Market Update
-US tsys lower, US 10Y 1.77% (+5bps) , amid higher crude prices and move lower in core EU bond prices. Yesterday tsy futures sold off on news Russia had agreed to cut oil production along with Saudi Arabia. GOC yields higher, yet 2-3bps narrower vs tsys, outperforming in the selloff even as Cda Housing Starts came in above exp for Sep 220k vs 190k exp. Provis spds not reacting to higher GOC yields, could be positioning for upcoming supply. FOMC minutes tommorrow expected to shed light on why meeting was a close call with three dissents.The US also auctions 3, 10 & 30 yr bonds starting tommorrow and Thursday for $56bln, not easy in backdrop of rising EU & tsy yields.
News headlines
–Dollar Climbs as Treasuries Decline on Fed Wagers; Rand Sinks (Bloomberg) The dollar rose to its strongest level in 11 weeks and U.S. bonds declined as investors boosted wagers that the Federal Reserve will raise interest rates this year. South Africa’s rand tumbled after prosecutors said they will charge the nation’s finance minister with fraud.
–Oil price falls back from one-year highs, hit by OPEC deal concerns (Reuters) Oil fell back from one-year highs on Tuesday, knocked by concerns that a production cut by the world’s largest exporters might not be enough to erode a two-year old global surplus of unwanted crude oil.
–German investor morale brightens more than expected in October (Reuters) The mood among German analysts and investors improved more than expected in October, a survey showed on Tuesday, suggesting traders are more upbeat about the growth prospects of Europe’s biggest economy. Mannheim-based ZEW said its monthly survey showed a rise in its economic sentiment index to 6.2 points in October after an unchanged reading of 0.5 points the previous month. This was better than the Reuters consensus forecast for a reading of 4.3.
–No recovery in sight for Canada’s 100,000 unemployed oil workers (Financial Post) The recent rise in oil prices and the accelerating political dance to approve a pipeline by imposing a hefty national carbon price are fueling some optimism in the Canadian oil scene – but not for the estimated 100,000 oil workers out of a job, the majority highly educated professionals based in Calgary.
–China banks may need $1.7 trillion injection as credit quality worsens: S&P (Reuters) Rising debt levels will worsen the credit profiles of China’s top 200 companies this year, requiring the country’s banks to raise as much as $1.7 trillion in capital to cover a likely surge in bad loans, S&P Global said in reports on Tuesday.
–Bank of Japan seen holding off more stimulus for now unless yen rises sharply: Reuters poll (Reuters) The Bank of Japan is expected to wait until next year before easing policy further unless any sharp spikes in the yen undermine the economy significantly in the meantime, a Reuters poll found. Last month the central bank switched the focus of its stimulus program to targeting market interest rates after years of massive asset buying failed to push up inflation.
Overnight markets
– Overview: US 10yr note futures are down -0.012% at 129-25, S&P 500 futures are down -0.29% at 2152.75, Crude oil futures are down -0.41% at $51.14, Gold futures are down -0.29% at $1256.8, DXY is up 0.43% at 97.345.
US Economic Data
-10:00 AM: Labor Market Conditions Index, Sep, est.1.5 (prior -0.7)
Canadian Economic Data
-8:15 AM: Housing Starts, Sep, 220.6k, est. 190.0k (prior 182.7k)
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, David Leclair-Legault
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230