US tsys opening lower. US 10Y 2.07 (+3.7bps), back to pre-payroll lvls as risk sentiment continues to climb, European equities ~0.80% higher, crude closing in on $50 (+1.7%). Core EU bonds lower for a 3rd day led by 10Y gilts,weighed by BOJ decision to forgo additional stimulus (see above) and another uncovered German 10Y auction. GOCs opening lower led by 10s, spds ~1bp wider vs tsys. Provi spds opening unch after yest 2bp rally led by longs, Ont 45/25 bx 9bps from 10.5 last wk, expecting supply in longs given positive tone – hearing QC, Alta or Ont.
- German Industrial Output Unexpectedly Falls as Risks Emerge (Bloomberg) German industrial production unexpectedly declined in August, signaling that Europe’s largest economy is vulnerable to risks including weaker growth in emerging markets.
- BoJ damps hopes for stimulus boost (FT) The Bank of Japan has kept monetary policy on hold with an upbeat statement acknowledging risks from a slowdown in emerging markets but otherwise made little concession to recent bad data.
- Further fall in China forex reserves points to more renminbi support (FT) China’s foreign exchange reserves fell another $43bn last month, suggesting continued intervention in the forex markets to support the renminbi.
- Crude oil inches closer to $50 a barrel on lower U.S. production (Marketwatch) Crude oil prices climbed on Wednesday on signs of ebbing U.S. production and increasing willingness among the major oil producers to collectively jump-start the market amid the prolonged price slump.
- Beware of the liquidity delusion (FT) Is the fragility of market liquidity a reason for concern? The “flash rally” in US Treasury bonds in October 2014 and the “German Bund tantrum” in April 2015 show that dislocations can occur even in markets for highly liquid assets.
- Once the Biggest Buyer, China Starts Dumping U.S. Government Debt (WSJ) Central banks around the world are selling U.S. government bonds at the fastest pace on record, the most dramatic shift in the $12.8 trillion Treasury market since the financial crisis.
- Overview: IG24 5Y 79.896/80.559 (-3.372), US 10yr note futures are down -0.23% at 128-23+, S&P 500 futures are up +0.61% at 1980.5, Crude oil futures are up +1.46% at 49.24, Gold futures are up +0.44% at $1151.50, DXY is down -0.01% at 95.452.
US Economic Data
- MBA mortgage applications came in this morning at 25.5% for the week ending October 2nd, versus prior week -6.7% decrease.
- Consumer credit is forecast at $19.5B in August versus July $19.097B.
Canadian Economic Data
- Building permits came in at -3.7% MoM in August versus +0.7% in July (revised from -0.6%).
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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240