cti2015header-morning comments web

Market Update

  • Tsys higher & flatter, yields 2-4 bps lower led by the long end, US 10Y 1.688 (-2.4), volumes light in tsy futures (191k in TY1) as Japan returns from vacation. Core Euro bonds higher, bund & gilt curves both sharply flatter as well – strong demand seen at UK 30Y gilt auction. GOCs higher, spds ~1bp wider vs tsys, yields ~2bps lower with the 10Y 1.17%. Poloz scheduled to deliver a speech entitled ‘lower for longer’ in Quebec City at 12:50PM. More buying of long provis yest left spreads 2-3bps tighter led by the long end the and Ont 10/30 credit curve 1bp flatter 13.4/13 from 14.5 on Friday. Ont 26s lifted late in the day at 83, Ont 48s closed 96 bid. Spds opening firm despite lower Cda yields, could still see some supply ahead of FOMC.

 News headlines                                                                            

  • Dollar Falls With Treasuries Amid Fed, BOJ Countdown; Oil Rises  (Bloomberg) The dollar dropped with Treasuries as traders braced for key policy decisions in the U.S. and Japan. Oil rallied. The dollar dropped with Treasuries as traders braced for key policy decisions in the U.S. and Japan. Oil rallied.
  • Fed again poised to cut longer-run interest rate forecast (Reuters) U.S. Federal Reserve policymakers are set this week to again cut their forecasts for how high interest rates will need to go in an economy where output, productivity and inflation are growing at a slower pace than in past decades. It would be the fourth time in 15 months that the U.S. central bank has been forced to admit its estimate of this so-called neutral rate was too optimistic, raising questions about the health of the economy in the coming years.
  • Two of Fed’s Own Primary Dealers Warn Shock Hike Awaits Markets (Bloomberg) There’s uncommon dissent in the ranks of the Federal Reserve’s primary dealers over the central bank’s interest-rate decision this week. Two of the Fed’s 23 preferred bond-trading partners — Barclays Plc and BNP Paribas SA — are betting against their peers and the bond market by forecasting officials will raise rates Wednesday. It’s the first time more than one dealer has gone against the consensus during the week of a policy meeting since last September, data compiled by Bloomberg show. Economists at both banks say traders have too steeply discounted officials’ intent to hike after the Fed has remained on hold for longer than expected.
  • BOJ seen easing policy on Wednesday; economists split on next move (Reuters) The Bank of Japan is expected to further ease its ultra-loose policies at this week’s meeting, a Reuters poll of economists found on Tuesday, as it struggles to overcome chronic stagnation and quell speculation that it is running out of options. The economists polled Sept. 14-20 were largely split over whether the BOJ’s next move would be to cut its negative interest rate even deeper, or to ramp up or recalibrate its asset purchase program, or even do both.
  • OPEC may decide on extra meeting immediately after Algiers: Algeria (Reuters) OPEC members could decide to hold an extraordinary meeting to discuss oil prices immediately after an informal gathering in Algiers next week, Algerian Energy Minister Noureddine Bouterfa said on Tuesday. Bouterfa told local radio he was optimistic that participants would reach a consensus on how to stabilize the oil markets at the Algiers meeting of OPEC and non-OPEC producers on Sept. 26-28.
  • Encana unveils stock sale to pay down debt, fund spending (The Globe And Mail) Encana Corp. is raising more than $1-billion (U.S.) in a marketed share issue, a departure from priced bought deals that are more often used to raise money in the oil patch. Encana plans to use half the proceeds from the sale of 107 million shares to help fund its 2017 capital spending, much of which will be in the Permian shale oil play in Texas. The rest will be used to reduce debt, which has hovered slightly above industry norms.
  • Export Development Canada sets up shop in London in Brexit’s wake (The Globe And Mail) Export Development Canada is opening an office in London and hopes to take advantage of opportunities created by Brexit. “Some people may be asking why EDC would choose the U.K. at this time. The answer is simple: Where some see risk and volatility after the Brexit vote, EDC sees opportunity,” said Mairead Lavery, EDC’s senior vice-president of business development.

Overnight markets

  • Overview: US 10yr note futures are up 0.0479% at 130-16, S&P 500 futures are up 0.35% at 2140.5, Crude oil futures are down -1.18% at $42.79, Gold futures are down -0.08% at $1316.8, DXY is up 0.1% at 95.936.

US Economic Data

  • 8:30 AM: Housing Starts, Aug, 1142k , est. 1190k (prior 1211k, revised 1212k )
    • Housing Starts, m/m, Aug, , est. -1.7% (prior 2.1%, 1.4%)
    • Building Permits, Aug, , est. 1165k (prior 1152k, 1144K)
    • Building Permits, m/m, Aug, , est. 1.8% (prior -0.1%, -0.8%)

Canadian Economic Data

  • There is major economic data release 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, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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