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Market update

US tsys lower after stronger CPI (core highest since Aug 2011), 10Y futures higher on above avg. volume, US 10Y 1.78% (+2.5bps). European stocks lower led by banks despite ECB capital buffer news (see above). GOCs lower & steeper, spds ~3bps tighter vs tsys in the short end. Cda retail sales fell 2.2% m/m in Dec after rising 1.7% in Nov, missing consensus est by wide margin (-1.6% ex-autos vs -0.7%). Provis starting 0.5bps weaker after profit taking yesterday took spds 2bps wider. BC continues to outperform post budget – BC48/Ont46 traded up at -11.5 yest aft, now -11.8/-12.5. Another active day in corps yest with Ford long 3Y (June 19) @ 265OTC which we saw as a ~20bp concession and bonds broke tighter 259/256. Toyota priced a dual 5Y fixed & 3Y FRN, the 5Y @ 164 which broke 3bps tighter.

News headlines

• European Banks Gain Reprieve as ECB Retreats on Capital Demands (Bloomberg) Euro-area banks will get a reprieve from regulators’ post-crisis steps to pile on capital requirements after the European Central Bank said it would curtail its demands on individual lenders to offset the phasing in of capital buffers.
• Here Are The Numbers That Show Who `Brexit’ Would Hurt Most (Bloomberg) If David Cameron ends up leading the U.K. out of the European Union, he’ll drag everyone else down with him. That’s the conclusion of an academic study about what the economic impact of a “Brexit” would be. No one escapes unhurt.
• Wildest Currency Swings Since 2011 Curtail Options Strategies (Bloomberg) The highest currency-market volatility in more than four years is depriving investors of a cheap way to protect against risks in financial markets — including Britain’s referendum on its membership of the European Union.
• PBOC to Raise Reserve Ratios for Banks That Don’t Meet Criteria (Bloomberg) China’s central bank said some banks will be forced to lock away more reserves, a move that may contain credit growth after advances by smaller lenders jumped in January.
• ‘Deflationary Bias’ May Afflict U.S. Economy, Fed Paper Finds (Bloomberg) The U.S. economy may be saddled with a “deflationary bias” after the last recession that makes it harder for the Federal Reserve to achieve its 2 percent inflation goal, according to research published this month by the central bank.
• K. Retail Sales Surged Most in More Than Two Years in January (Bloomberg) U.K. retail sales surged the most in more than two years in January, boosted by demand for clothing and computers.
• Tough road for Venezuela after dire data, inadequate measures (Reuters) Venezuela’s central bank on Thursday released long-awaited data showing the depth of the OPEC country’s recession, a day after President Nicolas Maduro announced a package of measures seen as insufficient to salvage the unraveling economy. The bank reported that Venezuelan inflation hit 180.9 percent in 2015, one of the highest rates in the world, while the economy contracted 5.7 percent.

Overnight markets 

• Overview: US 10yr note futures are down -0.1432% at 130-24, S&P 500 futures are down -0.68% at 1903.5, Crude oil futures are down -3.54% at $29.68, Gold futures are up 0.12% at $1227.8, DXY is up 0.03% at 96.978.

 US Economic Data 

• CPI MoM was released at a level of 0%, better than expected and up from prior month
• CPI Ex Food and Energy MoM, was 0.3%, beating the estimate by 0.1% and up from prior month
• CPI YoY growth was 1.4%, better than expected and up 0.7% from prior month

Canadian Economic Data 

• Retail Sales MoM growth was -2.2%, worse than expected and down 3.9% from prior month
• Retail Sales Ex Auto MoM growth was -1.6%, missing the estimate by 0.9% and down from the previous period.
• CPI NSA MoM growth was released at 0.2%, better than expected and up 0.7% from prior month
• CPI YoY growth was 2%, beating the estimate by 0.2% and up 0.4% from the previous period

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 slightly lower in quiet overnite trade, volume on ten yr futs below avg (283k), US 10Y 1.82%, curve 1bp steeper. Crude up 2.7% at 31.50, Euro & Asia stocks higher, S&P  futs up slightly. Core Euro bonds mixed, gilts underperforming bunds for 2nd day, bund curve 3bps flatter as Spain & France sold combined E11bln in short end issuance. Japan sold Y2.5trln in 5Y bonds at a negative yield for the time, -0.138%, bid/cover 3.57 lowest since Oct. GOCs slightly lower after another weak session yest led by cheapening in 5s by ~2bps on the curve post auction thou the 5Y roll is basically unch (8.5/8.3). Omers  Realy Corp came in with a 8Y issue  which was well oversubscribed @178 (~80 over ont). CMB 10Y this morn – guidance 71.5 but WI is 70 bid so likely 70.5 (we are sold out). Provis opening unch, solid tone, Q 26s yest @ 115 – 114/113 this morn.

