Market Update
– Tsys trading slightly weaker, curve flatter, US 10Y 1.62%, narrow overnite range in TY futures. European stocks higher, reserve Bank of Australia kept rates unch, big decline in Aussie bonds pressured tsys, Aussie curve ~6bps steeper. Order book said to be quite strong for Italy’s first 50yr bond – over E18bln for E5bln deal. Crude lower slightly lower48.34, gold below $13,00 for the first time since the Brexit vote in June. Cleveland Fed Mester said yest aft she favored Nov rate hike. GOCs unwinding early gains as German bunds/ UK gilts succumb to selling pressure. The GBP at new lows after May refused to grant any special favors to British financial services sector in the leadup to a ‘hard Brexit’. Provies opening unch with issuance exp after nothing yest, Alberta 5Y , Ontario in 10s & longs. Ontario 2016 fiscal update – deficits will be smaller than exp this FY – $5bln vs $5.7bln projected in Feb., thou net debt is $10.7bln higher.
News headlines
–U.S. Index Futures Little Changed as Investors Assess Hike Odds (Bloomberg) U.S. stock-index futures were little changed as investors assessed the odds of the Federal Reserve judging the world’s biggest economy strong enough to withstand an interest rate hike this year, while concerns over European banks eased.
–Oil eases as Iran, Libya output rises hit OPEC deal momentum (Reuters) Oil prices eased on Tuesday on news that Iran and Libya have continued to increase production, overshadowing an OPEC agreement struck last week to freeze output levels in a bid to stem a two-year price rout.
–Pound Drops to Lowest Since 1985 as Angst Builds Over Brexit (Bloomberg) The pound tumbled to its lowest level in three decades amid mounting concern the U.K. is heading for a so-called hard Brexit that would restrict access to the European Union’s single market. Sterling exceeded its lows versus the dollar set in the wake of the June 23 referendum and touched the weakest in three years against the euro. The slide extended as Prime Minister Theresa May was said to take the view that financial services would get no special favors in EU exit talks. The pound has fallen against all 16 of its major peers since the premier’s weekend announcement that she’ll trigger the formal process for quitting by March.
–Low rates are here to stay, ECB’s Praet tells bankers (Reuters) The European Central Bank is set to keep its interest rates low until it gets inflation back to its target, the ECB’s chief economist said on Tuesday, arguing it was not up to the institution to shore up meager bank profits.
–China September data seen tipping mild pickup in economy (Reuters) A flurry of data from China in coming weeks is expected to point to modest improvement in the economy in the third quarter as a government infrastructure spree and a housing boom boosts demand from steel and glass to furniture and appliances. Exports are expected to remain, weak, however, while fixed asset investment is likely to hover near 17-year lows, leaving the economy imbalanced and highly reliant on a rebound in heavy industry and government spending for growth.
–Federal government closes tax loophole used by foreign home buyers, hikes mortgage scrutiny (Financial Post) The federal government is taking aim at slowing Canada’s overheated housing market with new measures, including closing a tax loophole used by foreign buyers and stress testing more domestic mortgages. Finance Minister Bill Morneau announced the changes during a conference Monday, describing them as a way to ensure that the country’s housing market remains stable and affordable for Canadian buyers.
–U.S. apartment vacancy rate stays flat in third quarter (Reuters) U.S. apartment vacancy rate was unchanged at 4.4 percent in the third quarter from the second, while rent growth decelerated in a period that generally sees the strongest increase, real estate research firm Reis Inc (REIS.O) said on Monday. Asking and effective rents both expanded 0.9 percent during the quarter, compared with a 1.1 percent growth rate in the second. This was the third consecutive quarter of decelerating year-over-year rent growth.
–The Reserve Bank of India unexpectedly lowered its repo rate by 25 basis points to 6.25% (Reuters) The latest cut extends an easing cycle that began in January 2015 under Patel’s predecessor Raghuram Rajan and reduces the repo policy rate to its lowest since November 2010. The Indian rupee is weaker by 0.1% at 66.5425 per dollar.
Overnight markets
– Overview: US 10yr note futures are down -0.0835% at 130-27, S&P 500 futures are up 0.01% at 2153.5, Crude oil futures are down -0.31% at $48.66, Gold futures are down -1.32% at $1295.4, DXY is up 0.52% at 96.192.
US Economic Data
-9:45 AM: ISM New York, Sep, (prior 47.5)
Canadian Economic Data
-There is no major 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, David Leclair-Legault
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230