Market Update Tsys mixed before PPI, curve steeper10Y 2.95%narrow 3 tick range in TY futures on low volume (220k), little movement in EGBs as well with no major news overnite. The US tsy auctions $18bln 30Y notes at 1:00ET while Fed Evans, a noted dove, speaks this aft as well. GOCs in a narrow range over the past week, 10Y off the lows just under 2.36%. 2Y auction yest went well with the Nov20/2Y roll tighter (3/2.6) – which still appears 0.5 cheap to us. AT&T priced $2bln tranche long 7 & 30Y@ 170.5, 277 – both deals over subscribed breaking 1bp tighter.
News headlines
Saudis Play Hardball With Their Checkbook by Bashing Canada (Bloomberg) For Saudi Arabia, a new version of checkbook diplomacy is taking shape. The kingdom used to pursue a behind-the-scenes foreign policy, deploying its oil wealth as a carrot. Crown Prince Mohammed Bin Salman is ready to wield it like a stick. That’s the implication of his shock move to penalize Canada for criticizing Saudi treatment of women activists. With diplomatic ties and new business deals frozen, and the managers of Saudi wealth funds under orders to sell Canadian holdings, the measures were unexpected and sweeping.
Inflation Doubts Don’t Stop Global Central Banks Following Fed (Bloomberg) Some of the world’s biggest central banks are taking baby steps on the path away from easy money despite uncertain inflation outlooks that suggest they need to tread more carefully. The Bank of England raised interest rates last week to the highest since 2009, even as Governor Mark Carney fretted about the “uncomfortably high” chance of a hard Brexit. The European Central Bank, while worried about trade protectionism, is ending bond purchases and preparing for a possible rate hike next year. The Bank of Japan is sticking to a massive stimulus program amid feeble inflation but giving bond yields more room to rise.
U.S. Oil Vanishing From China Tariffs Reveals American Clout (Bloomberg) The removal of U.S. crude from goods targeted by Chinese tariffs is a sign that America has become too big to ignore in the oil market. Less than two months after threatening to impose levies on imports of U.S. crude, the world’s biggest oil buyer has now spared the commodity. Only fuels such as diesel, gasoline, propane will be hit with duties on Aug. 23, according to China’s commerce ministry. That’s after the nation’s buyers, including top refiner Sinopec, began shunning American supplies to avoid the risk of tariffs.
Stocks Mixed Amid Trade Salvos; Dollar Advances: Markets Wrap (Bloomberg) Stocks were mixed Thursday, with European shares slipping and U.S. index futures flat, after a mostly positive session in Asia that saw Chinese equities shrug off the tariff to-and-fro between Beijing and Washington. The dollar gained, while crude oil hovered near a seven-week low. Energy majors led the decline in the Stoxx Europe 600 Index as futures on the S&P 500, Nasdaq and Dow Jones drifted before the release of jobs and price data later Thursday. Chinese and Hong Kong stocks firmed earlier as earnings reports offered a respite from the recent sell-off, while Japanese shares dropped. Treasuries were steady. Emerging-market currencies weakened for a second day, with Turkey’s lira and Russia’s ruble extending their slump as disputes with the U.S. deepened.
Saudi Arabia reassures Canada on oil supplies in row over jailed activists (Reuters) A row over human rights in Saudi Arabia will not have any impact on Saudi oil supplies to Canada, its energy minister said on Thursday, reassuring customers after Riyadh froze new trade with Canada and ruled out mediation efforts. Saudi Arabia, infuriated by Canada’s demand last week that jailed activists in the kingdom be released immediately, expelled the Canadian ambassador on Sunday, blocked imports of Canadian grain and ended state-backed educational and medical programs in Canada.
Rio Tinto considers float of Canadian iron ore business-sources (Reuters) Rio Tinto, the world’s second largest listed mining company, is exploring a public listing of its Iron Ore Company of Canada business, banking and industry sources said, as it focuses on boosting revenue from its flagship Australian assets. Iron ore, which accounts for most of Rio’s profit and is used in making steel, has provided healthy margins for years but the outlook is uncertain as major buyer China is expected increasingly to rely on recycling rather than importing raw material.
Overnight markets
Overview: US 10yr note futures are up 0.078% at 119-19, S&P 500 futures are up 0.11% at 2858.5, Crude oil futures are down -0.01% at $66.93, Gold futures are up 0.27% at $1224.3, DXY is up 0.14% at 95.221, CAD/USD is up 0.1% at 0.7672.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.116% | 2 Year | 2.662% |
| 5 Year | 2.261% | 5 Year | 2.825% |
| 10 Year | 2.352% | 10 Year | 2.949% |
| 30 Year | 2.364% | 30 Year | 3.106% |
US Economic Data
| 8:30 AM | Initial Jobless Claims, Aug 4th est 220k (218k prior) |
| Continuing Claims, Jul 28th est 1730k (1724k prior) | |
| PPI Final Demand MoM, Jul est 0.2% (0.3% prior) | |
| PPI Ex Food and Energy MoM, Jul est 0.2% (0.3% prior) | |
| PPI Ex Food, Energy, Trade MoM, Jul est 0.2% (0.3% prior) | |
| PPI Final Demand YoY, Jul est 3.4% (3.4% prior) | |
| PPI Ex Food and Energy YoY, Jul est 2.8% (2.8% prior) | |
| PPI Ex Food, Energy, Trade YoY, Jul (2.7% prior) | |
| 9:45 AM | Bloomberg Consumer Comfort, Aug 5th (58.6 prior) |
| 10:00 AM | Wholesale Inventories MoM, Jun est 0.0% (0.0% prior) |
| Wholesale Trade Sales MoM, Jun est 0.2% (2.5% prior) |
Canadian Economic Data
| 8:15 AM | Housing Starts, Jul est 219.0k (248.1k prior) |
| 8:30 AM | New Housing Price Index MoM, Jun est 0.1% (0.0% prior) |
| New Housing Price Index YoY, Jun est 0.8% (0.9% prior) |
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, Hugues Savard
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230