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Market update

US tsys opening lower, US 10Y 1.766 (+2bps) with curve slightly steeper, avg volume o/n in ten yr futs (428k vs 460k). Tsys rebounding on Fed Yellen comments that pace of rate hikes could be slowed, citing rising global risks. Tsys lower o/n with Euro govt bonds on recovery in European bank stocks with Deutsche Bank up 13%. Rumours that ECB may purchase bank stocks as part of its QE also supporting stocks. Mkt awaits Q&A from Fed Yellen later this morning and $23bln 10Y note auction at 1:00PM. GOCs rebounding higher with tsys on Yellen, spds 1-2bps narrower vs tsys. Provis opening 0.5bps better after better buying yest aft took spds ~2bps tighter at the close.

News headlines

• Currency market is braced for Janet Yellen’s Congressional testimony (FT) A jittery currency market is braced for further volatility on Wednesday when Janet Yellen, the Federal Reserve chair, delivers her semi-annual testimony on the outlook for the economy and policy before Congress.The dollar has lately come under growing pressure against its main peers, led by the yen, euro and Swiss franc as the bond market has priced out the prospect of further increases in overnight borrowing costs set by the central bank.
• Deutsche Bank Jumps as Lender Said to Consider Bond Buyback (Bloomberg) Deutsche Bank AG shares jumped the most in almost seven years and credit risk fell as Germany’s biggest bank considers a bond buyback to help ease investor concerns about its funds, according to a person with knowledge of the matter.
• Yellen Signals Fed Rate Path Hinges on Whether Turmoil Persists (Bloomberg) Chair Janet Yellen said the Federal Reserve still expects to raise interest rates gradually while making it clear that continued market turmoil could throw the central bank off course from the multiple increases that policy makers have forecast for 2016.
• Russia’s Biggest Oil Producer Skeptical on Output Deal With OPEC (Bloomberg) Russia’s largest oil producer Rosneft OJSC said it will defend traditional markets and expressed doubts over any coordinated action by crude-exporting nations to curb output.
• S. 10-Year Sale’s Lowest Yield Since 2012 May Diminish Demand (Bloomberg) The U.S. Treasury is scheduled to auction $23 billion of 10-year debt Wednesday in a sale that looks set to draw the lowest yield since 2012 as turmoil in equity, credit and commodity markets boosts demand for the safest fixed-income assets.
• Europe’s Crumbling Inflation Outlook Matches Record Low: Chart (Bloomberg) The outlook for consumer-price inflation in the euro area, as implied by one of European Central Bank’s preferred metrics, has matched the lowest on record.
• Manufacturing’s rebound faces ‘significant’ structural hurdles: federal memo (TheGlobeandMail) Amid hopes that Canadian manufacturing will drive economic growth in a country reeling from low oil prices, internal federal documents warn the sector’s rebirth is staring at “significant” structural obstacles.
• Strong demand for German two-year bonds at minus 0.50 pct yields (Reuters) Germany’s two-year bond sale drew strong demand on Wednesday, with safe haven flows and bets that the European Central Bank may cut its deposit rate by more than 10 basis points in March sugar-coating the minus 0.50 percent yield on offer.
• IMF warns Ukraine it will halt $40bn bailout unless corruption stops (TheGuardian) The International Monetary Fund has warned it will halt its $40bn (£28bn) bailout programme to Ukraine unless the conflict-torn eastern European country takes immediate action to tackle corruption. The IMF’s managing director, Christine Lagarde, said on Wednesday that “without a substantial new effort” to improve governance, it was hard to see how the Washington-based organisation could continue to provide financial help.
• Japan’s Asahi ‘to buy Peroni and Grolsch brands’ (TheGuardian) Asahi Group has reportedly reached a preliminary deal to buy SABMiller’s Peroni and Grolsch beer brands for over 400bn yen (£2.3bn). Asahi, known for its Super Dry beer, is Japan’s biggest brewer with a 38% market share. But the company has sought growth outside Japan where beer sales have fallen over the past two decades, as the population shrinks and wine becomes increasingly popular.
• World’s Negative-Yielding Bond Pile Tops $7 Trillion: Chart (Bloomberg) More than $7 trillion of government bonds offered yields below zero globally as of Monday, making up about 29 percent of the Bloomberg Global Developed Sovereign Bond Index. The total is poised to swell further after Japan’s 10-year yield went below zero for the first time on record on Tuesday, as central-bank easing policies push borrowing costs to new depths. A negative yield means investors who buy the debt now and hold to maturity will receive less than they paid.

