Market Update
US tsys trading weaker off the lows before non farms (exp 170k, unem rate 4.3%, 0.3% AHE), US 10Y 2.386% (+2bps), heavy selling in 10Y tsy futures tied to weaker Yen – 2 block trades for combined 780k/DV01. Crude -2.5% @ 44.33 despite yesterday’s drop in DOE inventories. Core EGBs mixed, 10Y bund reached new 2017 high 0.581% . GOCs lower before Cdn employment, spreads ~1bp tighter vs tsys, CAD resilient 1.2977 despite steep drop in crude. New CM 5Y deposit note 79/77, priced at 80.3.
News headlines
Yields Stay Higher as Stocks Drop Before Jobs Data: Markets Wrap (Bloomberg) Bond yields stayed elevated after a sell-off in debt this week stoked by a number of central banks stepping up talk of tighter policy conditions. The yen slumped to an eight-week low after the Bank of Japan stepped in to curb the rise in rates.
Dollar climbs as payrolls eyed, hits seven-week high vs yen (Reuters) The dollar climbed on Friday, hitting a seven-week high against the yen after the Bank of Japan expanded its monetary policy as other major central banks are moving in the opposite direction.
Inflation elusive, but central bankers getting twitchy (Reuters) A significant pickup in inflation still remains tantalizingly out of reach in most developed economies — aside from asset prices — yet several central banks are leaning toward launching or stepping up efforts that could slow it down.
Oil prices fall 3 percent on signs market still oversupplied (Reuters) Oil prices fell 3 percent on Friday after data showed U.S. production rose last week just as OPEC exports hit a 2017 high, casting doubt over efforts by producers to curb oversupply. Global benchmark Brent futures LCOc1 were down $1.43, or 3 percent, at $46.68 a barrel at 1116 GMT, after falling to as low as $46.63, its weakest level in more than a week.
U.S. job growth seen accelerating; unemployment rate steady (Reuters) U.S. employers likely stepped up hiring in June and boosted wages for workers, signs of labor market strength that could keep the Federal Reserve on course for a third interest rate increase this year.
BOE Policy Hawks Face New Signs of Weakening U.K. Economy (Bloomberg) The hawks circling over the Bank of England may have just got their wings clipped. Unexpectedly weak manufacturing, construction and trade data Friday all darkened the economic outlook, casting doubt over the U.K.’s performance in the second quarter and reining back expectations of tighter policy.
Overnight markets
Overview: US 10yr note futures are down -0.1% at 124-28, S&P 500 futures are up 0.09% at 2410.75, Crude oil futures are down -2.17% at $44.53, Gold futures are down -0.12% at $1221.8, DXY is up 0.2% at 95.992, CAD/USD is down -0.03% at 0.7707.
US Economic Data
| 8:30 AM | Change in NonFarm Payrolls, Jun, est. 178k (prior 138k) |
| Change in Private Payrolls, Jun, est. 170k (prior 147k) | |
| Change in Manufacturing Payrolls, Jun, est. 5k, (prior -1k) | |
| Unemployment Rate, Jun, est. 6.6% (prior 6.6%) | |
| Average Hourly Earnings, m/m, Jun, est. 0.3% (prior 0.2%) | |
| Average Hourly Earnings, y/y, Jun, est. 2.6% (prior 2.5%) | |
| Average Weekly Hours, Jun, est. 34.4 (prior 34.4) | |
| Labor Force Participation Rate, Jun, est. 62.7% (prior 62.7%) |
Canadian Economic Data
| 8:30 AM | Net Change in Employment, Jun, est. 10.0k (prior 54.5k) |
| Unemployment Rate, Jun,, est. 6.6% (prior 6.6%) | |
| Full Time Employment Change, Jun, (prior 77.0) | |
| Part Time Employment Change, Jun, (prior -22.3) | |
| Participation Rate, Jun, (prior 65.8) | |
| 10:00 AM | Ivey Purchasing Managers Index, Jun, est. 58.0 (prior 53.8) |
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