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Market update

US tsys lower overnite , off the lows as equities pare gains, crude recedes after initial spike on Saudi Russian agreement to freeze crude prod, US 10Y 1.78 (+2.6bps).  Core Euro bonds lower, curves steeper – German govt curve ~3bps steeper despite weak Feb ZEW. China stocks up 3.0% on surge in bank lending, stability in yuan. Tsys traded in narrow range o/n but on huge volume (879k TY1), a lot of vol going thru when crude spked on Saudi news ~4:00am. In Canada, GOCs are higher after weaker Empire Man, provi spds ~1bp tighter – expect some supply with relative stability in provi mkts – long Onts are ~6bps off the wides of last Wed, haven’t had a Ont/Qc issue since Jan 29th.

News headlines

• Saudis and Russia agree to oil output freeze, Iran still an obstacle (Reuters) Top oil exporters Russia and Saudi Arabia agreed on Tuesday to freeze output levels but said the deal was contingent on other producers joining in – a major sticking point with Iran absent from the talks and determined to raise production.
• Oil eases off highs after output freeze agreement (Reuters) Oil prices slipped off session highs on Tuesday after four of the world’s largest producers agreed to freeze output at January levels if other major exporters joined the pact, dashing hopes among the price bulls for an outright cut to supply.
• Offshore Yuan Forwards Show Bears’ Confidence Has Been Shaken (Bloomberg) Global investors are winding in bets on a yuan devaluation as a dollar rally reverses at the same time as China strengthens support for its currency. Twelve-month forwards for the offshore yuan rallied 2 percent so far this month in Hong Kong, outperforming the exchange rate’s 1.2 percent gain, data compiled by Bloomberg show.
• China January new yuan loans climb to record high in seasonal surge (Reuters) Chinese banks armed with fresh lending quotas extended a record 2.51 trillion yuan ($385.40 billion) of new loans in January, far more than markets had expected, suggesting Beijing is keeping monetary policy loose to counter a protracted economic slowdown.
• S&P 500 Futures Rise After China Stock Gains; Oil Pares Advance (Bloomberg) Futures on the Standard & Poor’s 500 Index rose as U.S. markets reopened after the Presidents’ Day holiday, buoyed by the biggest rally in Chinese shares in three months.
• K. Inflation Rate Rises to Highest in a Year on Motor Fuel (Bloomberg) U.K. inflation climbed to its highest in a year in January, driven by motor fuels, food and clothing.
• Canadian investor sentiment worsens to levels not seen since crisis, Manulife says (Financial Post) One of Canada’s biggest insurance and financial services companies says nervousness among Canadian investors has risen to levels not seen since the financial crisis. Manulife Financial says that Canadian investors have lost confidence in mutual funds, exchange-traded funds and balanced mutual funds over the past six months.
• Bank of Japan launches negative interest rates (TheGuardian) The Bank of Japan’s negative interest rates came into effect on Tuesday in a radical plan already deemed a failure by financial markets, highlighting Tokyo’s lack of options to spur growth as global markets sputter.

Overnight markets

• Overview: US 10yr note futures are down -0.13% at 130-29, S&P 500 futures are up 1.16% at 1879.75, Crude oil futures are down -0.14% at $29.4, Gold futures are down -2.16% at $1212.6, DXY is up0.67% at 96.586.

US Economic Data 

• The Empire Manufacturing number came in at a level of -16.64 points, missing the estimate by 6.64 points , and up 2.73 from the previous period
• The Total Net TIC Flows will be released at 4:00 PM
• The Net Long-term TIC Flows will be released at 4:00 PM

Canadian Economic Data 

• The Manufacturing Sales MoM growth was 1.2%, beating estimate by  0.7% and up 0.2% 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

Market update

US tsys opening lower, steeper, US 10Y 1.70 (+4bps) after Jan Retail Sales came in above exp, import prices fell less than exp. European equities higher, crude  up 5% above $27.50. Tsys pressured overnite with only a brief bounce on Nikkei decline (-5%), yet European stocks are higher led by financials as Commerzbank rose 15% on Q4 earnings beat, Deutsche Bank announcing plans to buy back $5.4bln in bonds. Core Euro bonds lower on bounce in stocks, with Euro & German GDP coming in as expected. Peripheral spreads tighter, Portugal 10Y -15bps below 4% despite weaker Q4 GDP. With momentum indicators on longs USTs way above overbought levels (daily RSI on US1 ~82, Pandemonium Index sentiment highest since Apr 2015) we have been looking for opportunities to go short but have been stymied by intraday volatility. In Canada, GOCs are lower, spds ~2bps wider vs tsys which would normally be considered unusual as GOCs tend to lag tsys either way in large moves… But considering at one point yest the 10Y Cda/Tsy spd was ~8bps tighter in the rally (-68 bps thru), 10s look vulnerable here. Provi spds opening better bid after another wild day yest which saw spds close ~2bps tighter after opening 3bps wider.