News headlines

• OECD downgrades global growth, says world’s economy needs urgent fiscal response from governments (Financial Post) The global economy is growing at a stubbornly weak pace and governments should be deploying fiscal tools alongside monetary policy to stoke growth, the Organisation for Economic Co-operation and Development said in its latest outlook Thursday.
• Oil extends rally to $35 after Iran welcomes output freeze (Reuters) Oil rose to $35 a barrel on Thursday after Iran welcomed plans by Russia and Saudi Arabia to freeze output and an industry report showed a surprise drop in U.S. inventories.
• Brexit nerves knock FTSE as oil rally cools (Reuters) A four-day rally in world stocks cooled in Europe on Thursday, as oil prices steadied and nerves set in ahead of crunch talks between EU leaders aimed at keeping Britain in the 28-member bloc. Asian bourses had seen gains overnight including almost 3 percent for Tokyo’s Nikkei. But the mood faltered shortly after Europe.
• Iran sees oil freeze pact as not enough to help market: Iranian sources (Reuters) Iran believes a global agreement to freeze oil output will not be enough to help prop up prices as the world is producing too much crude, Iranian oil sources told Reuters. Iranian Oil Minister Bijan Zanganeh and his counterparts from Qatar, Iraq and Venezuela held talks in Tehran on Wednesday aimed at persuading Iran to join a global pact to restrain output, agreed this week by OPEC leader Saudi Arabia and non-OPEC member Russia, the world’s two largest oil exporters.
• ECB sees new growth risks, fears second-round effect of low oil price (Reuters) The euro zone’s modest economic recovery was progressing but risks are on the rise and there were also signs that low energy prices could feed into the price of other goods and services, the European Central Bank said on Thursday.
• China inflation quickens in January (FT) Chinese consumer prices rose in January, an encouraging sign for the world’s second largest economy in a month characterised by turbulence in its financial markets. The consumer price index rose by 1.8 per cent year-on-year in January, from 1.6 per cent in December 2015. However, CPI continues to trail Beijing’s target of “around 3 per cent“. Analysts survey by Bloomberg expected a rise to 1.9 per cent in January.
• Japan’s Exports Drop Most Since 2009 as Sales to China Fall (Bloomberg) Japan’s exports fell for a fourth consecutive month and dropped the most since 2009, underscoring continued weakness in an economy that contracted in the final months of 2015. Exports to China, Japan’s largest trading partner, were down almost 18 percent, driving an overall decline of nearly 13 percent in the value of overseas shipments in January from a year earlier. Imports dropped 18 percent, leaving a 645.9 billion yen ($5.7 billion) trade deficit, the Ministry of Finance said on Thursday.
• Bank Indonesia Cuts Rates as Emerging-Market Risk Appetite Perks Up (WSJ) Bank Indonesia on Thursday cut its main policy rates for the second time this year as it looks to support the economy and take advantage of improving emerging-market risk appetite. The central bank cut the benchmark BI rate by another quarter percentage point, to 7.0%, in a bid to help the government achieve its 5.3% economic growth target this year. The bank also cut the yields on its lending facility to 7.50% and on its deposit facility to 5.0%.
• Venezuela Boosts Gas Price, Devalues Bolivar as Economy Unravels (Bloomberg) Venezuela hiked gasoline prices for the first time in almost two decades and devalued its currency as President Nicolas Maduro attempts to address triple-digit inflation and the economy’s deepest recession in over a decade.

Overnight markets 

• Overview: US 10yr note futures are down -0.024% at 130-13, S&P 500 futures are up 0.23% at 1927.25, Crude oil futures are up 2.84% at $31.53, Gold futures are down -0.46% at $1205.8, DXY is up 0.21% at 96.986.

