Market Update

US tsys trading slightly lower, 10Y 2.073% (+1.5bps), after the 10Y hit a nine-month low 2.05% in yesterday’s risk-off rally on Trump’s military equipment comments as well as dovish remarks from Fed speakers Brainard & Kashkari.  European stocks recovering from losses after Asian equities fell, Nikkei down for a third day.  Core European bonds lower as well, German 10Y bund 0.34% – eurozone data was second tier, German factory orders fell 0.7% in July vs 0.2% exp, PMIs were mixed. In Canada, GOCs lower, 1-2bps wider vs tsys , curve 2bps steeper before BOC at 10:00am. Provincial & corp supply weighed heavily on GOC yest,  Can/US 10Y 5 bps wider in largest move since July 28th.  Mkt pricing in ~30% odds of a rate hike, consensus is BOC waits until October for second hike.  Provi spreads 0.5bps wider this morning after supply yest pushed 1.5bps wider. Alberta reopened longs yest @ 92 or 8.5 over  Ontarios, the roll 8.5/8.0 this morn.

News headlines 

Stocks Slide as Headwinds Build; Treasuries Steady: Markets Wrap (Bloomberg) There was little optimism on display in Wednesday trading, with North Korean tensions simmering, another hurricane bearing down on the U.S. and the American debt ceiling looming. European stocks followed Asian peers lower and most industrial metals dropped.

Oil up after Harvey fallout; Hurricane Irma heads into Caribbean (Reuters) Oil prices rose on Wednesday as strong global refining margins and the reopening of U.S. Gulf Coast refineries provided a more bullish outlook after sharp drops due to Storm Harvey.

Britain could still reverse Brexit, former minister Heseltine says (Reuters) Brexit could be reversed if economic pain prompts a change in public opinion that brings a new generation of political leaders to power in Britain, former Conservative minister Michael Heseltine said.

A rate hike is coming — what’s unclear is how the economy will react (Financial Post) 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.

Nearly half of Canadians would face financial crunch if paycheque delayed by even a week, survey shows (Financial Post) Almost half (47 per cent) of Canadian employees say they’d be hard-pressed to meet their financial obligations if their paycheques were delayed by even a week, says a survey being released Wednesday.

Toronto home sales fall in August, prices down 20 percent from peak (Reuters) Toronto home sales plummeted in August from a year earlier and prices were down more than 20 percent from April as government moves to cool a long housing boom in Canada’s largest city continued to douse demand, data showed on Wednesday.

Overnight markets 

Overview: US 10yr note futures are down -0.012% at 127-13, S&P 500 futures are up 0.15% at 2463.5, Crude oil futures are up 1.07% at $49.18, Gold futures are down -0.03% at $1344.1, DXY is down -0.03% at 92.225, CAD/USD is up 0.14% at 0.8071.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.356% 2 Year 1.29%
5 Year 1.587% 5 Year 1.651%
10 Year 1.899% 10 Year 2.072%
30 Year 2.309% 30 Year 2.692%

US Economic Data 

7:00 AM MBA Mortgage Applications, Sep 1, est. 3.3% (prior -2.3%)
8:30 AM Trade Balance, Jul, -$43.7b, est. -$44.7b (prior -$43.6b, revised -$43.5b)
9:45 AM Markit US Services PMI, Aug F, est. 56.9 (prior 56.9)
Markit US Composite PMI, Aug F, (prior 56.0)
10:00 AM ISM Non-Manufacturing Composite, Aug, est. 55.6 (prior 53.9)
2:00 PM U.S. Federal Reserve Release Beige Book

Canadian Economic Data 

8:30 AM Labor Porductivity, q/q, 2Q, -0.1%, (prior 1.4%, revised 1.3%)
Int’l Merchandise Trade, Jul, -3.04b,  est. -3.30b (prior -3.60b, revised -3.76b)
10:00 AM Bank of Canada Rate Decision, Sep 6, est. 0.75% (prior 0.75%)

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