News headlines

• S. Benchmark Yield Will Be at Record Low in March at This Rate (Bloomberg) Treasury benchmark yields are on course to set a new all-time low in March if they keep rallying at the current pace. Ten-year yields dropped almost 40 basis points during the past three weeks to 1.66 percent. The record low of 1.379 percent was set in July 2012.
• Yellen’s dilemma: A downturn with no easy response (Reuters) The U.S. Federal Reserve’s carefully scripted decision to raise interest rates last December, and begin a return to “normal” policy, may now become a nightmare for the central bank if an economic downturn forces a return to unconventional methods.
• Germany Keeps Momentum Showing Resilience to Global Turmoil (Bloomberg) Germany’s economy sustained its momentum at the end of 2015, showing resilience amid an emerging-market slowdown that’s heightened concerns about global growth and sent equities plunging this year.
• Here Is Trudeau’s Six-Point Checklist for Bombardier’s Bailout (Bloomberg) Prime Minister Justin Trudeau will have a hard time saying no to Bombardier Inc.’s request for aid to complete the troubled C Series aircraft because of the company’s deep political and economic roots in Canada.
• PM says may be hard to keep balanced budget promise (Reuters) The Canadian government could find it hard to balance the budget by 2019/20 as promised if the economy continues to struggle, Prime Minister Justin Trudeau said in an interview published on Thursday.
• Economists Are Ditching Their Calls for a Fed Rate Hike in March (Bloomberg) Economists are pushing back their calls for the next Federal Reserve interest-rate hike in droves. Trouble overseas and uncertain economic conditions at home have helped move the median forecast to June from March.
• Eurozone Economy Grows, but Total Output Still Lags Behind 2008 (NY Times) Europe is still trying to crawl back to where it was in 2008. That was the underlying message of the economic data for the eurozone published on Friday.
• Oil prices jump on talk OPEC is ready to deal, but traders are wary of ‘jawboning’ (Financial Post) Still, analysts said such a move remained unlikely and prices for Brent and U.S. West Texas Intermediate (WTI) crude were on track for weekly losses of more than 7 per cent and 11 per cent, respectively, as oversupply weighed.

Overnight markets 

• Overview: US 10yr note futures are down -0.36% at 131-18, S&P 500 futures are up 1.11% at 1844.75, Crude oil futures are up 6.26% at $27.85, Gold futures are down -0.99% at $1235.4, DXY is up0.5% at 96.036.

US Economic Data 

• The Import Price Index MoM number came in at a level -1.1%, better than expected and up 0.1 % from last month
• The Retail Sales Advance MoM growth was 0.1%, beating the analysts estimate by 0.1%, up 0.3% from prior month
• The Retail Sales Auto MoM growth was 0.1%, better than expected and up 0.2% from the previous month
• The Retail Sales Ex Auto and Gas growth was 0.4%, beating the analysts estimate by 0.1%, up 0.1% from the previous month
• The University of Michigan Sentiment index will be released 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 surging higher overnite, US 10Y 7bps lower @ 1.61% as equity mkts tumble, yen surged to 16mnth high vs USD. Tsys coming under pressure since ~8:00EST with prices falling further after initial claims fell 11k to lowest level in seven weeks. Euro stoxx -3.4%, peripheral spds sharply wider led by Portugal (70bps) & Greece, crude -3.6% below $27. Core Euro bonds also higher, 10Y bunds 7bps lower @ 0.18% new low, 10Y gilt 12bps lower & 10/30 curve 4bps steeper after weak 2045 gilt auction (1bp tail 2.08 b/c). Soc Gen -12% as Q4 eps missed driven by 35% drop in investment bank earnings. GOCs pairing early gains, 10s trading below 1.0% for first time. With mega flattening since last BOC, the short end is now inverted out to four years. Indeed, using old 5s (Sep 20s) 2s/5s is barely 6bps, so 5s/10s @ 50 looks relatively attractive. Buying of longs yest aft flatten 10/30 back towards 80 bps. Provis opening 4bps wider Ont 46s traded down @ 125.5 , now 124 bid so fairly volatile to say the least.

