12/09/2018

Market Update Tsys trading higher after August PPI fell 0.1% vs +0.2% exp, 10Y 2.963% (-1.5bp), curve 1bp flatter. Equity futures slightly lower – S&P -1.75, Asian equities lower, Hang Seng at one-year lows, Euro stocks holding on to slight gains. Core EGBs higher led by 10Y bund @ 0.41% , just off recent highs. GOCs higher, in line with tsys – NAFTA in the headlines, yesterday afternoon positive news on talks impacting GOCs and the CAD -which continues to rall – 1.3062 (-50pps). The BOC auctions $400mln in reopened 2050 RRBs at noon with long breakevens at the lower end of ther range this yr -170bps. 

News headlines

China Bank Lending Slowed in August as Bond Issuance Surges (Bloomberg) China’s broadest measure of new credit expanded as companies issued more debt, though the expansion in new bank loans slowed, showing that banks are still cautious about extending credit and taking on risk. China’s credit growth has been sluggish for months as a multi-year campaign to slow debt growth squeezed shadow banking and hurt people’s appetite for risk. As the trade conflict with the U.S. intensifies, policy makers have loosened monetary policy and eased regulatory requirements on banks to encourage lending.

There’s Never Been a President This Unpopular With an Economy This Good (Bloomberg) President Donald Trump’s unpopularity is unprecedented given the strength of the economy. That’s according to a Bloomberg analysis of polling data. It shows that Trump is the first U.S. leader dating back to at least Ronald Reagan whose approval rating is consistently low and lagging consumers’ favorable assessment of the economy.

Trump Tariffs Spark Industry Campaign to De-Escalate Trade War (Bloomberg) Trade associations representing farmers, retailers and manufacturers are joining forces in a new multi-million-dollar campaign to oppose President Donald Trump’s tariffs, in the latest attempt by U.S. business to stop an escalating trade war. Groups lobbying for months to persuade the president that tariffs are the wrong approach have been largely ignored, as Trump slapped duties on billions of dollars of imports from steel to Chinese products. But a new coalition called Americans for Free Trade is joining Farmers for Free Trade to change the direction in Washington by highlighting stories of businesses, consumers and farmers in the heartland negatively affected by the duties.

Europe Stocks Rise, Asia Extends Drop; Euro Slips: Markets Wrap (Bloomberg) European stocks advanced on Wednesday and Asian shares extended a losing streak as traders turned their focus to the outlook for monetary policy amid lingering worries for global trade. Treasury yields edged lower after climbing a day earlier. Energy companies and miners were among the biggest winners in Europe as Bloomberg’s commodity index rose. Futures on the Dow, S&P 500 and Nasdaq advanced even as America’s East Coast battened down for Hurricane Florence. The MSCI Asia Pacific Index was on course for a 10th consecutive decline, the longest losing streak since 2002. Two-year Treasury yields held near a decade high and the dollar edged lower. The euro slipped after a report that the European Central Bank is set to lower its economic growth forecasts, while the pound fluctuated as Britain attempts to foster an amicable split from the EU.

Canada ready to allow U.S. dairy access in NAFTA talks (Reuters) Canada is ready to offer the United States limited access to the Canadian dairy market as a concession in negotiations to rework the North American Free Trade Agreement, two Canadian sources with direct knowledge of Ottawa’s negotiating strategy said on Tuesday. U.S. President Donald Trump said at the White House that trade talks with Canada were going well and that Ottawa wants to make a deal. Chrystia Freeland, Canada’s foreign minister, returned to Washington on Tuesday for talks with U.S. Trade Representative Robert Lighthizer.

Trump says NAFTA deal with Canada ‘coming along very well’ (BNN) The U.S. and Canada continued to look for ways to bridge their differences as talks resumed to update the North American Free Trade Agreement, with Ottawa insisting it won’t sign a bad deal. “We had a very productive, constructive conversation. The atmosphere continues to be cordial. There continues to be goodwill on both sides,” Foreign Affairs Minister Chrystia Freeland said Tuesday after meeting U.S. Trade Representative Robert Lighthizer in Washington. “It is a truism of trade negotiations that nothing is done until everything is done.”

Loblaw beats Canadian banks in credit card survey (BNN) Canada’s biggest grocery chain is beating the banks at their own game. Loblaw Cos.’s President’s Choice Financial credit cards rank No. 1 for customer satisfaction, beating out cards issued by the country’s biggest banks, according to a study published Monday by J.D. Power. Despite being Canada’s biggest credit-card issuer, Toronto-Dominion Bank trails the pack. PC Financial scored 788 on a 1,000 point scale making the cards “among the best,” according to the survey. American Express Co.’s cards ranked second, with 780 points, followed by Canadian Tire with 774 points, and Capital One at 764. Each of the three rated “better than most.”

Overnight markets

Overview: US 10yr note futures are up 0.079% at 119-14, S&P 500 futures are down -0.06% at 2888, Crude oil futures are up 1% at $69.94, Gold futures are down -0.27% at $1198.9, DXY is down -0.03% at 95.218, CAD/USD is up 0.07% at 0.7648.

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	2.139%	2 Year	2.744%
5 Year	2.248%	5 Year	2.859%
10 Year	2.323%	10 Year	2.963%
30 Year	2.341%	30 Year	3.106%

US Economic Data

7:00 AM	MBA Mortgage Applications, Sep 7th -1.8% est -1.8% (-0.1% prior)
8:30 AM	PPI Final Demand MoM, Aug -0.1% est 0.2% (0.0% prior)
	PPI Ex Food and Energy MoM, Aug -0.1% est 0.2% (0.1% prior)
	PPI Ex Food, Energy, Trade MoM, Aug 0.1% est 0.2% (0.3% prior)
	PPI Final Demand YoY, Aug est 3.2% (3.3% prior)
	PPI Ex Food and Energy YoY, Aug 2.3% est 2.7% (2.7% prior)
	PPI Ex Food, Energy, Trade YoY, Aug 2.9% (2.8% prior)
14:00 AM	U.S. Federal Reserve Releases Beige Book

Canadian Economic Data

8:30 AM	Teranet/National Bank HP Index, Aug 226.12  (225.57 prior)
	Teranet/National Bank HPI MoM, Aug 0.2%  (0.8% prior)
	Teranet/National Bank HPI YoY, Aug 1.4% (1.8% prior)
	Capacity Utilization Rate, 2Q 85.5% est 86.9% (86.1% prior)