Market Update
US tsys trading sharply lower, US 10Y 2.382 (+6bps) – no reaction from weaker June ADP (158k vs 188k) . Tsy weakness spurred by steep selloff in core EGBs, particularly bunds & OATS. German 10Y +9bps @ 0.562% at 1 ½ yr high eclipsing 0.509% resistance from March, heavy selling in bund futures (>750k). Eurozone supply from Spain and France – the latter sold 10 & 30Y bonds , 30Y b/c 1.53x vs 1.93x at the previous auction on Jan 5th. GOCs well offered, 10Y new high @ 1.85% ( was 1.46% last Monday!). Yesterday’s 5Y auction @ 1.486% is now ~2bps underwater with Sep 22s above 1.50% and the sep 22/5Y roll unch 5.5/5.3. Provincials reacting as expected to higher GOC yields and no supply – narrowing 0.5bps yest – Ont 27s 69.5, Ont 48s 79.5/78.5. First Capital Realty (Baa2/BBBH) issued 200mln in 10s at 195.7 , now 193/190.
News headlines
European Bonds and Stocks Slump; Oil Rises on Data: Markets Wrap (Bloomberg) Markets took a nervous turn in the European session, with government bonds slumping in the wake of a disappointing French debt sale and the selloff spilling over into stocks. Oil clawed back some of its biggest loss in four weeks, while gold and silver retreated.
ECB’s Praet calls for a steady hand with policy (Reuters) The European Central Bank needs to be patient and maintain a steady hand in policy as inflation is still far below its target, its chief economist, Peter Praet, said on Thursday. His comments may dampen expectations for imminent policy tweaks.
China’s central bank: We’ll boost ability to adjust interest rates (Reuters) China’s central bank said on Thursday that it will strengthen the ability to adjust interest rates and improve efficiency of its medium-term lending facility (MLF), standing lending facility (SLF) and reverse repos operations.
MEG Energy CEO says oilsands new chapter is exciting, but Canada has to want it, too (Financial Post) Canada’s oilsands appeared to be skidding toward big trouble in the dying days of 2014. Shale producers in the United States had found ways to produce oil faster and cheaper, and the Organization of the Petroleum Exporting Countries was pushing down prices to try to drive everyone else out of business.
Can U.S. defend against North Korea missiles? Not everyone agrees (Reuters) Not everybody asserts as confidently as the Pentagon that the U.S. military can defend the United States from the growing threat posed by North Korea’s intercontinental ballistic missile capability.
The Flashpoints for World Leaders at the Hamburg G-20 (Bloomberg) The Group of 20 summit that starts in Hamburg on Thursday is the most anticipated—and potentially turbulent—meeting of global leaders in years. An unpredictable U.S. president with a protectionist bent, a Russian leader subject to international sanctions and a Chinese president looking to assert a greater global role are just a few of the factors that might stoke tensions.
Overnight markets
Overview: US 10yr note futures are down -0.262% at 124-29, S&P 500 futures are down -0.35% at 2419.5, Crude oil futures are up 1.51% at $45.81, Gold futures are up 0.22% at $1224.4, DXY is down -0.31% at 95.989, CAD/USD is down -0.14% at 0.7729.
US Economic Data
| 7:00 AM | MBA Mortgage Applications, Jun 30, est. 1.4% (prior -6.2%) |
| 7:30 AM | Challenger Job Cut, y/y, Jun, -19.3%, (prior 9.7%) |
| 8:15 AM | ADP Employment Change, Jun, 158k, est. 188k (prior 253k, revised 230k) |
| 8:30 AM | Initial Jobless Claims, Jul 1, -248k, est. 243k (prior 244k) |
| Continuing Claims, Jun 24, 1956k, est. 1940k (prior 1948k, revised 1945k) | |
| Trade Balance, May, -$46.5b, -$46.3b (prior -$47.6b) | |
| 9:45 AM | Markit US Services PMI, Jun F, est. 53.0 (prior 53.0) |
| Bloomberg Consumer Comfort Index, Jul 2, (prior 48.6) | |
| Markit US Composite PMI, Jun F, (prior 53.0) | |
| 10:00 AM | ISM Non-Manufacturing Composite, Jun, est. 56.5 (prior 56.9) |
Canadian Economic Data
| 8:30 AM | Building Permits, m/m, May, 8.9%, est. 1.0% (prior -0.2%, revised 0.5%) |
| Int’l Merchandise Trade, May, -1.09b, est. -0.50b (prior -0.37, revised -0.55b) |
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