Overnight markets 

• Overview: US 10yr note futures are down -0.24% at 131-0, S&P 500 futures are up 0.84% at 1863.75, Crude oil futures are up 0.29% at $28.02, Gold futures are down -0.91% at $1187.7, DXY is up0.29% at 96.347.

US Economic Data 

• The MBA Mortgage Application growth was released at 9.3%, up 11.9% since prior month
• The Monthly Budget Statement will be released at 2:00 PM

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 yields higher on almost double the avg. volume in TY futures, US 10Y 1.73 (-2bps), after trading in a 9bp range o/n and hitting a low 1.68% in Asia trading. Tsys were bid in Tokyo with the Nikkei down 5.4%, 10Y JGBs trading below zero for the first time.  But oil & stocks recovered somewhat in European trading, which saw heavy sales in front end Euro dollar contracts and German bunds. Nothing on the eco calendar today of significance, the US auctions $24bln in 3Y notes at 1:00PM. GOCs higher, 10Y closing in on 1.0%Provi spds opening unch after closing 2-2.5bps wider yest. Ont 46 123/122, Ont 25 112.5/122.

News headlines

• Nikkei posts biggest drop in three years as global growth fears hit banks (Reuters) Japan’s Nikkei share average posted its biggest daily drop in nearly three years on Tuesday, with banks taking the brunt of the sell-off, while a stronger yen dragged down stocks across the board. The Nikkei .N225 ended 5.4 percent lower at 16,085.44 points, its lowest closing level since Jan. 21 and its heftiest percentage drop since mid-2013.
• IEA sees global oil glut worsening, OPEC deal unlikely (TheGlobeandMail) The world will store unwanted oil for most of 2016 as declines in U.S. output take time and OPEC is unlikely to cut a deal with other producers to reduce ballooning output, the International Energy Agency said. The agency, which co-ordinates energy policies of industrialized countries, said that while it did not believe oil prices could follow some of the most extreme forecasts and fall to as low as $10 per barrel, it was equally hard to see how they could rise significantly from current levels.
• Oil Seen `Lower for Longer’ by Morgan Stanley as Forecasts Cut (Bloomberg) Low oil prices will persist for longer than previously expected, according to Morgan Stanley, which reduced its quarterly crude forecasts for this year by as much as 51 percent. Morgan Stanley now sees oil mostly falling through 2016, compared with a previous outlook for prices to rise each quarter, analysts including Adam Longson said in a report Thursday. Brent crude is expected to average $29 a barrel in the three months to December, compared with an estimate for $59 in a Jan. 18 note.
• Fed May Lack Legal Authority for Negative Rates: 2010 Memo (Bloomberg) The Federal Reserve may not have the legal authority to set negative interest rates in the U.S., according to a 2010 staff memo that was posted late last month on the central bank’s website.
• IEA Raises Estimate of Surplus Oil Supply on Higher OPEC Output (Bloomberg) The global oil surplus will be bigger than previously estimated in the first half, increasing the risk of further price losses, as OPEC members Iran and Iraq bolster production while demand growth slows, according to the International Energy Agency.
• Global Bond Rally Near ‘Panic’ Level With Japan Yield Below Zero (Bloomberg) Sovereign bonds surged, sending the Japanese benchmark 10-year yield below zero for the first time, as investors seeking the safest assets gorged on government debt.
• Bonds Follow Bank of Japan Into Negative Territory (NY times) Given Japan’s outsize public debt, holding an i.o.u. from its government might seem like a risky proposition that would require the promise of a substantial reward.
• Global economic woes will delay a UK interest rate rise until 2020, say analysts (TheGuardian) Anxiety in global markets and a weakening US economy will force the Bank of England to delay UK interest rate rises until at least 2020, according to a leading firm of analysts.
• Futures lower as investors shy away from risk (Reuters) U.S. stock index futures were lower on Tuesday, as cautious investors doubled down on safer assets amid increasing concerns of a sustained slowdown in global economic growth.
• Global stocks hit the rocks after Asian markets slump (Reuters) A drop in bank shares kept European shares under pressure on Tuesday, after losses in Asian markets sent investors scurrying for safe havens.
• Greece, lenders should conclude first bailout review the soonest: government (Reuters) Greece and its official lenders must conclude a first assessment of the country’s compliance with agreed reforms as fast as possible, the government’s spokeswoman said on Tuesday.
• North American oil producers face more pressure to cut spending (TheGlobeandMail) The slumping crude price is putting new pressure on North American oil producers to further slash capital spending to reflect depressed revenues, as analysts paint a bleak picture of coming distressed asset sales and looming bankruptcies.

