Market Update

Tsys weaker, near overnight lows after stronger Oct ADP (235k vs 200k exp), 10Y 2.395% (+1.8bps) before ISM & FOMC later. European equities higher for a fifth day to the highest in more than two years, S&P futures up 9.5pts, crude extending rally above $55.00 the highest since April. Treasuries seeing a bid after  quarterly refunding left  coupion sizes unch with no mention of ultra longs – next week’s  slate of auctions 3, 10 and 30Y unch at $63bln , cpn sizes to increase next February to offset the imminent rolloff of Fed tsy holdings, estimated at ~250bln next yr. In Canada, GOCs are lower , in line with tsys, longs seeing decent month end buying yest afternoon with 10s30s 1bp narrowing back below 35bps. Robust activity in provincials with $1.4bln in month end 10Y supply from Ontario and Quebec easily absorbed, spreads ending 1-2bps tighterat new multi-year lows  led by longer maturities. This morning spds are in another 0.5ps.

News headlines 

Fed Chair Drama Steals Spotlight From FOMC: Decision Day Guide (Bloomberg) As investors eagerly await President Donald Trump’s Federal Reserve chair nomination, the central bank’s policy-setting committee will meet quietly in the background this week. If all goes as expected, they’ll announce on Wednesday that they’re holding interest rates unchanged.

New York City Terror Attack With Truck Kills 8; Suspect Held (Bloomberg) A suspected terrorist plowed a truck down a bicycle path in lower Manhattan blocks from the site of the World Trade Center, killing eight and seriously wounding several more before an officer shot and arrested him.

Trump Says He’s Ordering Tougher Vetting After Attack Kills Eight in New York (Bloomberg) President Donald Trump ordered the Department of Homeland Security to bolster the vetting of immigrants coming into the U.S. after an Uzbek man allegedly drove a truck down a bike path in New York, killing eight and injuring almost a dozen more.

GOP Braces for ‘All Hell’ to Break Loose When Tax Bill Finally Drops (Bloomberg) House tax writers pushed back the reveal of their highly guarded, long awaited tax bill by a day, a sign that disputes among Republican lawmakers are threatening their effort to pass comprehensive legislation by Thanksgiving.

House Tax Writers Plan to Keep Top Individual Rate at 39.6% (Bloomberg)  House Republican tax writers are planning to keep the top individual income tax rate at 39.6 percent, according to two people familiar with the negotiations. The top rate may apply to taxpayers with adjusted gross incomes of about $1 million and higher, said the people who asked not to be named because the discussions are private.

Stocks Gain as Metals Surge; Crude Extends Rally: Markets Wrap (Bloomberg) Stocks started the month on a positive note, with mining shares spurring gains in Europe as nickel led a surge in industrial-metal prices. Oil headed for an eight-month high after U.S. industry data showed inventories declined last week.

Oil in Longest Rally in 3 Months on Signs of U.S. Stockpile Drop (Bloomberg) Oil rose above $55 a barrel in New York in the longest winning streak in three months as U.S. industry data showed both crude and gasoline inventories declined last week. Futures advanced for a fifth day, having added 5.5 percent since Oct. 25, while in London Brent crude rose to a new two-year high. Crude stockpiles dropped by 5.09 million barrels, while gasoline supplies fell by 7.7 million last week, the American Petroleum Institute was said to report. A Bloomberg survey also forecast a decline in oil inventories — the fifth in six weeks — before government data Wednesday.

Watchdog raids offices of Canadian grocery retailers in bread price-fixing probe (Financial Post) The Competition Bureau says it has raided the offices of certain companies in a criminal investigation tied to alleged price fixing following statements released by some of the country’s largest grocery chains.

Foreign buyers inch back into Vancouver housing market (Reuters) Foreign buyers have started inching back into the Vancouver housing market, more than a year after the province of British Columbia imposed a foreign buyer tax on real estate deals, according to government data released on Tuesday.

Overnight markets

Overview: US 10yr note futures are down -0.113% at 124-26, S&P 500 futures are up 0.38% at 2582.5, Crude oil futures are up 1.14% at $55, Gold futures are up 0.41% at $1275.7, DXY is up 0.15% at 94.697, CAD/USD is up 0.05% at 0.7754.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.406% 2 Year 1.612%
5 Year 1.64% 5 Year 2.028%
10 Year 1.971% 10 Year 2.39%
30 Year 2.319% 30 Year 2.883%

US Economic Data

7:00 AM MBA Mortgage Applications, Oct 27th -2.6% (-4.6% prior)
8:15 AM ADP Employment Change, Oct 235k est 200k (135k prior)
9:45 AM Markit US Manufacturing PMI, Oct est 54.5 (54.5 prior)
10:00 AM ISM Manufacturing, Oct est 59.5 (60.8 prior)
ISM Price Paid, Oct est 67.8 (71.5 prior)
ISM New Orders, Oct (64.6 prior)
ISM Employment, Oct (60.3 prior)
Construction Spending MoM, Sep est -0.2% (0.5% prior)
14:00 PM FOMC Rate Decision (Upper Bond), Nov 1st est 1.25% (1.25% prior)
FOMC Rate Decision (Lower Bond), Nov 1st est 1.00% (1.00% prior)
11/01 Wards Total Vehicle Sales, Oct est 17.50m (18.47m prior)
Wards Domestic Vehicle Sales, Oct est 13.7m (14.33m prior)

Canadian Economic Data

7:00 AM MLI Leading Indicator MoM, Sep 0.1% (0.2% prior)
9:30 AM Markit Canada Manufacturing PMI


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, Hugues Savard

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230