Market Update

US tsys slightly lower, yields 0.5-1bp higher, US 10Y 2.343%, prices well of the lows of the o/n session, rallying since mid morning with European bonds, also Block trade in TY futures (7.35k) . UK gilts outperforming after lower than exp UK Man PMI. German bunds also off the lows, modrate risk off after Catalan referendum led to ~10bp widening in 10Y bund-Spain spread.  GOCs lower in line with tsys, longs lagging 10s30s ~5bps steeper since Poloz/GDP .  Odds of a rate hike at this month’s BOC have been cut in half to ~23% from 50% last week with Cda/US 8-10bps tighter post July GDP.  The BOC is back to being ‘data dependent’ meaning this Friday’s employment data will be closely scrutinized -particularly the wage component as it impacts the output gap – the latter increasingly looks do be a more important determininant of mon policy going forward.

News headlines 

At Least 50 Killed as Gunman Opens Fire at Las Vegas Concert (Bloomberg) A gunman perched high on the 32nd floor of a Las Vegas Strip casino unleashed a shower of bullets down on an outdoor country music festival below, killing at least 50 people and wounding more than 200 as tens of thousands of frantic concert-goers screamed and ran for their lives, officials said Monday. It was the worst mass shooting in modern U.S. history.

Spanish Bonds, Stocks Fall as Catalan Breakaway Risks Rise (Bloomberg) Spain’s benchmark bonds fell to the lowest in almost three months after Catalan separatist leaders signaled they may be moving toward a unilateral declaration of independence.

Euro Factories Add Jobs in Struggle to Keep Up With Orders (Bloomberg) A Purchasing Managers Index for the region’s manufacturing industry rose to 58.1 in September from 57.4 the previous month, London-based IHS Markit said on Monday. That compares with a preliminary reading of 58.2 and is the highest level in more than six and a half years. A gauge for employment rose at the fastest pace since the survey began in 1997.

Dollar Rises on Fed Outlook; Spain Woes Hit Euro: Markets Wrap (Bloomberg) The dollar strengthened as investors contemplated the prospects of a new — and potentially less dovish — Federal Reserve chief as well as the chances of U.S. tax cuts. The euro underperformed in the wake of a contentious vote for independence in the Spanish region of Catalonia.

An Asian Stock Market Beats Peers But Few Traders Get to Profit (Bloomberg) Australia’s stocks finally got a chance to outperform most of their Asia-Pacific peers, but few were around to appreciate it. The S&P/ASX 200 index rose as much as 1.2 percent Monday as China’s official factory gauge climbed to a five-year high, signaling robust growth in Australia’s largest trading partner. The gauge closed 0.8 percent higher, the most in two months. The MSCI Asia Pacific Index was little changed and Japan’s stock gauges were mixed. Australia’s main stock measure has closed for the day, while Philippines, Singapore and Thailand’s benchmarks are slowly gaining ground.

Canadian producer prices rise on energy, petroleum products (Reuters) Canadian producer prices rose in August on higher costs for energy and petroleum products as refineries in the United States were shut down due to Hurricane Harvey, data from Statistics Canada showed on Friday. The 0.3 percent increase was shy of economists’ forecasts for a gain of 0.5 percent, while figure for July was downwardly revised to show a decline of 1.6 percent from the originally reported 1.5 percent decrease.

RBC says housing affordability measure worst since 1990, Toronto hits worst level ever (CP24) Housing affordability in Canada hit the worst level in 27 years in the second quarter of this year, according to a Royal Bank of Canada report. RBC Economics said in a report Friday that its housing affordability measure for Canada deteriorated for the eighth straight quarter. The Toronto area was the hardest hit, where RBC says affordability declined the most compared to the previous year and hit the worst level ever measured in the city.

Metro, Jean Coutu formalize $4.5B deal to combine grocery, pharmacy chains (CBC)  Metro Inc. has formalized its $4.5-billion takeover offer for Jean Coutu pharmacy group, which will operate as a separate division of the grocery company. Shareholders of Jean Coutu are being offered a combination of cash and shares worth about $24.50 per share.

Overnight markets 

Overview: US 10yr note futures are down -0.112% at 125-06, S&P 500 futures are up 0.17% at 2520.25, Crude oil futures are down -2.15% at $50.56, Gold futures are down -0.72% at $1275.6, DXY is up 0.53% at 93.572, CAD/USD is up 0.31% at 0.7994.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.526% 2 Year 1.487%
5 Year 1.762% 5 Year 1.941%
10 Year 2.104% 10 Year 2.343%
30 Year 2.489% 30 Year 2.869%

US Economic Data

9:45 AM Markit US Manufacturing PMI, Sep est 53.0 (53.0 prior)
10:00 AM ISM Manufacturing, Sep est 58 (58.8 prior)
ISM Price Paid, Sep est 63.5 (62 prior)
ISM New Orders, Sep (60.3 prior)
ISM Employment, Sep (59.9 prior)
Constuction Spending MoM, Aug est 0.4% (-0.6%)

Canadian Economic Data

7:00 AM MLI Leading Indicator MoM 0.2% (0.2% prior)
9:30 AM Markit Canada Manufacturing PMI, Sep (54.6 prior)
10:00 AM Bloomberg Nanos Confidence, Sep 29 (58.9 prior)


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