Commentaires

Market update

US tsys opening lower, US 10Y 1.84, curve steeper after ADP came in above exp (214K vs 190K) thou Jan was revised lower. Tsy 10Y futures confined to narrow range most of the o/n session with weaker bias as. European stocks higher for a 5th day, Crude -1.3% on API inventory data. Asian stocks sharply higher – Australia Q4 GDP rose 0.6% vs 0.4% exp. Euro continues to weaken on the back of expected ECB stimulus at next Thursday’s meeting. Core European bonds lower on better Aussie & Swiss (Q4 GDP) data, yet bunds recovered losses & curve steepened on German 5Y auction which came at lowest yield on record -0.36%. GOCs lower, curve ~1bp steeper – this aft the BOC auctions $400mln in 2047 RRBs. 30Y breakevens have rallied over the past month by ~15bps and at 140bps are sitting at two month highs – yet this is still ~ 60bps lower than the 2.0% headline & core inflation rate. Provis opening another 1bp tighter, Ont 46 118.5/118, Ont 25s 108.5/108 – rumoured supply yest did not materialize so today we expect Ont , Sak , Mani to take advantage of good mkt conditions.  Yest Choice Properties  came with 7Y & 30Y bond @ 216 & 325 – both of which we did not view as large enough concessions for a high beta BBB corp. The bonds broke 3bps tighter on the break.

News headlines

• Coeure Says ECB Watching Impact of Negative Rates on Banks (Bloomberg)  The European Central Bank is monitoring the risk that negative rates will hurt bank profitability while sticking to its commitment to deliver price stability first, Executive Board Member Benoit Coeure said. “We are well aware of this issue,” Coeure said in a speech in Frankfurt on Wednesday. “We are studying carefully the schemes used in other jurisdictions to mitigate possible adverse consequences for the bank lending channel. But I also think we need to qualify the narrative that banks’ challenges flow largely from our monetary policy.”
• How `Brexit’ Puts European Institutions at Risk of Downgrade (Bloomberg) The consequences of a “leave” vote in the U.K.’s June 23 referendum on its European Union membership may spread beyond Britain’s shores, according to Societe Generale SA. While the U.K.’s assets will depreciate should the nation vote to sever a more-than-40-year-alliance with the continent, its close links to the rest of the bloc’s financial entities also leave the EU vulnerable. The EU’s ratings could suffer and the European Investment Bank, which helps provide financing for projects in the region, is “particularly at risk” in the event of a “Brexit,” Cristina Costa, a Paris-based analyst at SocGen wrote in a note to clients.
• U.S. Index Futures Pare Declines With Crude Before ADP Jobs Data (Bloomberg) U.S. index futures were little changed after trimming declines with crude oil, following a surge in shares Tuesday that sent the Standard & Poor’s 500 Index to an almost two-month high. Contracts on the S&P 500 expiring in March fell 0.2 percent to 1,975 at 7:53 a.m. in New York. In yesterday’s votes, Donald Trump and Hillary Clinton solidified their positions in the race to their parties’ presidential nominations. Dow Jones Industrial Average futures lost 0.1 percent to 16,825. West Texas Intermediate crude futures declined 1.4 percent, trimming an earlier 2.5 percent slide. A gauge of growth in February private payrolls is due at 8:15 a.m.
• Moody’s cuts China outlook on eve of NPC, cites reform, fiscal risks (Reuters) Moody’s downgraded its outlook on Chinese government debt to « negative » from « stable » on Wednesday, citing uncertainty over authorities’ capacity to implement economic reforms, rising government debt and falling reserves. The Moody’s downgrade comes just days before the National People’s Congress (NPC) is due to vote on China’s 13th five year plan, a closely held development blueprint for the next five years, which policymakers began formally drafting in 2015.
• Japan PM Abe adviser: G20 statement not a restriction on BOJ (Reuters) The Group of 20’s agreement that monetary policy alone cannot lead to balanced growth does not place any restrictions on the Bank of Japan’s ability to expand its negative interest rate policy, an adviser to Japan’s prime minister said on Wednesday. The BOJ should calmly study the impact of its negative rate policy, which came into effect last month, when deciding its next move, Masahiko Shibayama told Reuters in an interview.
• Oil below $37 as U.S. inventory rise counters output freeze plan (Reuters) Oil edged further below $37 a barrel on Wednesday as an industry report showing a rise in U.S. crude stockpiles to a new record countered support from producer efforts to tackle a supply glut. U.S. crude inventories jumped by 9.9 million barrels last week, the American Petroleum Institute (API) said on Tuesday, much more than the 3.6-million-barrel increase analysts had forecast.
• Oil price slide casts shadow over Canada’s banks, despite solid quarter (Financial Post) Canada’s big banks wrapped up the first quarter of the fiscal year with increased profits and widely expected dividend hikes. But the early impact of the oil rut was evident, with increased provisioning and reports of growing credit card and loan delinquencies in the hardest hit provinces, primarily in Western Canada.

