cti2015header-morning comments web

Market Update

  • US tsys slightly lower, yields ~1bp higher, US 10Y 1.68%, despite a steep decline in European and Asian stock markets, while crude fell 2.0%. Tsys off the lows in NA trade rebounding from losses in Europe. Mkts await important speech from Fed Brainard (voter) in Chicago before the blackout period commences tomorrow. Brainard, relatively dovish in the past, could add to calls for a rate hike next week as a no. of FOMC members have come out in favor of raising rates to prevent overheating. German govt bonds lower, the 10Y bund at 0.023% the highest since June 27th, bund curve 2bps steeper at 125. The US Tsy is scheduled to sell $44bln in  3Y & 10Y notes at the same time today 1:00 EST; European sov supply also picks up this week – E24.5bln vs E7.8bln last week. GOCs opening weaker, spds wider vs tsys by 1bp in 5s and 30s. Provis opening wider, Ont 48s 98/97.5, Ont 26 86/85 – provis have hardly budged despite GOC yields in the 10Y area being ~15bps higher.  Despite a steeper 5s10s, the 10Y roll continues to flatten and June 25s are starting to look cheap in that respect – this doubtlessly reflects selling in CGBs as 25s are CTD.

 News headlines                                                                                                

  • Selloff gathers pace as stimulus pullback fears deepen (Reuters) European stocks and bonds fell in a volatile market on Monday, hit by growing concerns that global central banks’ commitment to the post-crisis orthodoxy of super-low interest rates and asset purchase programs may be waning. German Bund yields DE10YT=TWEB rose further above zero to as high as 0.06 percent, their highest since Britain’s Brexit vote in late June, and the rise in lower-rated euro zone countries’ yields was even sharper.
  • Oil falls as U.S. drills more (Reuters) Oil fell for a second trading day in a row on Monday, after speculators cut their bullish bets by the most in three months last week and U.S. crude drillers added more rigs for a tenth week running. Brent crude oil futures LCOc1 fell 53 cents on the day to $47.48 a barrel, by 0830 GMT, while U.S. West Texas Intermediate futures CLc1 fell 66 cents to $45.22 a barrel.
  • OPEC points to larger 2017 oil surplus as rivals keep pumping (Reuters) OPEC raised its forecast of oil supplies from non-member countries in 2017 as new fields come online and U.S. shale drillers prove more resilient than expected to cheap crude, pointing to a larger surplus in the market next year. Demand for crude from the Organization of the Petroleum Exporting Countries will average 32.48 million barrels per day (bpd) in 2017, OPEC said in a monthly report on Monday. That is down from the previous forecast of 33.01 million bpd.
  • German economic growth to be slower in second half of 2016: ministry (Reuters) German economic growth will be slower in the second half of 2016 than in the first six months of this year, the Economy Ministry said on Monday, adding that the downside risks abroad had increased due to Britain’s decision to leave the European Union.
  • Atlanta Fed’s Lockhart: ‘Serious discussion’ over rate rise warranted (Reuters) Current economic conditions warrant a « serious discussion » of whether to raise interest rates at next week’s Fed meeting, Atlanta Federal Reserve Bank president Dennis Lockhart said on Monday in remarks that may raise the likelihood of Fed action.
  • Basel Capital Revamp Endorsed Without Assurance Sought by EU (Bloomberg) The central bank governors overseeing the Basel Committee on Banking Supervision backed the “broad direction” of the regulator’s bank capital-rule revamp, while stopping short of providing assurances sought by Europe on the overhaul’s impact.
  • Potash Corp and Agrium agree to merge to create global agricultural giant worth $36 billion (Financial Post) Potash Corp. of Saskatchewan and Agrium have agreed to merge in a deal that would create a global agricultural giant worth an estimated US$36 billion. The deal would bring together Saskatoon-based PotashCorp’s huge fertilizer mining operations — the world’s largest by capacity — with Calgary-based Agrium’s extensive global direct-to-farmer retail network.

Overnight markets

  • Overview: US 10yr note futures are down -0.024% at 130-11, S&P 500 futures are down -0.14% at 2113, Crude oil futures are down -1.96% at $44.98, Gold futures are down -0.42% at $1328.9, DXY is down -0.08% at 95.262.

US Economic Data

  • There is no major economic data for today

Canadian Economic Data

  • 10:00 AM: Bloomberg Nanos Confidence Index, September 9th, (prior 58.4)



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