cti2015header-morning comments web

Market Update

  • US tsys slightly lower to unch, the US 10Y yield close to two week low @ 1.53%, prices close to yesterday’s post ISM highs. Fed Williams repeated his call for the Fed to raise rates ‘sooner rather than later’ in a speech in Reno yest. Tsys were briefly pressued in Europe after weak 10Y bund auction, also BlackRock CIO said the co. no longer likes long term tsys, afraid the Fed will let inflation overshoot.  Core Euro bonds higher led by long term bunds, gilts before ECB decision tommorow, UK gilts outperforming on ~Stg44bln in coupon & redemption payments. In US corporates the new issue mkt opened in full force, with over $23bln in IG issuance including a 5-part $6bln deal from Siemens (A1/A+). GOCs small higher led by longs after rally yest, 10Y closing in on 1.0%. Provis well bid here despite lower cda yields, expect supply to heat up  with all in yields at attractive levels for issuers. BOC decision the focus with no change expected, but Poloz may take on a dovish tone in an effort to talk down the CAD & sustain the rebound in exports seen in last week’s trade data. Enbridge/Spectra all stock deal lead to sharp tightening in ENB spreads (~20bps) with S&P affirming ENB at BBB+ late in the day.

 News headlines                                                                                        

  • Emerging Markets Gain With Commodities on Receding Fed Wagers (Bloomberg) Emerging-market stocks gained with commodities as a slew of weak U.S. economic data quelled speculation the Federal Reserve will raise interest rates as early as this month. European equities traded near their highest level since April. An MSCI gauge of shares in developing nations to its highest levels in more than a year as relatively loose monetary policy in major industrialized nations fueled a search for higher yields.
  • Oil rises, but doubt over output deal tempers rally (Reuters) Oil rose on Wednesday to pare some of the previous day’s losses, partly thanks to a weaker U.S. dollar, but the limited likelihood of a near-term agreement among the world’s biggest exporters to rein in production kept gains in check. November Brent crude futures rose 50 cents to $47.76 a barrel by 1105 GMT, while U.S. crude futures gained 40 cents to trade at $45.23 a barrel.
  • K. Manufacturing Shrinks Most in a Year After Brexit Vote (Bloomberg) U.K. manufacturers cut production at the fastest pace in a year in July as Brexit trauma rocked the British economy, a downturn that may prove short-lived. Output fell 0.9 percent from June, far exceeding the 0.3 percent decline forecast in a Bloomberg survey, Office for National Statistics data published Wednesday show. Total industrial production rose 0.1 percent, thanks to a jump in oil and gas output.
  • UK banks call for transitional trade arrangements after Brexit (Reuters) Britain should negotiate transitional arrangements with the European Union to avoid « cliff edge » disruption to markets once the country has left the bloc, a top banking official said on Wednesday. Anthony Browne, chief executive of the British Bankers’ Association, said there was a need for an orderly transition.
  • Fed policymakers defend role of private bankers at central bank (Reuters) Two Federal Reserve policymakers plan to warn U.S. lawmakers against changing the Fed’s structure to reduce the role of private bankers at the U.S. central bank, according to statements seen by Reuters.
  • Enbridge Inc deal to buy Spectra creates ‘energy infrastructure colossus’ with $48 billion of future projects (Financial Post) Enbridge Inc.’s $37-billion merger with Spectra Energy Corp. will create a new integrated pipeline “colossus” with a massive $48 billion worth of potential future projects. Calgary-based Enbridge announced Tuesday it would merge with Houston-based Spectra in an all-share deal to create the largest pipeline company by market value on the continent — leapfrogging competitor Kinder Morgan Inc.
  • CMHC head warns of funding shortage to meet housing strategy demands (GlobeAndMail) The head of Canada’s housing agency is warning there simply will not be enough money available for Ottawa to meet expectations for a national strategy to tackle the wide-ranging problems in the housing market. Evan Siddall, the president and CEO of the Canada Mortgage and Housing Corp., said on Tuesday that consultations for a national housing strategy will intensify this week, but he cautioned that demands for new spending clearly exceed what will likely be in the 2017 federal budget.

Overnight markets

  • Overview: US 10yr note futures are up 0.1189% at 131-17, S&P 500 futures are down -0.06% at 2183.25, Crude oil futures are up 0.18% at $44.91, Gold futures are up 0.09% at $1355.2, DXY is up 0.02% at 94.843.                                                                                                                                                                                                                                                

US Economic Data

  • 10:00 AM: JOLTs Job Openings, July, est. 5630 (prior 5624)
  • 14:00 AM: U.S. Federal Reserve Releases Beige Book

Canadian Economic Data

  • 10:00 AM: Bank of Canada Rate Decision, September 7th, est. 0.50% (prior 0.50%)
    •        Ivey Purchasing Managers Index, August, est. 56.5 (prior 57.0)



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