Market update
US tsys opening lower for the first time in four days after stronger Sep core CPI/ lower claims, US 10Y 2.025 (+5bps) curve with 2s & longs out performing. CPI came in as exp falling 0.2% overall yet the core rose 0.2% /1.9% y/y vs 0.1%/1.8% exp driven by 0.5% increase in furniture , 0.3% rise in OER & medical. Claims fell 7k to 255k the lowest since 1973 (BN). Core Euro bonds lagging the move in tsys, German 10Y bunds at 0.55 close to 0.50% low from May/Sep. In corps, just 2 deals expected to price in the US so far today -$600M CSX & $500M Dollar General – yet AB InBev is said to be planning as much as a $55bln bond sale to finance part of the ~100+bln purchase of SABMIller. In Canada, GOCs are lower, curve steeper in directional move with higher 10Y yields, 10s/30s flatter thou 80.5 (-1.5bps) consistent with US. Of note, despite the ~1.5bp narrowing in the 10Y roll over the past week(11.6/11.4), the 26/10Y roll continues to cheapen (15.9/15.5)– highlighting the fact that June26s look cheap on the curve. Provis 0.5bps wider, Ont 46s trading down at 111.5 – Ont, Sask rumoured for today .
News headlines
- Goldman Sachs Posts Weaker Results (WSJ) Goldman Sachs Group Inc.’s quarterly profit tumbled as the big U.S. bank with the greatest dependence on Wall Street waded through choppy markets that damped clients’ appetite to trade.
- Goldman Earnings Miss as Bond Traders Suffer (WSJ) Goldman Sachs Group Inc.’s quarterly profit tumbled 36% as the big U.S. bank with the greatest dependence on Wall Street was trounced by volatile markets.
- Oil Bears Buck Market Sentiment (WSJ) Oil prices might have rebounded from multiyear lows but some market bears think the cost of a barrel could still almost halve from current levels by next summer.
- Fed splits fuel doubts on 2015 rate rise (FT) Market concerns are rising over divisions at the top of the Federal Reserve on when to lift interest rates, casting fresh uncertainty over the US central bank’s strategy for withdrawing its monetary stimulus.
- Surging Canadian Liberals ask for majority mandate in next week’s election (Reuters) Canadian Liberal leader Justin Trudeau, surging in opinion polls in the final stretch of the election campaign, asked voters on Wednesday to give him a majority government on Oct 19 – but insisted he would not get over-confident.
- Energy stocks will see red if anyone but Stephen Harper wins this election (FP) Like much of the country, energy stocks could turn red if Liberals win next week’s federal election. “A non-Conservative government would likely be negative for energy equities,” Toronto-based investment bank Canaccord Genuity said in a new report.
Overnight markets
- Overview: IG24 5Y 80.067/80.733 (-0.801), US 10yr note futures are down -0.28% at 129-06, S&P 500 futures are up +0.57% at 1995.25, Crude oil futures are down -0.96% at 46.19, Gold futures are up +0.77% at $1188.9, DXY is up +0.15% at 94.073.
US Economic Data
- Initial jobless claims came in at 255K for the week ending October 10th, lower than expected (270K) and prior week (263K).
- Continuing claims decreased to 2158K from 2208K and lower than expected (2200K).
- Empire manufacturing increased to -11.36 in October from a reading of -14.67 in September. Analysts had expected the index to rise to -8.0.
- CPI decrease -0.2% MoM (+0.0% YoY) in September (-0.2% MoM and -0.1% YoY Expec) versus August -0.1% MoM (0.2% YoY).
- CPI core came in at 0.2% MoM (1.9% YoY) in September (0.1% MoM and 1.8% YoY Expec) compared to previous month 0.1% MoM (1.8% YoY).
- Philadelphia Fed is forecast at -2.0 in October above September level of -6.0.
- Monthly budget statement is forecast at $95.0B in September versus $105.8B in August.
Canadian Economic Data
- Teranet/National bank housing price index for the month of September came in at 0.6% MoM and 5.6% YoY.
- Existing home sales for September will be release at 9:00.
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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230