US Economic Data 

• Philadelphia Fed Business Outlook came in at a level of -2.8, better than expected and up from prior month
• Initial Jobless Claims number was released at of 262k, beating the estimate by 13k and down from the previous week
• Continuing Claims number came in at a level of 2273k, worse than expected and up from the previous week
• Leading Index will be release at 10:00 AM

 Canadian Economic Data 

• There is no major economic data release 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 moving lower, accelerating since mid-morning on stronger core PPI (0.4% vs 0.1%) equity mkts improve: Euro stoxx up 2%, S&P futs +1.6%. US 10Y 1.82% (+4bps), curve ~1bp steeper.  Crude up 3% @ 29.90 after falling on Russia/Saudi news.  Yesterday’s TIC data showed China holdings of tsys fell to the lowest since last Feb at 1.25trln, while Japan’s fell $22.4bln. Core Euro bonds lower led by 10Y UK gilts (1.47 +3bps) despite weaker empl data – likely focus on higher wage growth (2% vs 1.9%), lower productivity. Also pressure from 10Y UK & German supply. GOCs lower led by 10s, 2bps on the curve, longs outperforming 10s/30s below 80. Five year auction today – $3.8bln reopening Mar 21s. The 5Y roll @ 8.7/8.3 is sitting just off recent lows, ~2bps tighter since last auc. Long Ontarios opening 1bp tighter 117/116 after 3bp rally yesterday on Ont budget announcement, risk on env. BC48/Ont46 roll tighter (-11.1/-11.5) – BC budget better surplus ($377mln 2016FY, $264mln for FY17, lower net borrowing etc). Yest Sunlife priced a 5+5Y sub debt at 250 or ~ 55 back of Sr Holdco paper where we thought 40bps was closer to the basis – it broke 3bps tighter on secondary. Shaw issued 5Y @ 255 which also looked very cheap and was quoted 8 bps tighter on the break (still solid value in our opinion). We are 248 bid for 2MM this morn.

News headlines

• Futures rise as oil gains hold steady (Reuters) U.S. stock index futures were higher on Wednesday, setting the stage for a third straight day of gains, as oil prices rose and investors snatched up beaten-down shares.
• China promises economic stability as G20, parliament loom (Reuters) Chinese policymakers emerged from the Lunar New Year hiatus with one collective message for nervous investors at home and abroad – Beijing will put a floor under the slowing economy, keep its currency steady and ensure employment remains stable even as bloated industries undergo restructuring.
• Iran says will resist curbs on oil output as part of global pact (Reuters) Iran said on Wednesday it would resist any plan to restrain its oil output as fellow OPEC ministers tried to persuade the country to join the first global oil pact in 15 years.
• Canada misses out on new auto assembly plants (TheGlobeandMail) Investment by auto makers in Canada doubled last year from 2014 levels, but the country failed to win any of the three new assembly plants that were announced for North America, pushing Canada’s losing streak for new plants to a decade.
• Bombardier Plans to Cut 7,000 Jobs as Profit Misses Estimate (Bloomberg) Bombardier Inc. said it planned to cut about 7,000 jobs as it reported fourth-quarter profit that fell short of analysts’ estimates. It also signed a letter of intent for Air Canada to buy at least 45 of the planemaker’s C Series jets.
• UK wage growth slows as employment rises (TheGuardian) A first UK interest rate rise since the financial crash appears to be even further away after official figures showed that wages growth last year dipped to 1.9%. Wages growth, which is watched carefully by the Bank of England for signs of inflation, lost momentum in December for an eighth month as the global slowdown in trade and turmoil on world stock markets hit the previously bouyant UK economy.

Overnight markets 

• Overview: US 10yr note futures are down -0.32% at 130-16, S&P 500 futures are up 0.99% at 1907.5, Crude oil futures are up 2.89% at $29.88, Gold futures are down -0.03% at $1207.8, DXY is up0.12% at 96.985.

US Economic Data 

• MBA Mortgage Applications was released at a level of 8.2%, down 0.9% from prior week.
• Housing Starts for January was at a level of 1099k, worse than expected and down 50k from December.
• Building Permits was released at a level of 1202k better than expected and down 30k prior period.
• PPI Final Demand MoM growth for January was 0.1%, beating the estimate by 0.3% and up 0.3% from the previous month
• PPI Ex Food and Energy MoM growth was at 0.4%, better than expected by the analysts and up 0.3% from previous month.
• PPI Final Demand YoY growth was at -0.2%, beating the estimate 0.4% and up 0.8% from prior period
• PPI Ex Food and Energy YoY growth was 0.6%, better than expected by the analyst and up 0.3% from the previous month
• Industrial Production MoM will be released at 9:15 AM
• Capacity Utilization will be released at 9:15 AM

Canadian Economic Data 

• There is no major economic data release 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