Market Update

US tsys higher, yields 4-5bps lower across the curve, US 10Y 2.115% (-5bps) near low of o/n range on heavy volume in TY futures (~438k)- rallying on news Trump will sell military equipment to South Korea and Japan . Core Euro bonds lagging the rally in tsys in front of ECB & BOE decisions later this week as well as heavy supply – Austria sold E1.2bln in 10 & 30Y debt while the UK saw large demand for its 2.5% 2065 gilt syndication.  Light data week in the US , thou Fed speakers & IG corp supply expected to ramp up.  Gasoline futures, while down for a second day, still 20% higher in two weeks, little impact on front end TIPs breakevens so far. In Canada, GOCs are unch, short end yields 0.5bps higher, extending flattening move from last week ahead of BOC tomorrow. The BOC not expected to raise rates this week even as odds have risen sharply from ~25% mid August to over 50% at present. Provi spds 0.5 – 1bp wider on risk off, long supply from HQ & Alberta rumoured . John Deere (A2/A) issuing 5 & 10Y in the US  @ 70/95 (IPT).

News headlines 

Dollar Slips, Stocks Mixed Before Central Bankers: Markets Wrap (Bloomberg) The dollar slipped and European stocks were mixed as traders shifted focus from North Korea to a week packed with central-bank decisions, Federal Reserve speakers and economic data that will help illuminate the path of the global economy.

U.K. Economy Held Back as Services Weaken, Consumers Struggle (Bloomberg) Britain’s economy is failing to recharge after slowing sharply in the first half of the year. IHS Markit said its latest round of industry surveys suggest growth of about 0.3 percent this quarter, matching the pace of the previous three months. It published the forecast after its gauge of services, the biggest part of the economy, indicated the slowest expansion in almost a year in August. The index drop was bigger than economists had forecast.

Rate Hike Imminent as Poloz Takes Hawkish Turn (Bloomberg) No one doubts the Bank of Canada will raise interest rates again soon. The country’s economy has turned out to be much stronger than anyone was predicting only a few months ago, giving policy makers scope to bring rates back up to more normal levels.

South Korea seeks bigger warheads, North Korean ICBM reportedly on the move (Reuters) South Korea said on Tuesday an agreement with the United States to scrap a weight limit on its warheads would help it respond to North Korea’s nuclear and missile threat after it conducted its sixth and largest nuclear test two days ago.

China’s Oil Lifeline to North Korea Targeted After Nuclear Blast (Bloomberg) Even before North Korea detonated its most powerful nuclear bomb yet, Japan was calling for moves to cut off its oil supply. Afterward, U.S. President Donald Trump threatened to halt all trade with any country that does business with Kim Jong Un’s regime. China, which supplies most of its food and fuel, on Monday called the warning “unacceptable.”

Nafta Negotiators Are Said to Tackle Labor, Rules of Origin (Bloomberg) Officials from the U.S., Canada and Mexico will start to tackle some of the tougher issues in the North American Free Trade Agreement as they discuss labor, dispute resolution and rules of origin for products at a negotiating session in Mexico City, according to two people familiar with the schedule.

Watch for possible big moves by the Bank of Canada and the Fed (Financial Post) After a short respite from monetary movements, more could soon be on the way. And at least one of them might be “a biggie.” Both the Bank of Canada and the U.S. Federal Reserve will meet in the coming days and weeks to deal with some unfinished business. For Governor Stephen Poloz and his monetary team, the issue is whether the Canadian economy can embrace another rate hike after the July ice-breaker – the first increase in seven years.

Overnight markets 

Overview: US 10yr note futures are up 0.321% at 126-23, S&P 500 futures are down -0.24% at 2468.25, Crude oil futures are up 1.54% at $48.02, Gold futures are up 0.45% at $1336.4, DXY is down -0.16% at 92.487, CAD/USD is down -0.26% at 0.8076.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.335% 2 Year 1.31%
5 Year 1.57% 5 Year 1.686%
10 Year 1.865% 10 Year 2.108%
30 Year 2.269% 30 Year 2.729%

US Economic Data 

10:00 AM Factory Orders, Jul, est. -3.3% (prior 3.0%)
Factory Orders Ex Trans, Jul, (prior -0.2%)
Durable Goods Orders, Jul F, est. 1.0% (prior -6.8%)
Durables Ex Transportation, Jul F, (prior 0.5%)
Cap Goods Orders Nondef Ex Air, Jul F, (prior 0.4%)
Cap Goods Ship Nondef Ex Air, Jul F, (prior 1.0%)

 Canadian Economic Data 

10:00 AM Bloomberg Nanos Confidence, Sep 1, (prior 59.7)


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