Market Update
Tsys rallying on strong risk-off tone, yields 6- 13 bps lower with the 2s10s curve inverted for the first time since 2007, 10Y yield lowest since 2016 , heavy volume in TY futures (768k), 21K TY contracts trading in a two minute period once prices broke above Tuesday high was breached (130-17). Global stocks lower o/n while USTs and JPY gained. European equities down 1.75%, US equity futures -1.5%, crude -4.0%. China industrial production rose at the slowest rate since 2002 in July, while retail sales rose less than exp( 7.6% vs 8.6%). Yest Trump announced a delay of tariffs on certain Chinese goods from Sep1st to Dec 15th to ‘save christmas’. In Canada, GOCs higher, curve 4bps flatter 2s10s, 10s30s unch @ 21.5 – 3bps tighter on the week despite the rally in 10s to new lows, yet lagging the 7bp narrowing in US 10s30s. Long auction at noon – reopening of the Dec 2051s for $1.4bln with the Dec51/48 roll -0.3/-0.5.
News headlines
Stocks Slide, Bonds Flash Warning After Weak Data: Markets Wrap (Bloomberg) American equity-index futures slumped alongside stocks in Europe as weak data from two of the world’s biggest economies overshadowed an apparent de-escalation in the trade war. Treasuries and European bonds rallied, with key parts of both the U.S. and U.K. yield curves inverting.
TSX futures fall on lower crude prices (Reuters) Futures for Canada’s main stock index were down on Wednesday, as oil prices dropped on concerns over weaker economic data from Europe and China.
Oil Retreats After Biggest Jump in Five Weeks as Stockpiles Rise (Bloomberg) Oil declined after its biggest surge in five weeks as an industry report showed American crude stockpiles expanded, paring a rally that was fueled by signs the U.S.-China trade deadlock may be easing.
China industrial output weakens to 17-year low as economy slows (BNN) China posted the weakest industrial output growth since 2002 and slumping retail sales in July, as a cyclical slowdown and trade tensions add to the case to roll out more stimulus
Shrinking German economy ‘on edge of recession’ as exports stutter (Reuters) Slumping exports sent Germany’s economy into reverse in the second quarter, with prospects of an early recovery slim as its manufacturers struggle at the sharp end of a global slowdown amplified by tariff conflicts and fallout from Brexit.
U.S. Treasury bond curve inverts for first time since 2007 in recession warning (Reuters) The U.S. Treasury bond yield curve inverted on Wednesday for the first time since 2007, in a sign of investor concern that the world’s biggest economy could be heading for recession.
Euro zone GDP slows in second-quarter as growth in Germany shrinks (Reuters) The euro zone’s GDP barely grew in the second quarter of 2019, data showed on Wednesday, as economies across the bloc lost steam and the largest, Germany, contracted thanks to a global slowdown driven by trade conflicts and uncertainty over Brexit.
Kremlin says WTO’s existence would be in doubt if U.S., others left (Reuters) The Kremlin said on Wednesday that the existence of the World Trade Organization (WTO) would be in serious doubt if major economies such as the United States left it, a prospect raised a day earlier by U.S. President Donald Trump.
Market Overview: US 10yr note futures are up 0.493% at 130-15, S&P 500 futures are down -1.31% at 2893.5, Crude oil futures are down -2.75% at $55.53, Gold futures are up 0.78% at $1525.9, DXY is down -0.12% at 97.693, CAD/USD is up 0.53% at 0.7522.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.325% | 2 Year | 1.601% |
| 5 Year | 1.171% | 5 Year | 1.499% |
| 10 Year | 1.152% | 10 Year | 1.589% |
| 30 Year | 1.374% | 30 Year | 2.023% |
US Economic Data
| 07:00 AM | MBA Mortgage Applications, Aug 9 Survey: — Actual: 21.70% Prior: 5.30% |
| 08:30 AM | Import Price Index MoM, Jul Survey: -0.10% Actual: 0.20% Prior: -0.90% |
| Import Price Index YoY, Jul Survey: -2.00% Actual: -1.80% Prior: -2.00% | |
| Export Price Index MoM, Jul Survey: -0.10% Actual: 0.20% Prior: -0.70% | |
| Export Price Index YoY, Jul Survey: — Actual: -0.90% Prior: -1.60% |
Canadian Economic Data
There is no Canadian economic data for today.
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, Émile Bordeleau
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230