Market Update

US tsy & GOC mkts diverging this morning… US tsys lower, yields 2bps higher with the 10Y 2.29% (+2bps) after hawkish comments from Yellen over the weekend. Yellen said the economic drag from Hurricanes will be brief, soft inflation won’t persist. GOCs are bid particularly in the short end with 2-5Y yields 2.5-3bps lower. BOC governor Poloz said he expects the domestic economy to slow in the second half consistent with reaching full capacity, while the addition of   ‘capacity enhancing’ investment means both inflation & wages are not expected to rise as quickly as one would expect at this stage in the cycle. The CAD has spiked higher 1.2533 (+0.50%). The BOC will release its Qtrly Business Outlook Survey at 10:30 which should reflect some moderation in hiring and investment after a strong Q2.

News headlines 

Yellen Calls Inflation the ‘Biggest Surprise’ in the Economy (Bloomberg) Federal Reserve Chair Janet Yellen said that the U.S. central bank expects to continue to raise interest rates gradually as solid growth, a strong labor market and a healthy global economy lift prices even as she recognized that inflation has been surprisingly low.

Catalans Defend Claim to Independence as Spain Prepares to Act (Bloomberg) Catalan President Carles Puigdemont defended his region’s claim to independence as the Spanish government signaled it will move ahead with the process of suspending self-rule this week.

Austrian Vote Paves Way for Nationalist Party to Enter Government (Bloomberg) Austrian voters paved the way for the nationalist Freedom Party to enter government, heralding a shift to the political right that’s likely to make the country a more prickly ally for its European partners.

Merkel’s Hand Weakened Ahead of Coalition Talks After Loss (Bloomberg) German Chancellor Angela Merkel heads into potentially laborious talks this week to form a national government weakened after her Christian Democratic Union suffered a defeat in Volkswagen AG’s home state.

Commodities Rise as Oil and Copper Gain; Euro Down: Markets Wrap (Bloomberg) Stocks in Europe nudged higher, led by miners, as gains in oil and copper drove Bloomberg’s gauge of commodity prices to a seven-month high. The euro weakened and Spanish shares fell after Spain’s government gave Catalonia a new deadline to back down from its independence claim.

Theresa May Heads to Brussels to Try and Break Brexit Deadlock (Bloomberg) Over dinner in Brussels, Prime Minister Theresa May will plead with Europe’s top negotiator to help unlock Brexit negotiations, as politicians back in London are sounding out cross-party alliances to try to stop the U.K. leaving the European Union without a deal.

Iraq Seizes Oil Fields as Fighting Flares Over Kurds’ State Push (Bloomberg) Iraqi forces advanced toward the disputed city of Kirkuk, as the government sharply intensified its efforts to stall moves toward a Kurdish state by seizing the oil fields that would underpin its economy. Crude exports from the disputed area were flowing normally on Monday.

Ottawa to cut small business tax rate to 9% (CBC) Ottawa will announce plans today to cut the small business tax rate from 10.5 per cent to nine per cent on Monday, CBC News has learned, as it attempts to quell a backlash to proposed tax reforms that have stung the Trudeau government.

Bombardier exploring options for aerospace businesses: Report (BNN) Canadian train-and-plane maker Bombardier Inc (BBDb.TO) is exploring options for its aerospace businesses, including a sale of some operations, Bloomberg reported on Sunday.

Canadian oil producers alter strategies in face of oil supply certainty (CBC) A shift in global oil markets sentiment is under way, replacing decades of scarcity fears with confidence in surpluses, capping oil prices and forcing changes in the way the industry works, observers say.

Overnight markets 

Overview: US 10yr note futures are down -0.025% at 125-22, S&P 500 futures are up 0.06% at 2554.25, Crude oil futures are up 1.69% at $52.32, Gold futures are up 0.23% at $1307.6, DXY is up 0.1% at 93.18, CAD/USD is up 0.58% at 0.7975. 

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.506% 2 Year 1.509%
5 Year 1.696% 5 Year 1.915%
10 Year 2.009% 10 Year 2.284%
30 Year 2.374% 30 Year 2.813%

US Economic Data

8:30 AM Empire Manufacturing, Oct 30.2 est 20.4 (24.4 prior)
10/16 – 10/20 Monthly Budget Statement, Sep est 6.0b (33.4b prior)

Canadian Economic Data

8:30 AM Int’l Securities Transactions, Aug 9.85b (23.95b prior)
10:00 AM Bloomberg Nanos Confidence, Oct 13th (58.4 prior)
10:30 AM Business Outlook Futures Sales, 3Q (31.00 prior)
BoC Senior Loan Officer Survey



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