Market update
US tsys opening lower, curve steeper with the US 10Y 2.164 (+3.7bps)on ‘risk on’ after China stocks rallied 3.0% despite poor export figures. European equities are higher, USD lower , gold higher and crude lower. Also weighing on tsys – a wave of govt/corp supply: the US auctions $58bln in 3,10& 30Y bonds this week while corp issuance expected to pick up after a slow August. CP (Baa1/BBB+) set to issue ~$1bln in 20 & 30Y bonds to fund capital investments as well as a $850mln repurchase pgrm. S&P had noted that this would raise its debt/ebitda to ~2.5x – above which would necessitate a downgrade. In Canada, GOCs are lower & steeper with provis unch – expectations of supply weighing despite the positive tone in credit/equities, thou GOCs $1.00 lower in longs not supportive.
News headlines
- China Exports Mark Latest Soft Reading for Economy (WSJ) Weaker demand for Chinese goods in most global markets led to a drop in exports for the second consecutive month, as the economy continued its struggle to regain momentum.
- San Francisco Fed’s Williams Sees Rate Increase ‘This Year,’ (WSJ) If Risks DissipateFor much of 2015, John Williams, president of the Federal Reserve Bank of San Francisco, has projected a rosy U.S. economic outlook, seeing solid output growth, steady unemployment declines and an approaching need to increase short-term interest rates.
- Euro zone second-quarter GDP revised higher as Italy grows faster (G&M) The euro zone economy grew faster than expected in the second quarter, data showed on Tuesday, mainly because of faster growth in Italy and Greece.
- Canadian banks helping clients bend rules to move money out of China (G&M) Some Canadian banks allow wealthy Asian investors to skirt Chinese law by helping them bring in large amounts of money that is often used to buy real estate in Vancouver.
- ECB quantitative easing: Failure to spark (FT) When Siemens revealed a €200m investment in a new wind turbine plant at Cuxhaven, on Germany’s North Sea coast, last month, it was hard to know who had more reason to cheer: the 1,000 people who will be employed at the facility — or the European Central Bank.
- Bond Market Sends Fed All-Clear to Raise Interest Rates (Bloomberg) Janet Yellen has the fixed-income market just where she wants it: ripe for the first increase in U.S. interest rates since 2006.Just about every indicator is telling the Federal Reserve Chair a move at next week’s policy meeting would cause government bonds little disruption.
Overnight markets
- Overview: IG24 5Y 80.4/80.9 (-2.35), US 10yr note futures are down -0.23% at 127-14+, S&P 500 futures are up +1.70% at 1954.50, Crude oil futures are down -0.85% at 45.66, Gold futures are up +0.13% at $1122.9, DXY is down -0.12% at 96.111.
- US BANK CDS (5yr): BAC 76/80 (-1), GS 94/98 (-1), MS 85/89 (-1), C 85/89 (-1), JPM 77/81 (-1), WFC 56/60 (-1)
US Economic Data
- NFIB Small Business Optimism Index for August came in at 95.9 compared to the consensus of 96.0 and prior month (95.4).
- Labor market conditions for August will be release at 10:00 and is forecasted at 1.5 after a 1.1 level in July.
- Consumer credit is forecast at $18.0B in July versus June $20.74B.
Canadian Economic Data
- Bloomberg Nanos Canadian Confidence Index will be released today at 10:00am.
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
Fax: (514)-861-3230