Market Update
Tsys lower with the 10Y 2.31% (+1bp), lagging the rally in core European bonds esp UK gilts after BOE Carney comments. Equities unch, gold lower for a second day, crude surged o/n to 52.37 on Iraq conflict. UK gilts higher, 10Y gilt 1.30% at mth lows, after Carney suggested raising rates to ‘build a war chest’ for future shocks was not consistent with inflation targeting and the unwind of QE would be gradual. Short end of ‘Sonia’ mkt pricing 80% odds of a rate hike in Nov. GOCs slightly higher, 1bp tighter vs tsys. Provis unch, BC continues to perform – the BC/Ont 48 roll 0.7bps narrower since Friday
News headlines
Taylor Impresses Trump for Fed Chairman, Warsh Slips (Bloomberg) Stanford University economist John Taylor, a candidate for Federal Reserve chairman, made a favorable impression on President Donald Trump after an hour-long interview at the White House last week, several people familiar with the matter said.
North Korea Warns That Nuclear War Could ‘Break Out Any Moment’ (Bloomberg) North Korea warned that a nuclear war “may break out any moment” as the U.S. and South Korea began one of the largest joint naval drills off both the east and west coasts of the peninsula.
BOE Nears ‘Tipping Point’ as Inflation Climbs to 5 1/2 Year High (Bloomberg) U.K. inflation reached 3 percent for the first time in more than five years in September, taking the economy closer to what one Bank of England official described as a “tipping point” for policy.
Brexit Timeline Pushed Back as May’s Late Push Comes Up Short (Bloomberg) Last-minute efforts by U.K. Prime Minister Theresa May to unblock stalled Brexit talks came up short with European Union officials now looking to December to move negotiations on to discussions about the future EU-U.K. relationship.
China’s Stocks, Bonds, Currency Drop in Unison Before Congress (Bloomberg) Caution is spreading through China’s financial markets before the start of a crucial Communist Party gathering. The Shanghai Composite Index fell for a second day and government bonds retreated, with the 10-year yield rising to an almost three-year high, while the yuan retreated 0.5 percent against the dollar. With analysts expecting little in the way of substantial reforms to emerge from the twice-a-decade congress, which begins Wednesday, investors focused on comments from the chief of the central bank which suggested stronger action to cut corporate leverage.
Spain Jails Separatists as Growth Forecast Lowered on Catalonia (Bloomberg) Spain cut its economic forecast for 2018 as the costs of the Catalan crisis begin to mount. Output will grow by 2.3 percent next year instead of the 2.6 percent previously projected, the economy ministry said in an emailed statement just before midnight, citing the impact of the political standoff in Catalonia, which accounts for a fifth of Spain’s gross domestic product, and the related struggle to approve a budget.
Airbus Snaps Up Bombardier Jet in New Challenge to Boeing (Bloomberg) Airbus SE agreed to acquire a majority stake in Bombardier Inc.’s C Series program and will start assembling the jetliner in the U.S., vaulting a technologically advanced but slow-selling plane onto the front lines of the battle with Boeing Co. over global aircraft sales.
Morgan Stanley’s profit tops estimates as wealth management shines (Financial Times) Morgan Stanley’s exposure to wealth management and cuts at its debt dealing business have once again helped it weather a tough period for investment banks as it delivered improved third quarter profits.
Powell likely next Fed chief, though Yellen best suited: economists (Reuters) Jerome Powell likely will be the next Federal Reserve chairman, according to a slim majority of economists in a Reuters poll – but most of them said current Fed Chair Janet Yellen would be the best option.
Overnight markets
Overview: US 10yr note futures are up 0.012% at 125-14, S&P 500 futures are down -0.03% at 2555.5, Crude oil futures are up 0.44% at $52.1, Gold futures are down -0.97% at $1290.4, DXY is up 0.25% at 93.546, CAD/USD is up 0.11% at 0.7979
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.519% | 2 Year | 1.534% |
| 5 Year | 1.713% | 5 Year | 1.95% |
| 10 Year | 2.016% | 10 Year | 2.303% |
| 30 Year | 2.377% | 30 Year | 2.821% |
US Economic Data
| 8:30 AM | Import Price Index MoM, Sep 0.7% est 0.6% (0.6% prior) |
| Import Price Index ex Petroleum MoM, Sep 0.3% est 0.2% (0.3% prior) | |
| Import Price Index YoY, Sep 2.7% est 2.6% (2.1% prior) | |
| Export Price Index MoM, Sep 0.8% est 0.5% (0.6% prior) | |
| Export Price Index YoY, Sep 2.9% (2.3% prior) | |
| 9:15 AM | Industrial Production MoM, Sep est 0.3% (-0.9% prior) |
| Capacity Utilization, Sep est 76.2% (76.1% prior) | |
| Manufacturing (SIC) Production, Sep est 0.2% (-0.3% prior) | |
| 10:00 AM | NAHB Housing Market Index, Oct est 64 (64 prior) |
| 16:00 PM | Total Net TIC Flows, Aug (-7.3b prior) |
| Net Long-term TIC Flows, Aug (1.3b prior) | |
| 10/17-10/20 | Monthly Budget Statement, Sep 6.0b (33.4b prior) |
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, Hugues Savard
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230