Overnight markets

• Overview: US 10yr note futures are down -0.1447% at 129-13, S&P 500 futures are down -0.29% at 1972.25, Crude oil futures are down -1.22% at $33.98, Gold futures are up 0.12% at $1232.3, DXY is up 0.14% at 98.493.

US Economic Data 

• MBA Mortgage Applications growth was -4.8%, up 0.5% from prior week
• ADP Employment Change was released at a level of 214K, beating the estimate by 24k and up 21k from prior month
• ISM New York will be released at 9:45 AM
• S. Federal Reserve will release Beige Book at 2:00 PM

Canadian Economic Data 

• There is no major economic data for 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 mixed, short end modestly lower ,longs underperforming US 10Y 1.748 (-1.8bps). Tsys moving lower as stock futures improved o/n, Euro sotxx up ~1.0%. ISM Manufacturing coming up at 10:00EST after yest Feb Chicago PMI came in much weaker than exp (47.6 vs 52.5) – yet the index has been fairly eratic of late while Edmunds.com expects the best Feb for auto sales in 15 yrs.  GOCs are higher , spds narrower vs tsys despite Q4 GDP coming in 0.8% vs unch exp. Provis starting the day ~0.5bps weaker on supply rumours, with Sask 10Y, QC 10Y reopening, …

