Market Update

US tsys higher, yields 2-3bps lower, 10Y 1.77% , avg volume in TY futures (305k). Trading subdued before FOMC rate decision at 2:00PM – 25bp cut expected, update on balance sheet and ‘dot plot’ forecast. The Fed will buy up to $75bln in tsys this morning (QE ‘lite’) to alleviate o/n funding concerns with overnite repo still elevated at 2.8%. Core Euro bonds higher – EU Juncker warned on risks of no-deal Brexit, while UK Aug CPI came in below exp (1.7% vs 1.9%).  GOCs continue to underperform tsys, another 3bps wider this morning, with flattening at the long end the most notable development on the GOC curve – 10s30s 16bps has plunged from 28bps Sep 4th- the 10s30s Can/US Box flattest since July (i.e. GOC curve out flattening US 10bps over the month). CPI on deck – 00.2% forecast after 0.5% rise in July.

News headlines

Bonds Rally, Stocks Struggle as Traders Await Fed: Markets Wrap (Bloomberg) Bonds rallied globally while stocks struggled for traction as investors marked time until the Federal Reserve concludes its policy meeting Wednesday, with officials expected to cut interest rates again and possibly move further to calm overnight-loan markets. The dollar rose.

Futures edge higher ahead of U.S. Fed decision (Reuters) Futures for Canada’s main stock index inched higher on Wednesday ahead of the U.S. Federal Reserve’s monetary policy decision.

Oil Stabilizes as Saudi Output Restoration Calms Market Fears (Bloomberg) Oil stabilized on signs Saudi Arabia is quickly restoring production following a debilitating weekend attack, after two tumultuous days in which it surged the most on record and then pared almost half of that gain.

From oil shocks to funding strains, Fed confronts new complexities (Reuters) The Federal Reserve will conclude its latest policy meeting on Wednesday buffeted by conflicting economic data, under steady pressure from the White House for steep interest rate cuts, and confronted as well with an unexpected jump in overnight borrowing costs that may require action on its own.

Explainer: The Fed has a repo problem. What’s that? (Reuters) As if the U.S. Federal Reserve didn’t already have enough on its plate heading into its meeting on interest rates this week, chaos deep inside the plumbing of the U.S. financial system has thrown policymakers an unexpected curveball.

U.S. lawmakers urge Trump administration to restore India’s trade privileges (Reuters) Forty-four members of the U.S. Congress have urged President Donald Trump’s trade representative to restore trade concessions to India, saying the withdrawal of the privilege had led to retaliatory tariffs from New Delhi which were hurting U.S. industry.

Britain hopes for trade deal with Australia within months of Brexit (Reuters) Britain’s Trade Minister Liz Truss said on Wednesday she expects to complete a wide-ranging trade deal with Australia within months of exiting the European Union.

U.S. mortgage applications flat as rates jump: MBA (Reuters) U.S. mortgage applications were little changed on the week even as home borrowing costs jumped in step with a surge in bond yields during a selloff in the global fixed-income market, the Mortgage Bankers Association said on Wednesday.

Market Overview: US 10yr note futures are up 0.205% at 129-18, S&P 500 futures are down -0.17% at 3002.75, Crude oil futures are down -0.69% at $58.93, Gold futures are down -0.24% at $1509.8, DXY is up 0.16% at 98.419, CAD/USD is up 0.04% at 0.7547.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.604% 2 Year 1.703%
5 Year 1.47% 5 Year 1.629%
10 Year 1.448% 10 Year 1.774%
30 Year 1.612% 30 Year 2.244%

US Economic Data

07:00 AM MBA Mortgage Applications, Sep 13  Survey: — Actual: -0.10% Prior: 2.00%
08:30 AM Housing Starts, Aug  Survey: 1250k  Prior: 1191k
       Housing Starts MoM, Aug  Survey: 5.00%  Prior: -4.00%
        Building Permits, Aug  Survey: 1300k  Prior: 1336k
       Building Permits MoM, Aug  Survey: -1.30%  Prior: 8.40%
02:00 PM FOMC Rate Decision (Upper Bound), Sep 18 Survey: 2.00%  Prior: 2.25%
         FOMC Rate Decision (Lower Bound), Sep 18 Survey: 1.75%  Prior: 2.00%
         Interest Rate on Excess Reserves, Sep 19  Survey: 1.85%  Prior: 2.10%

Canadian Economic Data

08:30 AM  CPI NSA MoM, Aug  Survey: -0.20%  Prior: 0.50%
       CPI YoY, Aug  Survey: 1.90%  Prior: 2.00%
       Consumer Price Index, Aug  Survey: 136.7  Prior: 137.0

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, Émile Bordeleau

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.

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