Market Update

US tsys higher, yields 1.5-2bps lower led by the 7-10Y with the 10Y 2.33(-1.8bps), Euro equities lower, S&P futures -4 pts. Tsys saw heavy buying in Asia hours according to MNI with block trade in TY futs around the European open (~4.3k). Core Euro bonds higher, gilts lagging on news of deadlock in Brexit talks.  Given that a hike by the Fed in Dec is ~80% priced in upcoming inflation data take on more importance, especially given the uncertainty reflected in the latest FOMC minutes over whether low inflation is transitory or not. GOCs higher in line with tsys, 10Y close to 2.10% resistance. Primary corp mkt busy with Enbridge hybrid pricing as well as Nissan 3Y @ 79. We were active in Nissan post issue.

News headlines 

Inside the Fed’s September Meeting: The Annotated Minutes (Bloomberg) In September, the Federal Reserve maintained plans for a third interest rate increase in 2017; in October, it announced the start of its program to shrink its balance sheet.

Warsh Leads Yellen, Powell in Tight Race for Fed Chair (Bloomberg) Former Federal Reserve Governor Kevin Warsh has emerged as the leading candidate to run the central bank next year, jumping ahead of current Chair Janet Yellen, according to a Bloomberg survey of economists Oct. 6–11. Fed Governor Jerome Powell—until now seen as a long-shot—vaulted into a tie for second with Yellen behind Warsh in the poll.

Pound May Enter Bumpy Ride Into Year-End on BOE, Brexit: Chart (Bloomberg) Currency traders are getting more concerned about the political fate of Prime Minister Theresa May and the impasse in Brexit negotiations. Demand for options that are out of the money relative to those in the money has risen to the highest in two months, suggesting that investors anticipate wider swings in sterling. The Bank of England reviews its benchmark bank rate on Nov. 2, adding to the clamor for hedges.

Catalans Face a Deadline Dilemma (Bloomberg) Prime Minister Mariano Rajoy gave his Catalan antagonist Carles Puigdemont five days to clarify whether he has declared independence from Spain or not as the country prepared for its national holiday on Thursday.

Trump Rethinks State-Local Tax Issue Over Middle-Class Concerns (Bloomberg) Months after the White House proposed ending a tax break for people in high-tax states, President Donald Trump grew angry when he learned that the change would hurt some middle-income taxpayers, according to two people familiar with his thinking.

Canada’s Metro to sell majority stake in Couche Tard for C$1.5 bln (Reuters) Canada’s Metro Inc said on Wednesday it would sell a major portion of its stake in Alimentation Couche Tard Inc to fund its C$4.5 billion acquisition of pharmacy chain Jean Coutu Group.

Employee-discount tax change removed as feds face uproar (Toronto Star) The federal government appears to be doing away with a controversial tax policy interpretation that would have seen employees taxed for discounts they get at work.

BlackBerry signs license deal with Florida’s BLU, ends patent dispute (Reuters) BlackBerry Ltd (BB.TO) said on Thursday it signed a new license agreement with BLU Products Inc, a Florida-based maker of low-end Android phones, that would end patent disputes between the two companies.

Overnight markets 

Overview: US 10yr note futures are up 0.075% at 125-11, S&P 500 futures are down -0.15% at 2549.25, Crude oil futures are down -1.38% at $50.59, Gold futures are up 0.65% at $1297.3, DXY is up 0.08% at 93.09, CAD/USD is up 0.06% at 0.8021. 

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.566% 2 Year 1.509%
5 Year 1.77% 5 Year 1.941%
10 Year 2.105% 10 Year 2.334%
30 Year 2.455% 30 Year 2.871%

US Economic Data

8:30 AM PPI Final Demand MoM, Sep 0.4% est 0.4% (0.2% prior)
PPI Ex Food and Energy MoM, Sep 0.4% est 0.2% (0.1% prior)
PPI Ex Food, Energy, Trade MoM, Sep 0.2% est 0.2% (0.2% prior)
PPI Final Demand YoY, Sep 2.6% est 2.6% (2.4%prior)
PPI Ex Food and Energy YoY, Sep 2.2% est 2.0% (2.0% prior)
PPI Ex Food, Energy, Trade YoY, Sep 2.1% (1.9% prior)
Initial Jobless Claims, Oct 7th  243k est 250k (260k prior)
Continuing Claims, Sep 30th 1889k est 1930k (1938k prior)
9:45 AM Bloomberg Consumer Comfort, Oct 8th (49.9 prior)
10/12-10/20 Monthly Budget Statement, Sep est 6.0b (33.4b prior)

 Canadian Economic Data

8:30 AM New Housing Price Index MoM, Aug 0.1% est 0.2% (0.4% prior)
New Housing Price Index YoY, Aug 3.8% (4.8% prior)
Teranet/National Bank HPI MoM, Sep -0.8% (0.6% prior)
Teranet/National Bank HPI YoY, Sep 11.4% (13.1% prior)
Teranet/National Bank HP Index, Sep 220.33 (222.03 prior)


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, Hugues Savard

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230