cti2015header-morning comments web

Market Update

  • Tsys basically unch from after volatile overnite session following BOJ’s policy announcement, the 10Y yield rising sharply by ~4bps to 1.74% then falling back close to unch @ 1.68%. The BOJ left rates unch, deciding instead to target the yield curve – the 10Y JGB yield rose to 0% for the first time since March, yet ended at -0.04%. The Yen fell initially yet is now sharply higher with USDJPY below 101.40 support – clearly the mkt remains unconvinced as far as the BOJ’s new ‘tweaking’ measures. GOCs slightly lower in line with tsys, provis opening 0.5bps weaker with supply less likely prior to FOMC this aft. In corps we have seen buying in 5Y NVCC and bank FRNS lately, expect that a status quo FOMC this afternoon will be supportive for credit in general, higher beta in part.

 News headlines                                                                                                

  • Banks Emerge as Winners From BOJ With Bonds, Yen Erasing Losses (Bloomberg) The Bank of Japan shifted the focus of its monetary stimulus Wednesday from expanding the money supply to controlling interest rates, which some economists deemed as further evidence that BOJ policy had reached the limits of its effectiveness. The central bank said it would adjust the volume of its asset purchases, the core of its framework until now, as necessary in the short term to control bond yields, while keeping it at about 80 trillion yen ($780 billion) annually over the long term.
  • Oil jumps after surprise drop in U.S. crude inventories (Reuters) Oil prices jumped 2 percent on Wednesday after a surprisingly large drop in U.S. crude inventories and as an oil services workers strike in Norway threatened to cut North Sea output. Brent crude futures LCOc1 were up 91 cents at $46.79 per barrel by 1113 GMT, while West Texas Intermediate (WTI) crude futures CLc1 rose by 96 cents to $45.01 a barrel.
  • Fed expected to keep rates unchanged, may signal year-end hike (Reuters) The U.S. Federal Reserve is expected to keep interest rates unchanged on Wednesday amid tepid inflation and recent weak economic data, but could signal an increased likelihood of a hike by the end of the year. The U.S. central bank raised its benchmark overnight interest rate to a range of 0.25 percent to 0.50 percent in December, the first hike in nearly a decade, but has held rates steady this year.
  • German retail, construction associations lift 2016 sales forecasts (Reuters) Germany’s HDE retail association and the HDB construction association on Wednesday raised their sales forecasts for 2016 in a further sign that private consumption and building activity will propel growth in Europe’s biggest economy this year.
  • BoE paper says system-wide stress-testing would bring benefits (Reuters) Extending bank stress testing to the wider financial system could be the next step by regulators to root out weaknesses that undermine stability, a Bank of England paper said on Wednesday. The Bank has been conducting its own stress test of banks since the 2007-09 financial crisis, supplementing European Union tests. The aim is to spot flaws in business models and check if lenders are holding enough capital to withstand big market shocks.
  • OECD Sees Globalization Stalling as Weak Trade Hurts Economy (Bloomberg) A collapse in trade growth suggests that globalization may be stalling and is contributing to a stagnation in world economic output, the Organization for Economic Cooperation and Development said. The OECD trimmed its global growth forecasts by 0.1 point for this year and next to 2.9 percent and 3.2 percent, respectively. The volume of world trade declined in the first quarter and will fall short of overall output growth in the full year, the Paris-based organization said Wednesday in a report.
  • Expect lower interest rates for some time to come, Bank of Canada signals (Financial Post) The Bank of Canada governor is not alone in warning that weak economic growth and low interest rates have been with us for far longer than anticipated, and that trend is unlikely to change any time soon. It’s not just a domestic concern either, Stephen Poloz said Tuesday, but a global one that requires a lot of economic repairs across borders.

Overnight markets    

  • Overview: US 10yr note futures are down -0.0479% at 130-14, S&P 500 futures are up 0.29% at 2137.25, Crude oil futures are up 1.66% at $44.78, Gold futures are up 1.12% at $1332.9, DXY is down -0.17% at 95.856.

US Economic Data

  • 8:30 AM : Wholesale Trade Sales, m/m, Jul, 0.3%, est. 0.3% (prior 0.7%)
  • 14:00 AM : FOMC Rate Decision, Sep 21th, est. 0.25%-0.50% (prior 0.25%-0.50%)
    •         Fed Summary of Economic Projections

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