Market update
US tsys sharply higher, gapping higher in Tokyo on strong volume in TY futures (427k) with the 10Y yield reaching record low 1.375% in London, and the 30Y also record low 2.1395%. The tsy 5/30 curve flattest since April 2015. Commodities mixed – silver and gold new highs, crude off 3.0%. European stocks -1.8%,Nikkei -0.67%, US stocks futures -0.67%. Core European bonds higher, led by 10Y Gilts 0.81% – thou gilts have been pressure since the BOE decision to cut bank capital requirements for UK banks, Carney warning the UK current account is vulnerable . Also Standard Life announced they are suspending trading in UK real estate fund. GOCs opening higher, longs outperforming, 10s30s 1.1 bps flatter , provis opening unch, all in yields at new lows across the curve.
News headlines
- Pound Slides With Stocks as Record-Low Yields Paint Glum Outlook (Bloomberg) The pound is weakening anew, bond yields are falling to records around the world, and both stocks and commodities are starting to move lower. It all adds up to a gloomy outlook for the global economy as trading picks up after the Fourth of July holiday in the U.S. All industry groups on the Stoxx Europe 600 Index fell, led by insurers and financial services companies, as the implications of the U.K.’s shock decision to quit the European Union made themselves felt.
- Pound Tumbles to 31-Year Low as Its Post-Brexit Selloff Resumes (Bloomberg) The pound fell to its weakest level in three decades against the dollar, surpassing lows reached in the aftermath of Britain’s vote to leave the European Union. Sterling sank to its lowest since 2013 against the euro. It pared its losses slightly as Bank of England Governor Mark Carney outlined more tools to contain the fallout from the U.K.’s decision to quit the bloc. Speaking in London, he said his concerns about sterling declines had been borne out since the Brexit vote, while adding that the currency’s decline should help exporters.
- Bank of England eases rules for banks to meet Brexit challenge (Reuters) The Bank of England took steps to ensure British banks can keep lending and insurers do not dump corporate bonds in the « challenging » period that is likely to follow the country’s shock vote to leave the European Union. The central bank said it would lower the amount of capital banks are required to hold in reserve, freeing up an extra 150 billion pounds for lending in a reversal of a decision it took earlier this year, when it started tightening screws on lenders because Britain’s economy appeared on course for more growth.
- Property Stocks Slump After Standard Life Freezes U.K. Fund (Bloomberg) Commercial-property companies slumped after Standard Life Investments suspended trading in its 2.9 billion-pound ($3.9 billion) U.K. Real Estate fund on Monday as redemptions surged in the wake of Britain’s vote to leave the European Union. The fund, which invests in a mix of prime commercial real estate assets, was halted at midday and the decision will be reviewed every 28 days, the Edinburgh, Scotland-based fund manager said in a statement. Standard Life adjusted the value of the underlying assets by 5 percent last week.
- Oil falls below $50 on economic concerns (Reuters) Oil fell below $50 a barrel on Tuesday as concern about a potential slowdown in economic growth that would sap demand trumped supply outages in Nigeria and other exporting nations. Trade in one of Britain’s largest property funds was suspended in a sign of financial stress following the country’s vote to leave the EU. A flurry of data from China in coming weeks is expected to show weakness in trade and investment. Brent crude was down 99 cents at $49.11 a barrel at 1039 GMT. The global benchmark is still up more than 80 percent from a 12-year low close to $27 reached in January. U.S. crude was down $1.15 at $47.84 a barrel.
- Steady business growth seals off modest second quarter (Reuters) Euro zone business growth held steady in June, but the modest pace suggested economic growth in the second quarter was half the rate of January-March, even as a rebound in Italy and rapid acceleration in Spain brightened the outlook. In France, the euro zone’s second largest economy, data showed both services and manufacturing contracting. The majority of the surveys were completed before Britain voted on June 23 to leave the European Union, meaning the after-shocks of the referendum have yet to be reflected in the data.
Overnight markets
- Overview: US 10yr note futures are up 0.4696% at 133-23, S&P 500 futures are down -0.51% at 2085.5, Crude oil futures are down -2.82% at $47.61, Gold futures are up 0.79% at $1349.6, DXY is down 0% at 95.648.
US Economic Data
- 9:45 AM: New York ISM, June, (prior 37.2)
- 10:00 AM: Factory Orders, May, est. -0.8% (prior 1.9%)
- Factory Orders, Ex Trans. May, (prior 0.5%)
- Durable Goods Orders, May F, est. -2.2%, (prior -2.2%)
- Durables Ex Transportation, May F, est. -0.3%, (prior -0.3%)
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