Market update
US tsys lower & curve steeper on risk on rally as Nikkei surged 7.7% o/n (see above), US 10Y 2.22 (+4bps). Core EU bonds outperforming led by 10Y bunds- bund/tsy spd at three week wides. US auctions $21bln in new 10Y notes at 1:00EST with yields ~5bps higher since the 3Y yest. Also pressuring tsys is a building corp calendar after yest saw $14bln in issuance(JDC, CP…). Today Amex, Marsh & Mclennan and Gilead with the latter looking to sell bonds across the curve. GOCs are lower before BOC decision, CAD steady after housing starts/permits came in stronger than exp. provis opening 0.5 – 1bp tighter, Ont 46s traded at 99 (from 100 yest cls), Ont 45/25 bx unch 11.5/11.2.QC/Ont 45 5.9/5.6 unch.
News headlines
- Japan’s Nikkei 225 Rises 7.7% for Biggest Gain Since October 2008 (Bloomberg) Japanese stocks soared, with the Nikkei 225 Stock Average staging the steepest advance since the aftermath of the 2008 Lehman Brothers Holdings Inc. bankruptcy, amid speculation a selloff that drove valuations to an 11-month low was overdone.
- Blame short-sellers for Japan’s sharp equity rally (FT) The funny thing about short-sellers is that they are blamed when markets fall — most recently in China, but by US and European leaders in 2008 — but never celebrated when their actions help markets soar.
- Abe Pledges Corporate Tax Cut as Investments Slump (Bloomberg) Japanese Prime Minister Shinzo Abe pledged to follow through with a corporate-tax cut, a day after government data underscored businesses’ reluctance to ramp up domestic investment.
- Poloz Expected to Hold Rates in Lone Decision During Canada Vote (Bloomberg) The Bank of Canada will probably leave its main interest rate unchanged in a decision that will be closely parsed by the nation’s political leaders amid a tight election campaign focused on the economy.
- Interest rate rise: Redemption at last for banks? (FT) Whisper it quietly (especially if you are in the company of politicians or regulators) but banks are finally starting to find life a little easier. The pace of regulatory change is easing, the worst of the misconduct fines seem to be out of the way and US and UK interest rate rises are likely to be coming sooner rather than later.
- Canadian oil producers among first in the world to yield to low prices and turn off taps (FP) Amid the corn and canola fields of eastern Saskatchewan, oil foreman Dwayne Roy is doing what Saudi Arabia and fellow OPEC producers are loath to do: shutting the taps on active wells.
Overnight markets
- Overview: IG24 5Y 77.8/78.3 (-1.2), US 10yr note futures are down -0.23% at 126-31+, S&P 500 futures are up +0.97% at 1984.50, Crude oil futures are down -0.94% at 45.51, Gold futures are down -0.22% at $1118.5, DXY is up +0.38% at 96.349.
- US BANK CDS (5yr): BAC 72/76 (-1), GS 92/96 (-1), MS 81/85 (-1), C 81/85 (-1), JPM 73/77 (-1), WFC 54/58 (-1)
US Economic Data
- MBA mortgage applications came in this morning at -6.2% for the week ending September 4th, versus prior week 11.3% increase.
- JOLTs job openings are forecast at 5300 in July compared to June 5249.
Canadian Economic Data
- Housing starts came in at 216.9K in August versus July revised 193.3K.
- Building permits came in at -0.6% MoM in July versus 15.5% in June.
- Bank of Canada overnight lending rate decision will be release at 10:00 and is expected to remain at 0.50%.
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