Market Update
US tsys rallying on Yellen’s prepared text release – the mkt focusing on comments that US rates don’t need to rise much to reach neutral, US 10Y 2.31% vs 2.36 pre Yellen. Tsys were already higher overnite with core EGBs after solid 10Y bund auction pushed up prices, thou prices has faded , weighed by strong UK labor mkt data – employment rose 175k in 3 months to May pushing the unemployment rate down to 4.55 from 4.6%. Portugal sold E1bln in 10& 30Y bonds , at the high end of the target. GOCs lagging the rise in tsys by 1.5-3 bps before key BOC decision at 10:00am. At this point, with mkt pricing in ~90% odds of a rate hike, BOC credibility would be severly tested should they decide to pass. For us the more relevant questions are whether we see another 25bp hike before y/e and if so is the BOC done as the 50 bps of ‘insurance’ would have been removed.
News headlines
Stocks Rebound as Dollar Dips on Trump Revelations: Markets Wrap (Bloomberg) European equities rebounded with oil while the dollar slipped as a fresh bout of political uncertainty in Washington damped optimism about rebounding global growth. A gauge of the U.S. dollar was lower for a third day while Treasuries rose before a testimony by Janet Yellen that may provide clues about her plans to scale back the Federal Reserve’s balance sheet. Oil bounced on reports of a decline in stockpiles, though it remains in a bear market. The pound erased losses after U.K. payrolls data beat estimates and unemployment fell to a 42-year low.
Your Guide to the Bank of Canada’s Bellwether Rate Decision (Bloomberg) Canada will likely become the first Group of Seven country to join the U.S. in raising interest rates on Wednesday, potentially fueling speculation the world’s central bankers are heading into a tightening cycle.
China June new yuan loans rise, but credit growth seen slowing (Reuters) Chinese lenders extended more credit than expected in June, as home lending stayed buoyant while a clampdown on shadow financing activities forced banks to shift more loans onto their books.
Germany tightens rules to shield businesses from foreign takeovers (Reuters) Germany has approved rules to make it easier to block the sale of strategically important companies to investors from outside the European Union, prompted by concerns about China acquiring German expertise by that route.
OPEC sees lower demand for its oil in 2018, points to surplus (Reuters) World demand for OPEC’s crude will decline next year as U.S. shale producers and other rivals pump more, OPEC said on Wednesday, suggesting the oil market will see a surplus in 2018 despite an OPEC-led output cut.
Mexico Oil Privatization Pays Off With Billion-Barrel Find (Bloomberg) Mexico’s decision to allow private companies to explore for oil and gas started to pay off after the discovery of at least a billion barrels in a new offshore field.
Overnight markets
Overview: US 10yr note futures are up 0.424% at 125-23, S&P 500 futures are up 0.47% at 2436, Crude oil futures are up 1.78% at $45.84, Gold futures are up 0.69% at $1223.1, DXY is down -0.17% at 95.511, CAD/USD is down -0.01% at 0.7744.
US Economic Data
| 7:00 AM | MBA Mortgage Applications, Jul 7, -7.4% (prior 1.4%) |
| 8:30 AM | Fed Chair Yellen’s testimony to Congress published |
| 10:00 AM | Fed Chair Yellen testifies to the House Financial Services Committee |
| 2:00 PM | US Federal Reserve Releases Beige Book |
Canadian Economic Data
| 8:30 AM | Teranet/National Bank HPI , m/m, Jun, 2.6%, (prior 2.2%) |
| Teranet/National Bank HPI, y/y, Jun, 14.2%, (prior 13.9%) | |
| 10:00 AM | Bank of Canada Rate Decision, Jul 12, est. 0.75% (prior 0.50%) |
| Bank of Canada Release July Monetary Policy Report |
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