News headlines

• Gold Roars to One-Year High as Turmoil Drives Safe Haven Demand (Bloomberg) Gold climbed to the highest in a year as investors sought a haven from tumbling stock markets after Federal Reserve Chair Janet Yellen suggested the central bank may delay raising interest rates.
• Music stops for buyers of Bank Coco debt (FT) A lot of the recent worries with European banks have been centered on coco bonds, or contingent convertible bonds. These bonds automatically convert debt to equity when a bank’s cash reserves fall below a certain level. Thursday’s selling has run the yields on Deutsche Bank’s and Santander’s coco bonds to fresh highs (yields rise when prices fall), causing more concerns about Europe’s banks. Bank stocks across Europe are down at least 3%.
• Sweden Cuts Rates Deeper Into Negative Territory, Says May Go Further (Bloomberg) Sweden’s central bank lowered its key interest rate even further below zero and said it’s prepared to use its full toolbox of measures as it battles to revive inflation and keep the krona from appreciating.
• No Respite for S&P 500 as U.S. Stock Futures Join Global Selloff (Bloomberg) U.S. stock futures followed oil prices lower, extending an earlier slump as investors shunned risk worldwide to spark a global selloff in equities.
• Business Leaders Urge Zuma to Sell South Africa State Assets (Bloomberg) The heads of South Africa’s biggest companies urged President Jacob Zuma to sell state-owned assets, increase taxes and review the country’s labor laws as part of a raft of proposals to try and avoid a credit-rating downgrade to junk.
• Canadian dollar’s ‘petro-currency’ status may soon weaken, analysts say (TheGlobeandMail) Currency analysts at Bank of Nova Scotia believe the Canadian dollar’s “petro-currency” status may be about to weaken. Don’t get the wrong idea. The loonie’s ties to oil will remain, but possibly weaken, according to strategists Shaun Osborne and Eric Theoret.
• K. Bond Yield Drops to Record as Investors Seek Safer Assets (Bloomberg) U.K. government bonds advanced, sending the 10-year gilt yield to the lowest on record, as global stock markets resumed declines and boosted demand for the relative safety of sovereign debt.
• Yen Advances to 15-Month High as Korean Tensions Stoke Haven Bid (Bloomberg) The yen climbed against every major currency as a drop in global stocks and rising tensions between North and South Korea boosted demand for havens.
• Jobless Claims in U.S. Decline to Lowest Level in Seven Weeks (Bloomberg) Filings for unemployment benefits in the U.S. declined to a seven-week low as hiring managers demonstrated confidence in the outlook after temporary adjustments around the holidays.
• SocGen Slumps as Quarterly Profit Hurt by Securities Drop (Bloomberg) Societe Generale SA, France’s second-largest bank by market value, posted fourth-quarter profit that missed analysts’ estimates as earnings at the investment bank dropped 35 percent. The shares plunged the most since 2011.
• Oil falls on U.S. supply record, weak demand outlook (Reuters) Oil slid on Thursday, dented by record U.S. crude inventories, worries about the demand outlook and a Goldman Sachs forecast that prices would remain low and volatile until the second half of the year.
• Futures slump as global growth worries resurface (Reuters) U.S. stock index futures plunged on Thursday, with risk-averse investors piling into safe haven assets as another sharp fall in oil prices and cautious comments from Federal Reserve Chair Janet Yellen raised fresh doubts about the health of the economy.

Overnight markets 

• Overview: US 10yr note futures are up 0.71% at 132-14, S&P 500 futures are down -1.6% at 1817.25, Crude oil futures are down -2.73% at $26.7, Gold futures are up 3.48% at $1236.2, DXY is down-0.28% at 95.615.

US Economic Data 

• The Initial Jobless Claims was released at a level of 269k better than expected by the analysts, and down 16k from the previous week
• The Continuing Claims number came in at a level of 2239k, better than expected and down 6k from prior period

Canadian Economic Data 

• The New Hosing Price Index MoM growth was 0.1%, worse than expected and down 0.1% from the previous 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