05/10/2018

Market Update US tsys trading lower, yields 1.5-2.0bps higher across the curve, 10Y 3.205% on above avg volume in TY (340k) before Sep Nonfarm payrolls. Core EGBs also lower, 10Y bund +2bps @0.55% to new high, despite renewed slide in Italian BTPs – 10Y BTP/Bund spd +2bps @282bps.  Gilts weighed by positive Brexit headlines, the GBP higher for a second day. Reuters cited source saying EU negotiators are close to Brexit deal. GOCs lower in line with tsys, 10Y 2.57%. Canadian employment is forecast to have rebounded 25k last month after falling 52K in August – thou that was entirely due to the 92k plunge in part-time positions , Ontario alone lost 80k jobs in August.Provis opening unch after closing 0.5bps wider yest, 10Y Ontario 5bps tighter over the past week despite over $5bln in supply, mostly risk off tone in equities.

News headlines

The Labor Department will release its official hiring and unemployment figures for September at 8:30 a.m. on Friday  (NYTimes) US employment data will take center stage today, as evidence of strong jobs growth and higher wages could see bond yields rise again. The bond market selloff on Wednesday night was partly due to strong ADP payroll figures, which raised expectations for a bumper jobs print later today. Economists expect the report to show that employers added about 168,000 jobs last month. That would be a modest slowdown from the 201,000 jobs added in August, but would nonetheless represent another solid month in what is already a record streak of growth.

Wells Fargo Is Planning Its First Post-Crisis Mortgage Bond (Reuters) Wells Fargo & Co is planning its first post-crisis offering of bonds tied to U.S. home loans without government backing, Bloomberg reported here on Thursday, citing people familiar with the matter.

Costco barely beats sales estimates, gross margins weigh (Reuters) Costco Wholesale Corp’s (COST.O) quarterly sales barely beat analysts’ estimates on Thursday as growth in online business decelerated to its slowest in the year amid intense competition, while gross margins fell on rising costs and higher investments.

Unilever backs down on headquarters move to Netherlands after investor revolt (TheGlobeandMail) Unilever scrapped plans to move its headquarters to the Netherlands on Friday in the face of a shareholder revolt, keeping one of Britain’s most valuable companies in London ahead of Brexit. The climbdown comes three weeks ahead of the planned vote on the proposal and is a victory for shareholders who opposed the move, which would have kicked the maker of Marmite, Dove soap and Ben & Jerry’s ice cream out of the benchmark FTSE 100 index .

Samsung Electronics Announces Earnings Guidance for 3Q 2018 (Samsung) Samsung Electronics on Friday said its third-quarter operating profit likely rose to a record high, on demand from data centers and improved production yields. The third quarter is, however, expected to mark a peak in earnings as a two-year super cycle of tight supply and soaring demand comes to an end, with prices of some types of chips already sliding sharply.

EU Eyes Quick U.S. Trade Pact to Avoid Trump Car-Duty Threat (Bloomberg) The European Union vowed to seek a quick and limited trade accord with the U.S. in the hope of keeping at bay the threat of American tariffs on EU cars and auto parts. The pledge at a gathering of commerce ministers from the EU in Innsbruck, Austria, on Friday showed that Europe is still trying to understand the trade-policy intentions of U.S. President Donald Trump’s administration and wary of being wrong-footed.

Overnight markets

Overview: US 10yr note futures are down -0.04% at 117-26, S&P 500 futures are down -0.14% at 2903.75, Crude oil futures are up 0.48% at $74.69, Gold futures are up 0.27% at $1204.8, DXY is up 0.02% at 95.77, CAD/USD is down -0.04% at 0.774. 

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	2.32%	2 Year	2.885%
5 Year	2.472%	5 Year	3.057%
10 Year	2.575%	10 Year	3.202%
30 Year	2.559%	30 Year	3.365%

US Economic Data

8:30 AM	Trade Balance, Aug est -53.6b (-50.1b prior)
	Change in Nonfarm Payrolls, Sep est 185k (201k prior)
	Change in Private Payrolls, Sep est 180k (204k prior)
	Change in Manufact. Payrolls, Sep est 15k (-3k prior)
	Unemployment Rate, Sep est 3.8% (3.9% prior)
	Average Hourly Earnings MoM, Sep est 0.3% (0.4% prior)
	Average Hourly Earnings YoY, Sep est 2.8% (2.9% prior)
	Labor Force Participation Rate, Sep est 62.7% (62.7% prior)

Canadian Economic Data

8:30 AM	Int’l Merchandise Trade, Aug est -0.50b (-0.11b prior)
	Net Change in Employment, Sep 25.0k (-7.5k prior)
	Unemployment Rate, Sep est 5.9% (6.0% prior)
	Hourly Earnings Permanent Empl YoY, Sep est 2.6% (2.6% prior)
	Full Time Employment Change, Sep est 15.0 (40.4 prior)
	Part Time Employment Change, Sep est 20.0 (-92 prior)
	Participation Rate, Sep  est 65.4 (65.3 prior)

 

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