Market Update
US tsys lower, 10Y yield higher for a fifth day, closing in on 2.35%, now 2.345%, on moderate volume in TY futures. Equities firmer (S&P futs +2.25), crude weaker (WTI -0.19 50.40). Expect a muted session today with calendar empty , only Fed Powell remarks this morning with Q&A . Gilts leading EGBs lower, reversing yesterday’s gains, weaker UK construction PMI having little impact. GOCs lower, underperforming tsys in the belly by 0.5-1bp. Yesterday’s late day selling saw Cda/US close 2-3bps wider. The BOC auctions a new 5Y tomorrow -$3.9bln in March 23s with the current 5Y (Sep22/Mar22) roll 3.9/3.7 and the WI roll 7.2 bid – this speaks to the relative richness of the Sep 22s. The 5Y roll looks close to 2stds rich having narrowed 0.5bps since the last 5Y auction August 23rd , while the Jun23/Sep 22 roll has widened 3bps over the same period.
News headlines
Dollar Rises on Signs of Economic Strength, New Fed Chief Talk (Bloomberg) The dollar rose for a second day after U.S. factory data released Monday beat estimates, supporting the case for the Federal Reserve to raise interest rates. The Aussie dropped after the Reserve Bank of Australia said a stronger currency would hurt growth.
Dollar Drifts as Euro Rises; Stocks Pause Advance: Markets Wrap (Bloomberg) Both European stocks and the dollar lost some momentum on Tuesday as investors digested recent strong gains spurred by the prospect of tax cuts in the world’s biggest economy and growing optimism for global growth. The euro shrugged off tensions in Catalonia to strengthen.
Saudi Arabia to Plan Russia Deals, Deepening Energy Ties (Bloomberg) Saudi Arabia is looking at unprecedented deals to acquire oil and gas assets in Russia, deepening ties between the world’s largest energy exporters as the Saudi king prepares to visit Moscow later this week.
U.K. Construction Unexpectedly Shrinks as Confidence Weakens (Bloomberg) IHS Markit’s Purchasing Managers’ Index fell to 48.1, the lowest since the aftermath of the EU referendum in 2016 and far weaker than economists had forecast. Crucially, it’s also below the 50 level that divides expansion from contraction. The pound fell after the report, dropping 0.2 percent to $1.3254 as of 9:45 a.m.
Clothing retailer Roots prices shares in IPO at between $14 and $16 (CBC) Clothing retailer Roots Corp. says it is looking to price its initial public offering at between $14 and $16 per share. Roots says the total size of the offering being sold to the public is expected to $200 million or $230 million, if an over-allotment option is fully exercised.
Liberals hear fresh warnings on tax reform as consultations end (Macleans) With its public outreach winding down, the Trudeau government received fresh warnings Monday from major industry associations about the negative fallout from its controversial tax-reform proposals. Business leaders sent new letters to Ottawa insisting the proposed tax changes, which the Liberals have said are aimed at creating more fairness in the system, will cause considerable collateral damage in the economy.
Ontario’s minimum wage increases to $11.60/hour (CTV) The minimum wage increased by 20 cents to $11.60 an hour.That rate applies to most positions, excluding liquor servers, students under 18, hunting and fishing guides and homeworkers. Another increase will take effect on January 1st, with the minimum wage jumping to $14 an hour.The Liberal government has also promised to raise the minimum wage to $15 an hour in 2019.
Overnight markets
Overview: US 10yr note futures are down -0.037% at 125-07, S&P 500 futures are up 0.09% at 2528.5, Crude oil futures are down -0.3% at $50.43, Gold futures are down -0.23% at $1272.9, DXY is up 0.01% at 93.573, CAD/USD is down -0.04% at 0.7997.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.538% | 2 Year | 1.479% |
| 5 Year | 1.786% | 5 Year | 1.936% |
| 10 Year | 2.136% | 10 Year | 2.346% |
| 30 Year | 2.511% | 30 Year | 2.883% |
US Economic Data
| Wards Total Vehicle Sales, Sep est 17.15m (16.03m prior) | |
| Wards Domestic Vehicle Sales, Sep est 13.00m (12.48m prior) |
Canadian Economic Data
There is no Canadian economic data for 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, Hugues Savard
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230