09/08/2017

Market Update

US tsys rallying hard in NA trade on safe haven bid related to North Korea threat, yields 4-5 bps lower led by the 7Y ,10Y 2.21 (-5bps), volume in TY futures heavy (~350k) with a spike ~4:00am 20k contracts traded as prices eclipsed Tuesday’s high 126-09. Equities weakening in Europe with the DAX down 1.64%, S&P minis -11.5pts. US nonfarm prod 0.9% in Q2 vs 0.7% & ULC 0.6% vs 1.1%, but Q1 ULC revised sharply higher to 5.4% from 2.2%. Core Euro bonds outperforming, 10Y bund & gilt 6bps lower, bunds recovering from uncovered 5Y auction (0.77x). GOCs opening higher in line with tsys, 10Y at a two week low 1.885%. Provis better offered after closing weaker yest, Ont 27s 70/69 (68.5), Ont 48s 81/80 (80).

News headlines 

Havens Jump on North Korea Tension; Stocks Slide: Markets Wrap (Bloomberg) A risk-off tone gripped markets on Wednesday, with gold, the Japanese yen and bonds rising as tension grew between the U.S. and North Korea. European stocks slumped following declines across most of Asia.

North Korea considers missile strike on Guam after Trump’s ‘fire and fury’ warning (Reuters) North Korea said on Wednesday it is considering plans for a missile strike on the U.S. Pacific territory of Guam, just hours after President Donald Trump told the North that any threat to the United States would be met with “fire and fury”.

France calls on all sides to de-escalate North Korea situation (Reuters) France called on all the concerned parties to act responsibly and de-escalate the situation regarding North Korea, after North Korea said it was considering plans for a missile strike on the U.S. Pacific territory of Guam.

Shorting the short: Investors bet against Icahn’s oil refiner after biofuel trade (Reuters) Investors have built up a large short position in investor Carl Icahn’s oil refining company, CVR Energy (CVI.N), in the past three months, according to Reuters data, as evidence mounts that the company’s gamble on the biofuels market is going sour.

Brexit transition period desirable for UK and EU banks: BoE (Reuters) The Bank of England said a transition period after the Britain leaves the European Union would give banks more time to make orderly changes as Brexit poses risks to financial stability. With UK due to leave the bloc in March 2019, the BoE’s Prudential Regulation Authority (PRA) said it faces heavy demands from Brexit fallout on banks and insurers.

Overnight markets 

Overview: US 10yr note futures are up 0.384% at 126-16, S&P 500 futures are down -0.32% at 2464.75, Crude oil futures are up 0.71% at $49.52, Gold futures are up 1.36% at $1279.8, DXY is down -0.04% at 93.607, CAD/USD is up 0.22% at 0.7878.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.233% 2 Year 1.323%
5 Year 1.511% 5 Year 1.778%
10 Year 1.89% 10 Year 2.219%
30 Year 2.334% 30 Year 2.8%

US Economic Data 

7:00 AM MBA Mortgage Applications, Aug 4, est. 3.0% (prior -2.8%)
8:30 AM Nonfarm Productivity, 2Q P, 0.9%, est. 0.7% (prior 0.0%, revised 0.1%)
Unit Labor Costs, 2Q P, 0.6%, est. 1.1 % (prior 2.2%, revised 5.4%)
10:00 AM Wholesale Trade Sales, m/m, Jun, est. 0.0% (prior -0.5%)
Wholesale Inventories, m/m, Jun F, est. 0.6% (prior 0.6%)

 Canadian Economic Data

8:15 AM Housing Stats, Jul, 222.3k, est. 205.0k (prior 212.7k)
8:30 AM Building Permits, m/m, Jun, 2.5%, est. -1.9% (prior 8.9%, revised 10.7%)

 

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