Overnight markets 

• Overview: US 10yr note futures are up 0.21% at 131-19, S&P 500 futures are down -1.2% at 1829.75, Crude oil futures are down -0.91% at $29.42, Gold futures are down -0.03% at $1197.5, DXY is down-0.47% at 96.112.

US Economic Data 

• The NFIB Small Business Optimism number was released at a level of 93.9 missing the estimate by 0.6 point and down 1.3 points from the prior month
• The Wholesale Invetories MoM 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 higher, 10Y  below 1.80% , 1.79 (-4.3bps) with crude below $30, European stocks -2.6%, peripheral spds wider led by Greece  (+42bps). No real catalyst for the ‘risk off’ session –MNI attributing selloff in crude to bearish comments from CEO of Vitol Grp saying crude could remain low for decade, also article in WSJ on large companies reining in capital spending as profit margins are under pressure.  GOCs opening well bid, outperforming tsys in the rally ~2bps in 10s, 30s with the curve 3bps flatter and the 10Y new low 1.07%. Provis opening ~3bps weaker, Ont 46 123/122, Ont 25 112.5/112, QC 48 128.5/127.5.

News headlines

• European Stocks Fall, Credit Weakens as Signs of Distress Abound (Bloomberg) Signs of distress in financial markets are gathering force as concern over the state of the global economy deepens. European stocks are down for a sixth day and the cost of protecting European banks’ and insurers’ senior debt is on its worst run since March 2013.
• India Sees Growth Exceeding Estimate as Modi Prepares Budget (Bloomberg) India sees its growth exceeding economists’ estimates to overtake a slowing China, a pace Prime Minister Narendra Modi’s government will be under pressure to sustain when it presents its budget on Feb. 29.
• Russian Hackers Moved Currency Rate With Malware, Group-IB Says (Bloomberg) Hackers used malware to penetrate the defenses of a Russian regional bank and move the ruble-dollar rate more than 15 percent in minutes, according to a Moscow-based cyber-security firm hired to investigate the attack.
• Bank of Japan says will disclose findings of probe into negative rate leak (TheGlobeandMail) Bank of Japan Governor Haruhiko Kuroda said on Monday he will publish the outcome of investigations the central bank is conducting into a media leak of its impending decision last month to deploy negative interest rates.
• Trudeau Said To Tie Bombardier Aid to Governance Changes (Bloomberg) The Canadian government is pushing for changes in the dual-class share structure of embattled aircraft manufacturer Bombardier Inc. in exchange for possible financial aid, officials familiar with the plans said.
• EU proposals will force multinationals to disclose tax arrangements (TheGuardian) US multinationals such as Google, Facebook and Amazon will be forced to publicly disclose their earnings and tax bills in Europe, under legislation being drafted by the EU executive.
• Russia plans first bond issuance since sanctions (FT) Russia is exploring international bond issuance for the first time since the war in Ukraine sparked sanctions from the west, in a sign that the Kremlin is keen to find additional sources of revenue as the economy heads for a second year of recession.
• China’s Forex Reserves May Already Be Below IMF Safety Line (Forbes) Sunday, the People’s Bank of China, the central bank, announced that China’s foreign exchange reserves fell $99.5 billion in January. After the drop, the reserves stood at $3.23 trillion, their lowest level since May 2012. January’s decline was well below consensus forecasts. The latest Bloomberg survey, for instance, predicted the reserves would fall by $120 billion.

Overnight markets 

• Overview: US 10yr note futures are up 0.34% at 130-26, S&P 500 futures are down -1.27% at 1851.5, Crude oil futures are down -1.49% at $30.43, Gold futures are up 2.38% at $1185.3, DXY is up0.29% at 97.315.

US Economic Data 

• The Building Permits MoM growth was released at a level of 11.3 % stronger than expected, up 31.2 % from the prior month.

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