Market update
US tsys opening higher & flatter, US 10Y below 2.10% (2.093 -3.4bps). ‘Risk off’ session o/n with equities lower, volume in tsy futures higher than avg (TY1 <cmdty> VAT). 5Y TIPS auction this aft with 5Y breakevens ~60bps (USGGBE05 <index>) lower over the month @ 116 bps lowest since Jan after weaker CPI & lower oil. Decline in oil will hurt carry in the near term as well. Claims & Phili Fed only data today – the latter more important after sharp drop in Empire. In Canada, GOCs are higher in line with tsys except which are ~3bps wider – 10/30 crv @73.5 yest on provi related rate lock selling as well as curve steeepeners on CPI/Fed.
News headlines
- S. crude prices fall towards $40 on global glut (Reuters) U.S. crude oil prices fell to almost $40 a barrel on Thursday, their lowest since the global financial crisis of 2009, as supplies rose in North America and the Middle East, filling stockpiles to record levels.
- Markets flustered by more China volatility (FT) Equity benchmarks are under pressure while “haven” government bonds are in demand amid fretting over China’s economy and stocks, weak commodity prices, and fragile emerging markets.
- So Long September: Bond Traders Defer Their Date With the Fed (Bloomberg) So much for September.Traders gearing up for the Federal Reserve to raise interest-rates next month reversed course Wednesday after minutes from the central bank’s July meeting showed policy makers were still waffling on whether the economy is strong enough to warrant higher borrowing costs.
- Fed officials are concerned China woes could hit U.S. (Marketwatch) Concerns about China’s economy were apparent at the July meeting of the Federal Reserve, even before that country’s surprise loosening of its currency peg.
Overnight markets
- Overview: IG24 5Y 80.5/81 (+1.37), US 10yr note futures are up +0.05% at 128-05, S&P 500 futures are down -0.42% at 2064.0, Crude oil futures are up +0.37% at 40.95, Gold futures are up +1.26% at $1142.1, DXY is down -0.20% at 96.171.
- US BANK CDS (5yr): BAC 71/75 (+0), GS 90/94 (+0), MS 80/84 (+0), C 80/84 (+0), JPM 72/76 (+0), WFC 51/55 (+0)
US Economic Data
- Initial jobless claims came in at 277K for the week ending August 15, higher than expected (271K) and prior week (273K).
- Continuing claims decreased to 2254K from 2278K and lower than expected (2265K).
- Philadelphia Fed is forecast at 6.5 in August above July level of 5.7.
- Existing home sales are forecast at 5.43M (-1.1% MoM) in July versus June 5.49M (3.2% MoM).
- Leading index is forecast at 0.2% in July less than June 0.6% increase.
Canadian Economic Data
- Wholesale trade sales came in at 1.3% MoM in June better than May -0.9% decrease and higher than expected (0.9%).
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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230