Market Update

US tsys higher, TY futures in a narrow overnite range before FOMC, 10Y 2.23% (-1.4bps).  GOCs unch after giving up earlier gains with the 10Y 2.09%. GOCs wider by ~2bps vs tsys mostly in 2s, reversing recent outperformance, CAD +0.36% , WTI +1.1%, EUR higher for a fifth day.  Core Euro bonds higher, bund yields ~1bp lower, gilts lagging after significant beat for August UK retail sales (+2.8% vs 1.4%).  Fed unlikely to raise rates today yet odds of a Dec hike remain elevated at 53%,  while the issue of   balance sheet tapering will likely emphasize its gradualist nature.

News headlines 

Fed to Pack Up Crisis Tool, Debate Next Hike: Decision-Day Guide (Bloomberg) Will the Federal Reserve raise interest rates again this year? That’s the big question investors are hoping policy makers clarify when they conclude a two-day meeting Wednesday. Fed officials are widely expected to leave rates unchanged as they announce a start date for the gradual unwinding of the U.S. central bank’s $4.5 trillion balance sheet. That milestone, 10 years after the onset of the financial crisis, has been so well telegraphed by officials that it looks likely to be a non-event in financial markets.

Key Republican Says No Deal on Bipartisan Obamacare Fix Bill (Bloomberg) A crucial GOP senator says that after weeks of effort, there’s not enough agreement among lawmakers to advance a small package of bipartisan changes that would stabilize Obamacare’s health insurance markets.

U.K. Retail Sales Rise More Than Forecast as Consumers Stir (Bloomberg) U.K. retail sales rose in August at their fastest pace in four months, providing further evidence of a tentative pickup in consumer spending.

Carney’s Rate Message Is Slowly Resonating With Economists (Bloomberg) Economists are gradually starting to buy what Mark Carney is selling. After Bank of England policy makers said last week that an interest-rate increase may be needed in coming months, 11 firms now expect a hike in the fourth quarter of this year, according to a Bloomberg survey. While that’s still a minority, it’s up from three last month and may climb further as economists continue to tear up their forecasts in light of the bank’s hawkish shift.

Canada posts C$17.8 billion deficit in 2016-2017 (Reuters) Canada posted a budget deficit of C$17.8 billion ($14.5 billion) for the 2016-17 fiscal year, the Finance Department said on Tuesday, below the preliminary deficit of C$21.85 billion reported in May and well above the C$1.0 billion deficit the year before.

Volkswagen Comeback Pushes Europe Bond Sales Past Trillion Euros (Bloomberg) Volkswagen AG’s return from debt market exile following its 2015 diesel emissions scandal has helped propel European bond sales past 1 trillion euros ($1.2 trillion) one month earlier than in 2016.

ECB Stimulus Is Finally Reaching the Whole Euro Zone (Bloomberg) Back in 2013, when the region was reeling from recent debt crises, the European Central Bank’s monetary policy wasn’t being reflected in lending rates in the region’s south. Greece and Portugal were both about to see serious bouts of deflation, but the transmission of ECB interest rates – at the lowest level in the institution’s history to that point – to business loans in those countries had been virtually severed.

Overnight markets 

Overview: US 10yr note futures are up 0.074% at 126-03, S&P 500 futures are up 0.02% at 2505.25, Crude oil futures are up 1.17% at $50.06, Gold futures are up 0.43% at $1316.3, DXY is down -0.09% at 91.711, CAD/USD is down -0.37% at 0.8165.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.559% 2 Year 1.389%
5 Year 1.79% 5 Year 1.821%
10 Year 2.091% 10 Year 2.232%
30 Year 2.451% 30 Year 2.807%

US Economic Data

7:00 AM MBA Mortgage Applications, Sep.15, -9.7% (prior 9.9%)
10:00 AM Existing Home Sales, Aug, 5.45m (prior 5.44m)
Existing Home Sales, m/m, Aug, 0.2% (prior 0.2%)
2:00 PM FOMC Rate Decision (Upper), Sept 20, est. 1.25% (prior 1.25%)
FOMC Rate Decision (Lower), Sept 20, est. 1.00% (prior 1.00%)

Canadian Economic Data

There is no economic data scheduled 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

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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