Market Update

Tsys open slightly weaker pre Oct payrolls, Us 10Y 2.35%, low volume in TY futures (22k), narrow overnite range. Very little movement in EGBs as well, UK gilts weighed by better than expected UK service PMI for Oct (55.6 vs 53.3), also profit taking after yest BOE’s ‘dovish rate hike’.  GOCs lower in line with tsys, 10Y 1.962% before Cda empl data. Two year auction went well, Feb20/2Y roll closing 0.2bps tighter @ 3.2/3.0. Provis open unch after ending yest 0.5bps wider, Ont 48/27 curve unch 9.8/9.6.

News headlines 

Storm Surge Set to Boost U.S. Payrolls, Reversing September’s Loss (Bloomberg) Employers added 312,000 workers in October, according to the Bloomberg survey median, after two hurricanes helped reduce payrolls by 33,000 a month earlier, the first decline since 2010. While the projected gain would be the largest in two years as people resumed work, economists say the effects on the job market from hurricanes Harvey and Irma will linger through year-end.

Powell Lauds Economy’s Progress, Vows Vigilance on Market Risks (Bloomberg) Jerome Powell, President Donald Trump’s pick to lead the Federal Reserve, talked up the strength of the U.S. economy as he pledged to guard against financial market risks.

Here Are the Big Tax Changes House Republicans Are Proposing (Bloomberg) House Republicans announced a tax proposal Thursday that would cut the U.S. corporate tax rate to 20 percent, reduce most of the individual tax brackets, and cap the mortgage-interest deduction on new purchases of homes.

Homebuilders Slide After GOP Tax Plan Caps Mortgage-Interest Break (Bloomberg) The U.S. real estate industry reeled as the House Republican tax bill proposed capping the mortgage-interest deduction, a long-cherished incentive many Americans have had to buy a house.

A Few Tremors, No Major Quakes in Equities After Tax Proposals (Bloomberg) It sent a quick shock through a couple odd corners of the market, but in the end the House’s tax proposal blended enough risk and reward for equity investors to leave them unfazed. Concern among bulls that they may have been mildly misled about the benefits to business was mixed with relief about retirement-account limits.

French Government Eases Grip on Renault With $1.4 Billion Sale (Bloomberg) France gave up some of its control over Renault SA with the sale of a 4.7 percent stake in the carmaker that was acquired in a contentious power struggle two years ago. The government sold 14 million Renault shares for 1.21 billion euros ($1.4 billion), reducing its stake back to its historical level of 15 percent, the state’s investment agency APE said. Renault acquired 1.4 million shares as part of the transaction and plans to offer them to employees, the Boulogne-Billancourt-based company said in a statement Friday.

Venezuela Will Seek to Restructure Its Debt (Bloomberg)  President Nicolas Maduro said Venezuela will seek to restructure its global debt after the state oil company makes one more payment, blaming U.S. sanctions for making it impossible to find new financing.

U.S. cuts softwood lumber duties on all Canadian producers – except for 2 companies (Global News) Canadian softwood lumber producers will be hit only slightly less forcefully as the U.S. government reduced export duties for most Canadian producers after ongoing political talks failed to reach a deal.

Overnight markets

Overview: US 10yr note futures are down -0.012% at 125-04, S&P 500 futures are up 0.07% at 2578.5, Crude oil futures are up 0.29% at $54.7, Gold futures are down -0.25% at $1274.9, DXY is up 0.09% at 94.77, CAD/USD is up 0.13% at 0.7797. 

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.416% 2 Year 1.613%
5 Year 1.651% 5 Year 2.003%
10 Year 1.965% 10 Year 2.347%
30 Year 2.291% 30 Year 2.825%

US Economic Data

8:30 AM Change in Nonfarm Payrolls, Oct est 313k (-33k prior)
Change in Private Payrolls, Oct est 302k (-40k prior)
Change in Manufact. Payrolls, Oct est 15k (-1k prior)
Unemployment Rate, Oct est 4.2% (4.2% prior)
Average Hourly Earnings MoM, Oct est 0.2% (0.5% prior)
Average Hourly Earnings YoY, Oct est 2.7% (2.9% prior)
Trade Balance, Sep est -43.2b (-42.4b prior)
9:45 AM Markit US Services PMI, Oct est 55.9 (55.9 prior)
Markit US Composite PMI, Oct (55.7 prior)
10:00 AM ISM Non-Manf. Composite, Oct est 58.5 (59.8 prior)
Factory Orders, Sep est 1.2% (1.2% prior)
Durable Goods Orders, Sep est 2.0% (2.2% prior)
Durable Ex Transportation, Sep est (0.7% prior)
Cap Goods Orders Nondef Ex Air, Sep (1.3% prior)
Cap Goods Ship Nondef Ex Air, Sep (0.7% prior)

Canadian Economic Data

8:30 AM Int’l Merchandise Trade, Sep est -3.00b (-3.41b prior)
Net Change in Employment, Oct  est 15.0k (10.0k prior)
Unemployment Rate, Oct est 6.2% (6.2% prior)
Full Time Employment Change, Oct (112.0 prior)
Part time Employment Change, Oct (-102.0 prior)
Participation Rate, Oct (65.6 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