomberg) The sea stretched toward the horizon last New Year’s Eve as the Theo T, a red-and-white tug at her side, slipped quietly beneath the Corpus Christi Harbor Bridge in Texas. Few Americans knew she was sailing into history. Inside the Panamax oil tanker was a cargo that some on Capitol Hill had dubbed “Liquid American Freedom” — the first U.S. crude bound for overseas markets after Congress lifted the 40-year export ban.
• Canada’s banks could be forced to raise equity, cut dividends if oil prices keep sinking, Moody’s warns (Financial Post) Some Canadian banks could be forced to preserve capital by raising equity or even cutting dividends if oil prices continue to slump, Moody’s warns in a new report. In a “severe stress” scenario modelled by the ratings agency, and included in the report to be widely circulated Monday, losses in consumer lending portfolios would exceed historic peaks and capital markets activity at the country’s biggest banks would be significantly crimped.
• BMO Profit Increases 6.8% After Bank Buys GE Finance Unit (Bloomberg) Bank of Montreal posted fiscal first-quarter profit that beat analysts’ estimates as contributions from its purchase of General Electric Co.’s transportation-finance business added to U.S. earnings. Net income for the period ended Jan. 31 climbed 6.8 percent to C$1.07 billion ($778 million), or C$1.58 a share, from C$1 billion, or C$1.46, a year earlier, Canada’s fourth-largest lender by assets said Tuesday in a statement.
• BHP, Standard Chartered Drag Europe Stocks From Three-Week High (Bloomberg) A retreat in miners, led by BHP Billiton Ltd. after it cut its dividend, sent European stocks lower for the second time in three days. BHP lost 3.5 percent after also reporting a profit drop. That dragged down a gauge tracking commodity producers, after Monday’s surge to the highest level since Dec. 3. Standard Chartered Plc was another notable decliner, down 3.7 percent after posting a surprise annual loss.
• Carney Says BOE Has Room for Maneuver Should Economy Weaken (Bloomberg) Mark Carney said Bank of England officials have scope to loosen monetary policy if needed as concerns that Britain may leave the European Union put further pressure on the pound. “If we were in a position where the economy needed additional stimulus, we do have considerable room,” the central bank governor told lawmakers in London on Tuesday.

Overnight markets 

• Overview: US 10yr note futures are down -0.2628% at 130-14, S&P 500 futures are up 0.05% at 1937.25, Crude oil futures are down -0.21% at $33.32, Gold futures are up 1.02% at $1222.4, DXY is up 0.01% at 97.385. 

US Economic Data 

• Consumer Confidence Index will be released at 10:00 AM
• Richmond Fed Manufacturing Index will be released at 10:00 AM
• Existing Home Sales number will be released at 10:00 AM
• Existing Home Sales MoM growth will be released at 10:00 AM

 Canadian Economic Data 

• There is no major economic data 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

Market update

US tsys lower , curve flatter, US 10Y 1.77 (+2.4bps). European equities ~2.0% higher, USD +1.0%, crude 5% higher and gold 1% lower. British pound 2% lower at seven yr low on Brexit fears. HSBC posted an unexpected Q4 loss with the stock down 5.4% yet Euro banks higher, Santander up 3.5%. Euro data o/n showed weaker than exp Eurozone flash PMI for Feb (52.7 vs 53.6). In the US rate hike odds continue to rise since Yellen & last month’s payrolls, the 2Y is at 3 wk high. In Canada, GOCs are lower, flatter with spds unch vs tsys, provis opening 1/2bp tighter on risk on – supply from Alberta, BCMFA, Qc26. New Hydro ones opening small tighter, we are buyers of 10Y Hydone @ 162 (2.5MM). The issue was a relative success considering there was no ‘juicy concession for any of the 3 tranches (maybe 4bps in the 5Y) but issuance was much anticipated (they filed on Feb4th)

News headlines

• IMF’s Lagarde Says Oil May Stay Low for Longer Than Expected (Bloomberg) Crude prices will probably stay low for longer than expected, International Monetary Fund Managing Director Christine Lagarde said, urging Gulf Arab oil-producing countries to cut spending and boost revenue through new taxes. A value-added tax that’s the same across the six-nation Gulf Cooperation Council should be adopted, Lagarde said in a speech in Abu Dhabi. The measure along with corporate income and property taxes would help raise government income, she said.
• Oil Glut Will Persist Into 2017 as IEA Sees Prices Capped (Bloomberg) The global oil glut will persist into 2017, limiting any chance of a price rebound in the short term as the surplus takes even longer to clear than previously estimated, according to the International Energy Agency.
• Pound Slides Most Since 2009 as Johnson Backs ‘Brexit’ Campaign (Bloomberg) The pound fell the most since March 2009 after London Mayor Boris Johnson, one of the U.K.’s most popular politicians, said he’ll campaign for Britain to leave the European Union in a June referendum. Sterling dropped at least 1.2 percent against all its 16 major peers, reversing a gain made on Friday when Prime Minister David Cameron secured a deal on membership terms with EU leaders in Brussels.
• Europe’s Economy Strains as Global Slowdown Takes its Toll (Bloomberg) The euro area is showing signs of strain from the global slowdown. Weaker growth and deeper price cuts by companies, as captured in a monthly report by Markit Economics published Monday, will raise concerns about the health of the economy. They may also increase pressure on European Central Bank policy makers to add to stimulus at their next meeting in March.
• Schengen collapse could cost EU up to 1.4 trillion euros over decade (Reuters) A collapse of Europe’s Schengen passport-free travel zone could cost the European Union up to 1.4 trillion euros over the next decade, a study by Germany’s Bertelsmann Foundation showed on Monday.
• Canadian oil output growth could come to ‘complete standstill’, IEA warns (Financial Post) Canadian oilsands growth is likely to freeze after the projects under construction come on stream as heightened environmental concerns, lack of pipeline access and policy changes slow investment, warned the International Energy Agency.

Overnight markets 

• Overview: US 10yr note futures are down -0.0955% at 130-25, S&P 500 futures are up 1.06% at 1934.75, Crude oil futures are up 6.11% at $31.45, Gold futures are down -1.75% at $1209.2, DXY is up 0.98% at 97.543.

 US Economic Data 

• Chicago Fed Nat Activity Index was released at a level of 0.28, beating the estimate by 0.38 points and up from prior month
• Markit US Manufacturing PMI will be released at 9:45 AM

 Canadian Economic Data 

• There is no major economic data 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