Market Update
Treasuries prices open NY higher, fractionally flatter, follow core EGBs upward within range on light summer volume, France’s July 14th Bastille Day holiday. US equities futures mixed. Rally post data, holding gains on the double miss, orderly trade on moderate volume. Treasuries jump on soft core 0.1% June CPI and weak -0.2% June retail sales; 10Y yield is at 2.309%, vs. 2.332% at 8:26am. Tsys see 5/30Y steepeners, but 2/5Y, 2/7Y, 2/10Y flatteners. TIPS meanwhile also saw some buying. Those who bought 30Y auction Thurs at 2.936% rate, would have a profit, as WI 30Y is now at 2.891%.
News headlines
Bonds Gain, Stocks Steady as CPI Tests Fed Resolve: Markets Wrap (Bloomberg) Bonds rebounded while U.S. stock futures were steady as U.S. inflation data and bank earnings roll in, serving as a test for the strength of the economy. Treasuries headed for their first weekly gain in three, bolstered by Fed Chair Janet Yellen’s gradualist tone to policy tightening as inflation languishes below the central bank’s 2 percent target. Bunds rose for the first day in four. A gauge of the dollar fell for the fifth day, its longest streak of losses in two months. S&P 500 index futures were little changed after financial shares led gains yesterday. JPMorgan Chase & Co. reported quarterly earnings that were largely in line with expectations, although fixed-income revenue was hurt by low volatility.
Oil Sands Help Shale Stymie OPEC’s Effort to Rebalance Market (Bloomberg) OPEC producers are finding that shale oil drillers aren’t their only adversaries in their battle to drain a three-year crude glut. As oil rigs in the U.S. jumped 45 percent this year, north of the border, oil-sands companies including Devon Energy Corp., Suncor Energy Inc. and Cenovus Energy Inc. have ramped up operations as well. Their thermal production sites are running as much as 30 percent above capacity this year, squeezing barrels from existing production sites to maximize revenue.
Sterling inches higher, investors split on BoE rate hike (Reuters) Sterling rose against the dollar on Friday, investors still weighing the likelihood of an interest rate rise from the Bank of England after labour market data this week offset some worries over Britain’s exit from the European Union. The pound has recovered from its losses after Britain’s election in June as a number of BoE policymakers have spoken out in favour of reversing a rate cut delivered in the wake of the Brexit vote last year.
Canada-U.S. softwood deal possible by next month: forestry analyst (TheGlobeAndMail) The framework for a 10-year softwood lumber agreement between Canada and the United States could be reached in the coming weeks, an industry analyst says, citing discussions with unnamed trade contacts. In a report released on Thursday, Hamir Patel of CIBC World Markets Inc. said a deal setting quotas on Canadian softwood exports could be acceptable to the U.S. lumber industry if Canada drops several demands. That would include withdrawing a request that New Brunswick be excluded from any softwood agreement restrictions, Mr. Patel said.
IMF cautions Bank of Canada against tightening a day after it raised the rate (Financial Post) The International Monetary Fund said on Thursday that while Canada’s economy has regained momentum, housing imbalances have increased and uncertainty surrounding trade negotiations with the United States could hurt the recovery.
Sears Canada extends benefits to former employees while seeking approval for sales process (Financial Post) Sears Canada can begin soliciting potential buyers, an Ontario judge ruled Thursday, three weeks after the struggling retailer filed for creditor protection. Ontario Superior Court Justice Glenn Hainey approved the motion for the sale and investor solicitation process after several hours of negotiations between lawyers representing the company, its lenders and retirees and laid-off employees, according to the Canadian Press.
Overnight markets
Overview: US 10yr note futures are up 0.349% at 125-27, S&P 500 futures are up 0.05% at 2446.75, Crude oil futures are up 1.19% at $46.63, Gold futures are up 0.34% at $1221.4, DXY is down -0.11% at 95.621, CAD/USD is down -0.22% at 0.7877.
US Economic Data
| 8:30 AM | CPI, m/m, Jun, 0.0%, est. 0.1% (prior -0.1%) |
| CPI Ex Food and Energy, m/m, Jun, 0.1%, Jun 0.2% (prior 0.1%) | |
| CPI, y/y, Jun, 1.6%, est. 1.7% (prior 1.9%) | |
| CPI Ex Food and Energy, Jun, 1.7%, est. 1.7 % (prior 1.7%) | |
| Retail Sales Advance, m/m, Jun, -0.2%, est. 0.1% (prior -0.3%, revised -0.1%) | |
| Retail Sales Ex Auto, m/m, Jun, -0.2%, est. 0.2% (prior -0.3%) | |
| Retail Sales Ex Auto and Gas, Jun, -0.1%, est. 0.4% (prior 0.0%) | |
| 9:15 AM | Industrial Production m/m, Jun, est. 0.3% (prior 0.0%) |
| Capacity Utilization, Jun, est. 76.8% (prior 76.6%) | |
| Manufacturing (SIC) Production, Jun, est. 0.2% (prior -0.4%) | |
| University of Michigan Sentiment, Jul P, est. 95.0 (prior 95.1) |
Canadian Economic Data
There is no major economic data release 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, David Leclair-Legault
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230