Market Update

Tsys lower, extending declines in recent trade after BOE policy announcement and hawkish minutes, market discounting threats from N. Korea to ‘sink Japan and reduce US to ashes’ –  US 10Y 2.208 (+2bps). Tsys traded in narrow range overnite until BOE,  then fell with gilts after BOE minutes suggested some removal of stimulus would be appropriate, despite a 7-2 vote to leave rates unchanged as expected. A full rate hike is now priced in by February from July pre-meeting based on short sterling futures. Gilt yields sharply higher 4-9 bps and the curve 5bps flatter. GOCs lower in line with tsys, the 10Y @ 2.09% now firmly above 2.07% resistance from July 31st. On the curve, notable flattening in 10s30s late yest 34.5 one-month lows, seemed to be short covering driven by new issue pricing.  Provis continue to be well bid, spds 3bps tighter on the week – Alberta/Ont 48 roll 7.5/7.0  lows since Jan. Active in corps yesterday with over $2bln in primary issuance including $450mln (upsized) Capital Power 7Y @ 235 & $200mln 5Y Morguard 5Y @ 255 – both of which were 5bps tighter on the break. Weve traded the MRCCN 20s recently in the 220 context.

News headlines 

Bank of England hints that interest rate rise is coming, sending pound soaring – business (TheGuardian) The central bank is expected to keep both its key interest rate and QE unchanged as rhetoric takes a hawkish tilt to warn on rate hikes.

US intelligence shows North Korean preparations for a possible missile test (CNN) CNN has learned that US intelligence indicates that North Korea is making preparations for another intercontinental ballistic missile (ICBM) or intermediate range missile test. Two administration officials familiar with the latest intelligence confirm there are indicators of test preparations that could lead to a potential launch in about two weeks.

Saudi Aramco says IPO on track after report it is preparing for possible delay (Reuters) Saudi Aramco’s planned initial public offering remains on track, the company said on Thursday, after Bloomberg reported that the oil company is preparing contingency plans for a possible delay by a few months into 2019. Saudi authorities are aiming to list up to 5 percent of the world’s largest oil producer on both the Saudi stock exchange inRiyadh, the Tadawul, and one or more international markets in anIPO that could raise $100 billion.

U.S. consumer prices accelerate in August (Reuters) U.S. consumer prices accelerated in August amid a jump in the cost of gasoline and rents, signs of firming inflation that could allow further monetary policy tightening from the Federal Reserve this year. The Labor Department said on Thursday its Consumer Price Index rose 0.4 percent last month after edging up 0.1 percent in July. August’s gain as the largest in seven months and lifted the year-on-year increase in the CPI to 1.9 percent from 1.7 percent in July.

Trump Bars Chinese-Backed Firm From Buying U.S. Chipmaker Lattice (NYTimes) U.S. President Donald Trump blocked a Chinese-backed private equity firm from buying a U.S.-based chipmaker on Wednesday, sending a clear signal to Beijing that Washington will oppose takeover deals that involve technologies with potential military applications.

Overnight markets 

Overview: US 10yr note futures are down -0.086% at 126-11, S&P 500 futures are down -0.06% at 2493.25, Crude oil futures are up 1.12% at $49.85, Gold futures are down -0.32% at $1323.7, DXY is down -0.22% at 92.315, CAD/USD is up 0.2% at 0.8198. 

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.583% 2 Year 1.359%
5 Year 1.802% 5 Year 1.787%
10 Year 2.088% 10 Year 2.208%
30 Year 2.434% 30 Year 2.804%

US Economic Data 

8:30 AM Initial Jobless Claims, Sep 9, 284K (Prior 298K)
Continuing Claims, Sep 2, 1944K (Prior 1940K, revised 1951K)
CPI, m/m, Aug, 0.4%,  est. 0.3% (prior 0.1%)
CPI Ex Food and Energy, m/m, Aug, 0.2%,  est. 0.2% (prior 0.1%)
CPI, y/y, Aug, 1.9%,  est. 1.8% (prior 1.7%)
CPI Ex Food and Energy, y/y, Aug, 1.7%,  est. 1.6% (prior 1.7%)
CPI Core Index, Aug, 252.5K (prior 251.9K)
CPI Index, Aug, 245.5K (prior 244K)
9:45 AM Bloomberg Consumer, Sept, (prior 52.6)

Canadian Economic Data 

8:30 AM Housing Price Index, Jul, 0.4%, est. 0.4% (prior 0.2%)
Housing Price Index, y/y, Jul, 3.8%(prior 3.9%)


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

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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