News headlines

• OPEC watching Iran, Russia, unlikely to cut output in June (Reuters) OPEC is very unlikely to cut output at its next meeting in June, even if prices remain extremely low, according to OPEC sources and delegates, as it will be too early to say how fast Iranian output is rising. The sources, which include officials from the Middle East, say OPEC countries such as Saudi Arabia also want to test Russia’s commitment to freezing output before taking any further steps to stablize prices.
• S. Index Futures Signal Equities to Rebound After Monthly Drop (Bloomberg) U.S. stock-index futures rose, indicating equities will rebound after capping their third consecutive month of losses, amid investor optimism about central bank support. Standard & Poor’s 500 Index contracts expiring in March rose 0.8 percent to 1,945.25 at 7:29 a.m. in New York. Equities erased a monthly gain yesterday, as banks and health-cares stocks put the brakes on a two-week rebound. While the index is still 5.6 percent above a Feb. 11 low, it’s 9.3 percent off an all-time high reached last May. A measure of volatility has jumped 13 percent this year. Dow Jones Industrial Average futures rose 125 points, or 0.8 percent, to 16,622, today.
• Caixin China PMI notes shrinking staffs (FinancialTimes) Another abysmal PMI reading for China’s manufacturing sector. The Caixin-sponsored composite PMI for February came in at 48, below expectations for 48.4. It had been 48.4 in January. The 50-mark separates contraction from expansion. The reading means the sector has been shrinking for a whole year now, and was its lowest in five months.
• Yuan Halts Seven-Day Losing Streak as PBOC Raises Reference Rate (Bloomberg) China’s yuan advanced for the first time in eight days, with a stronger central bank reference rate easing pressure spurred by Monday’s cut to lenders’ reserve ratios. The currency climbed 0.1 percent to 6.5475 a dollar as of 4:44 p.m. in Shanghai, according to China Foreign Exchange Trade System prices. The offshore yuan traded in Hong Kong reversed an early loss and gained 0.06 percent after the People’s Bank of China raised its reference rate by 0.1 percent to 6.5385.
• Chinese Officials Assure Lew There’s No Plan to Devalue Yuan (Bloomberg) China’s officials said there is no intention or need to devalue the yuan, according to U.S. Treasury Secretary Jacob J Lew, who was speaking at a briefing in Hong Kong after Monday meetings with Premier Li Keqiang in Beijing. Policy makers in China restated plans to rebalance the economy and cut excess capacity, and said they have the policy tools — monetary, fiscal and structural — to do the job, Lew said Tuesday. He discussed with them the need « for clear communication and frequent communication. »
• Euro sinks as weak data piles pressure on European Central Bank (Reuters) The euro hit its lowest in almost three years against the yen while European shares extended their strongest run of the year on Tuesday as data from around the region bolstered the case for more ECB stimulus next week. Asia had risen after weak China data fanned stimulus hopes there, and the same pattern emerged in Europe as euro zone manufacturing activity expanded at its weakest pace for a year despite more deep discounting.
• Fed’s Dudley sees downside risks to U.S. economic outlook (TheGlobeandMail) An influential Federal Reserve official on Tuesday said he sees downside risks to his U.S. economic outlook, an assessment that could flag a longer pause before the Fed’s next interest-rate hike than he and his colleagues had earlier signaled. “At this moment, I judge that the balance of risks to my growth and inflation outlooks may be starting to tilt slightly to the downside,” New York Federal Reserve President William Dudley said in remarks at a conference in Hangzhou, China sponsored by the People’s Bank of China and the New York Fed.
• Argentina, lead creditors settle 14-year debt battle for $4.65 billion (Reuters) Argentina has agreed to a $4.65 billion cash payment to its main holdout creditors and will present the deal to Congress this week for a vote which would end 14 years of bitter legal battles and pave the way for its return to global credit markets.
• Scotiabank hikes dividend as profit rises five per cent on gains in foreign banking (FinancialPost) Bank of Nova Scotia, Canada’s third-largest lender by assets, said fiscal first-quarter profit rose 5 per cent on higher earnings from its international business. Net income for the period ended Jan. 31 climbed to $1.81 billion, or $1.43 a share, from $1.73 billion, or $1.35, a year earlier, the Toronto-based bank said Tuesday in a statement. The lender raised its quarterly dividend 2.9 per cent to 72 cents a share.

Overnight markets

• Overview: US 10yr note futures are up 0.0359% at 130-18, S&P 500 futures are up 0.67% at 1942.5, Crude oil futures are up 1.19% at $34.15, Gold futures are up 0.87% at $1245.2, DXY is down 0% at 98.207.

US Economic Data 

• Markit US Manufacturing PMI will be released at 9:45 AM
• ISM Manufacturing will be released at 10:00 AM
• ISM Prices Paid will be released at 10:00 AM
• Construction Spending MoM growth will be released 10:00 AM

Canadian Economic Data 

• GDP MoM growth was 0.2%, better than expected by the analyst, and down 0.1% from prior year
• GDP YoY growth number came in at a level of 0.5%, beating the analysts estimate, and at the same level than prior year
• Quarterly GDP Annualized growth was 0.8% higher than expected and down 1.6% from Q3 2015
• RBC Canadian Manufacturing PMI will be released at 9:30 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 higher, US 10Y 1.75% (-1.5bps) in range bound overnite session (TY1 in 5 tick range) , mild risk off tone with European equities slightly down, China CSI Comp -2.3% despite cut in reserve ratio. No big headlines out of G20 meeting just a commitment to spurring growth. Core Euro bonds outperforming in bull flattener on month end duration buying with the 10Y bund @ .114% close to all time low in yield (Apr 15 0.095%). The European bond index extends 0.11yrs which is ‘exceptionally large’ according to MNI. Month end ext also a factor in the US as the Barclays Tsy index extends 0.13yrs but the long Govt/Credit is 0.18yrs. In Canada GOCs are slightly higher, little reaction to higher IPPI, Raw Materials prices. Provis opening 1bp wider after Friday’s rally – expect supply from Ont, Sask and NB. TD issued $1.25bln in 10Y NVCC on Friday @360 (368.7) which closed 361/357.

