Market Update

US tsys slightly lower, yields ~1bp higher across the curve, 10Y 2.30%, little reaction to as expected June core PCE 0.1%, 1.5% y/y (exp 1.4%), pres income unch vs 0.4% exp. Overnight, tsys under some pressure as Ex Fed chair Greenspan said bonds were in a bubble as rates were ‘unusually low’, a corrective move higher could happen ‘fast’.  Core Euro bonds outperforming tsys, German bund yields 1.5-2 bps lower on month end bid – Bloomberg reporting seasonal support bunds into August as well as  decline in supply. Solid 10Y gilt auction (b/c 2/56 vs 2.28 prev July 6th) also supportive of longs while front end weighed by stronger UK Man PMI. GOCs slightly higher, long end lagging on the curve once again. Provis unch after closing tighter yest.

News headlines 

Stocks Gain as Earnings Roll In; Dollar Steadies: Markets Wrap (Bloomberg) Global stocks advanced following the latest set of corporate results, with European shares tracking a jump in Asian peers on both earnings and promising economic data. The U.S. dollar edged higher after Monday’s drop, as investors digested the latest developments in Washington.

Senate Democrats offer Republicans help on tax reform – with conditions (Reuters) U.S. Senate Democrats offered to work with Republicans on a bipartisan tax reform package on Tuesday but only if it does not cut taxes for the wealthy, add to the federal deficit or allow Republicans to enact legislation on their own.

China Caixin manufacturing PMI rises again (Market Watch) A private gauge of China’s factory activity rose for a second straight month in July and hit its highest level in four months, indicating a faster pace of expansion despite official data showing renewed weakness in production and demand.

Banks May Need $50 Billion New Capital After Brexit (Bloomberg) Banks may need to find $30 billion to $50 billion of additional capital to support new European units in the aftermath of a hard Brexit, and some smaller firms may abandon their operations on the continent altogether as profitability plunges, according to Oliver Wyman Inc.

Nafta Battle Will Test Strength of Renewed Canada-Mexico Ties (Bloomberg) Free trade between Canada and Mexico is in part an accident of history: two nations, each the other’s afterthought, came together in their shared race to capitalize on the U.S. market.

Air Canada just blew away earnings expectations with a record profit (Financial Post) Air Canada’s second-quarter profit smashed past analysts’ estimates as it flew more passengers at lower costs. Passenger traffic rose 13.6 per cent in the quarter ended June 30, while revenue from passengers increased 11.9 per cent to $3.52 billion.

Overnight markets 

Overview: US 10yr note futures are down -0.112% at 125-24, S&P 500 futures are up 0.28% at 2475, Crude oil futures are down -0.62% at $49.86, Gold futures are down -0.05% at $1272.8, DXY is up 0.12% at 92.972, CAD/USD is up 0.03% at 0.801.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.307% 2 Year 1.355%
5 Year 1.647% 5 Year 1.847%
10 Year 2.049% 10 Year 2.309%
30 Year 2.467% 30 Year 2.917%

US Economic Data 

8:30 AM Personal Income, Jun, 0.0%,est. 0.4% (prior 0.4%, revised 0.3%)
Personal Spending, Jun, 0.1%, est. 0.1% (prior 0.1%, revised 0.2%)
Real Personal Spending, Jun, 0.0%, est. 0.1%, (prior 0.1%, revised 0.2%)
PCE Deflator, y/y, Jun, 1.4%, est. 1.3% (prior 1.4%, revised 1.5%)
PCE Core, m/m, Jun, 0.1%, est. 0.1% (prior 0.1%)
PCE Core, y/y, Jun, 1.5%, est. 1.4% (prior 1.4%, revised 1.5%)
9:45 AM Markit US Manufacturing PMI, Jul F, est. 53.2 (prior 53.2)
10:00 AM ISM Manufacturing, Jul, est. 56.5 (prior 57.8)
ISM Price Paid, Jul, est. 55.8 (prior 55.0)
Construction Spending, m/m, Jun, est. 0.4% (prior 0.0%)
Wards Total Vehicle Sales, Jul, est. 16.80m (prior 16.41m)
Wards Domestic Vehicle Sales, Jul, est. 13.05m (prior 12.79m)

 Canadian Economic Data

9:30 AM Markit Canada Manufacturing, Jul, (prior 54.7)


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