Market update
US tsys trading sharply lower after Housing Starts surprised to the upside, rising 6.5% in Sep vs 1.4% exp – US 10Y 2.066 (+4.3bps). Core Euro bonds lower underperforming tsys, German 10Y bund ~5bps higher @ 0.62% as hopes fade for further ECB stimulus (see above). UK gilt curve flatter as longs drew support from record bids for new 50Y gilt sale. GOCs are lower marginally wider vs tsys after surprise Liberal majority, with the CAD also reversing early morning weakness, trading below 1.30. Provis opening tighter again, despite 3bp narrowing yest – supply expected but heavy tone in GOCs may upend plans to issue. Long onts have now retraced 60% of the widening since mid Sep. Levels: Ont 25s 96.5/95.5, Ont 46s 106.5/105.5, QC 48 112/111, QC/ON 25 rl 5.8/5.5 –unch from last week.
News headlines
- European Stocks Decline, Euro Rallies as ECB QE Optimism Fades (Bloomberg) European stocks fell for the first time in four days and the euro strengthened after lending data dented speculation that quantitative easing will be increased. Government bonds dropped.
- Canada’s Trudeau topples PM Harper in shock election win (Reuters) Canada’s Liberal leader Justin Trudeau rode a late surge to a stunning majority election victory on Monday, toppling Prime Minister Stephen Harper’s Conservatives with a promise of change and returning a touch of glamor, youth and charisma to Ottawa.
- The bright side of a majority Liberal government for Alberta’s energy sector (FP) A second wave of change hit Alberta Monday as Justin Trudeau’s Liberals won a surprise majority mandate, promising less favourable energy policies and stepped up environmental stewardship.
- Treasuries Defy Goldman Call as Returns Beat German, U.K. Bonds (Bloomberg) Treasuries have outperformed German and U.K. government bonds in October, defying Goldman Sachs Group Inc., which stuck to its call that the U.S. bonds were expensive, saying investors underestimated the outlook for inflation.
- With all this talk of headwinds and tech threat, are the Canadian banks really in trouble? (FP) There is no shortage of warning signs for the Canadian banks. Economic headwinds and technological threats are regular topics of discussion in the media, and at the banks’ own investor meetings. Yet amid all the doom and gloom, the banks continue to deliver solid results.
Overnight markets
- Overview: IG24 5Y 76.288/76.908 (+0.758), US 10yr note futures are down -0.24% at 128-21, S&P 500 futures are down -0.16% at 2024.25, Crude oil futures are up +0.04% at 45.91, Gold futures are up +0.17% at $1174.8, DXY is down -0.24% at 94.698.
US Economic Data
- Housing starts came in at 1206K (+6.5% MoM) in September versus August 1132K (-1.7% MoM).
- Building permits increase to 1103K (-5.0% MoM) in September compared to previous month 1161K (2.7% MoM).
Canadian Economic Data
- Wholesale trade sales came in at -0.1% MoM in August equal to July -0.1% decrease and lower than expected (0.2%).
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