News headlines

• S&P 500 Futures Trim Drop as China Boosts Support; Valeant Falls (Bloomberg) U.S. stock-index futures pared earlier losses, following a second weekly gain for the Standard & Poor’s 500 Index, after China’s central bank stepped up efforts to cushion the country’s economic slowdown. S&P 500 contracts expiring in March fell 0.2 percent to 1,938.75 at 7:19 a.m. in New York. They trimmed losses of as much as 0.8 percent after China cut the amount of cash the nation’s lenders must hold as reserve. Dow Jones Industrial Average futures dropped 0.3 percent to 16,558.
• China Stocks Tumble Toward 15-Month Low as Stimulus Bets Unwind (Bloomberg) Chinese stocks fell, with the benchmark index approaching the lowest level since November 2014, as some investors were disappointed by a lack of specific measures to boost growth during the Group of 20 meetings in Shanghai. The Shanghai Composite Index dropped as much as 4.6 percent. The measure has declined 24 percent this year, the worst performer among 93 global equity indexes, on concern capital outflows will accelerate and earnings deteriorate as the economic slowdown deepens. The yuan capped its longest losing streak this year.
• China cuts reserve requirement ratio for fifth time since Feb. 2015 (Reuters) China’s central bank reduced the amount of cash that banks must hold as reserves for the fifth time since February, 2015, as it seeks to revive a stumbling economy. The People’s Bank of China said on its website that it would cut the reserve requirement ratio by 50 basis points for all banks, taking the ratio to 17 percent for the country’s biggest lenders. China last cut the RRR on Oct. 23, when it also reduced interest rates by 25 basis points to rein in financing costs.
• Euro-Area Prices Decline Most in Year as ECB Mulls Easing (Bloomberg) The inflation picture in the euro area deteriorated in February, giving European Central Bank policy makers more bad news to digest just a week before their next meeting. Consumer prices in the 19-nation bloc declined to minus 0.2 percent from a positive reading of 0.3 percent in January, according to data published Monday. Core inflation, which strips out volatile elements such as food and energy, was at 0.7 percent, down from 1 percent in the prior month. Those are the worst readings since February and April of last year, respectively.
• Global shares fall on G20 disappointment, Fed hike prospect (Reuters) Global shares retreated on Monday after a weekend meeting of G20 finance chiefs ended with no new plan to spur global growth and as investors fretted the U.S. Federal Reserve could raise interest rates before year-end. The dollar, however, tumbled against the Japanese yen as investors sought shelter from the fall in equities, which saw Chinese stocks lose nearly 3 percent. Gold, another « safe haven », rose and was on track for its best month in four years.
• Bullish Oil Bets Rise as Hedge Funds See Supply Tightening (Bloomberg) Talk of an output freeze by OPEC and Russia along with falling U.S. production spurred money managers to bet oil is ready for a rebound. Prices have risen 13 percent since Saudi Arabia, Russia, Venezuela and Qatar tentatively agreed on Feb. 16 to cap production at January levels. U.S. crude output dropped for a fifth week, government data showed Feb. 24.
• Brexit would negatively affect lives of millions, official UK report says (TheGuardian) Car manufacturing, farming, financial services and the lives of millions of Britons living in Europe will all be affected as the UK takes 10 years to extricate itself from the EU, an official report says. The government’s first official analysis into how Brexit would unfold in practice says a decade of uncertainty would hit “financial markets, investment and the value of the pound”. It also warns that the rights of 2 million British expats to work and access pensions and healthcare in EU countries may no longer be guaranteed.

Overnight markets 

• Overview: US 10yr note futures are down 0% at 130-12, S&P 500 futures are up 0.1% at 1944.75, Crude oil futures are up 1.31% at $33.21, Gold futures are up 0.57% at $1227.3, DXY is up 0.17% at 98.313.

US Economic Data 

• ISM Milwaukee will be released at 9:00 AM
• Chicago Purchasing Manager will be released at 9:45 AM
• Pending Home Sales MoM growth will be released at 10:00 AM
• Dallas Fed Manufacturing Activity will be released at 10:30 AM

Canadian Economic Data 

• Industrial Product Price MoM growth was released at a level of 0.5% higher than expected by the analysts and up 0.7% from prior month.
• Raw Materials Price Index MoM growth was -0.4%, beating the estimate and up 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