09/10/2018

Market Update US tsys trading slightly higher, US 10Y 3.23%, after reaching a 7Y high 3.26% in European trading, heavy volume in TY futures (>700k), curve steeper as long end lags. Multiple Fed speaker including Fed Kaplan who expects strong GDP growth this year, solid consumer spending thou the fiscal boost expected to fade next yr. Core EGBS also lower, despite continued selloff in Italian debt, Fin Minister comments saying the govt would ‘do what it has to do’ if the BTP spd hit 400 or 500 bps (10Y spd 310bps). GOCs lower, in line with tsys, 10Y ~2.60% highest since Jan 2014. Provincials feel well supported with all in yields moving higher, supply easily absorbed, spds reaching their tights for the yr last week.  

News headlines

The IMF again downgrades outlook for the global economy (BI) The IMF announced it had reduced its outlook on the global economy to a 3.7% growth rate for this year and next, down 0.2% from what it had originally predicted in July. The organization’s assessment applies to the 19 nations of the European Union, as well as all countries in Central and Eastern Europe, Latin America, the Middle East and Sub-Saharan Africa. The IMF expects the US economy to continue growing this year at 2.9%, but sees that rate falling to 2.5% next year amid the country’s escalating trade war with China. While the IMF’s outlook for the Chinese economy stayed at 6.6% this year, its forecast for next year of 6.2% represents the slowest growth rate the Asian country has seen since 1990.

All eyes on rates: 10-year Treasury yield hits fresh 7-year high as bond market reopens. (CNBC) The yield on the benchmark 10-year Treasury note rose above 3.25 percent in early trading, returning to levels not seen in more then seven years. The 10-year yield is up more than 20 basis points over the last week amid a report showed the lowest U.S. unemployment rate in 49 years and rising wages. Concerns surrounding rising interest rates again took center stage after U.S. government debt yields hit highs not seen in several years during the bond market’s first day of trading this week. The yield on the benchmark 10-year Treasury note rose above 3.25 percent in early trading, returning to levels not seen in more then seven years. The yield on the 30-year Treasury bond was higher at 3.43 percent, its highest level since 2014.

Selloff sucks Europe back under after Asia sinks to 17-month low (Reuters) European stocks were sucked back into the red on Tuesday, as a four-day global selloff took Asia to a 17-month low and left Wall Street on course to equal its longest losing streak of the year. U.S. stock index futures fell on Tuesday, following European and Asian weakness, after the International Monetary Fund cut its global growth forecasts, squarely blaming the Sino-U.S. trade war.

China slashes U.S. LPG imports amid trade war (Reuters) China has choked back on imports of liquefied petroleum gas (LPG) from the United States, traders and analysts said, turning to the Middle East for extra supplies amid the two countries’ trade dispute.

China must take strong stimulus measures to support growth: state media (Reuters) China must take strong stimulus measures to support growth, with the country in a “critical” period of stabilizing its economy, according to a commentary in the Global Times, a state-backed Chinese tabloid.

Overnight markets

Overview: US 10yr note futures are down -0.04% at 117-21, S&P 500 futures are down -0.44% at 2881, Crude oil futures are up 0.65% at $74.77, Gold futures are up 0.12% at $1190, DXY is up 0.37% at 96.119, CAD/USD is up 0.31% at 0.7693. 

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	2.318%	2 Year	2.877%
5 Year	2.477%	5 Year	3.068%
10 Year	2.596%	10 Year	3.231%
30 Year	2.587%	30 Year	3.406%

 US Economic Data

6:00 AM

NFIB Small Business Optimism, Sep 107.9 est 108.3 (108.8 prior)

Canadian Economic Data

8:15 AM	Housing Starts, Sep 188.7k est 210k ( 201k prior 198.8k revised)
10:00 AM	Bloomberg Nanos Confidence, Oct 5th (55.2 prior)

 

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