Market Update
- US tsys slightly higher, curve flatter, US 10Y 1.575 (-0.5bps). Tsys lagging the core Euro bonds which are seeing renewed bull flattening with the 10Y bund yield -4bps @ -0.074%. Hawkish comments from Fed Fischer weighting on shorter term yields – Fischer noted the US economy is close to the Fed’s goal of max employment and price stability. Lower crude also supporting l.t. bonds – the Oct Brent contract breaking below $50 down ~3.0%. Stock futures lower, Euro stoxx down 0.50%, the USD index higher yet close to unch after rising overnite, bullish momentum in the JPY despite BOK Kuroda comments that the central bank could lower interest rates further. GOCs moving higher with tsys, curve flatter led by the 10Y. Provi spds opening better bid after closing the week 1-2bps tighter led by the long end. Supply in the near term unlikely after a slew in issuance last week, thou conditions are favorable for issuance given the flattening of the GOC & provi credit curves
News headlines
- Dollar gains, U.S. yields rise as investors await Fed hike signal (Reuters) The dollar strengthened and U.S. Treasury yields hit a two-week high on Monday on expectations the Federal Reserve will give a signal this week that it is gearing up to raise interest rates. An upbeat assessment of the U.S. economy’s strength from Fed Vice Chairman Stanley Fischer on Sunday was seen raising the prospect of Fed chair Janet Yellen flagging up a rate rise at a meeting with the world’s central bankers on Friday.
- Oil falls as China fuel exports jump, U.S. rigs rise (Reuters) Oil prices fell nearly 3 percent on Monday as China ramped up exports of refined products, U.S. oil producers added rigs for an eighth consecutive week, and prospects emerged for increased exports from Iraq and Nigeria. Brent crude futures LCOc1 were trading at $49.39 per barrel at 1028 GMT, down $1.49 from their last close.
- Fischer Signals 2016 Rate Hike With Economy Nearing Fed Goals (Bloomberg) Federal Reserve Vice Chairman Stanley Fischer signaled that a 2016 rate hike is still under consideration, saying the U.S. economy is already close to meeting the central bank’s goals and that growth will gain steam. “We are close to our targets,” Fischer said in a speech at the Aspen Institute in Aspen, Colorado on Sunday. “Looking ahead, I expect GDP growth to pick up in coming quarters, as investment recovers from a surprisingly weak patch and the drag from past dollar appreciation diminishes,” he added, without giving explicit views on his rate outlook.
- Show of European unity: Merkel, Hollande, Renzi meet to discuss gameplan (Reuters) The leaders of Germany, France and Italy will meet on Monday to discuss how to keep the European project together in the second set of talks between the premiers of the euro zone’s three largest economies since Britain’s shock vote to leave the bloc. Italian Prime Minister Matteo Renzi hosts German Chancellor Angela Merkel and French President Francois Hollande on an island off the coast of Naples ahead of September’s EU summit called to discuss reverberations from the Brexit vote.
- Pfizer to buy Medivation in $14 billion deal (Reuters) Pfizer Inc (PFE.N) said on Monday it would buy U.S. cancer drug company Medivation Inc (MDVN.O) in a deal valued at about $14 billion to boost its oncology portfolio. Pfizer will offer Medivation shareholders $81.50 per share in cash, a substantial premium to Sanofi SA’s (SASY.PA) first offer of $52.50 made in April that forced Medivation to put itself up for sale.
- Alimentation Couche-Tard Inc to buy Texas-based convenience store chain CST Brands Inc for $4.4 billion (Financial Post) Alimentation Couche-Tard Inc. has announced a US$4.4-billion friendly deal to buy Texas-based CST Brands Inc. The announcement comes after news of a possible deal between the two convenience store companies became public last week. Quebec-based Couche-Tard says it will pay US$48.53 cash per share of CST Brands. The total value of the deal includes assumed debt that Couche-Tard will assume. CST employs 14,000 people at more than 2,000 locations in the southwestern United States.
- Valeant shakeup continues, hires Zoetis’s Paul Herendeen as CFO (TheGlobeAndMail) The shakeup in the executive ranks at Valeant Pharmaceuticals International Inc. continues with the appointment of a new chief financial officer. The Laval, Que.-based drug giant said on Monday it has hired Paul Herendeen as executive vice-president, finance. Mr. Herendeen is leaving animal health company Zoetis Inc., where he had been CFO for the past two years. Current Valeant CFO Robert Rosiello is stepping down immediately but will stay on to oversee corporate development and strategy at embattled Valeant.
Overnight markets
- Overview: US 10yr note futures are up 0.1184% at 132-4, S&P 500 futures are down -0.19% at 2177.5, Crude oil futures are down -2.6% at $47.26, Gold futures are down -0.36% at $1341.4, DXY is up 0.16% at 94.662.
US Economic Data
- 8:30 AM: Chicago Fed Nat Activity Index, July, 0.27, est. 0.20 (prior 0.16, revised 0.05)
Canadian Economic Data
- 8:30 AM: Wholesale Trade Sales, m/m, June, 0.7%, est. 0.1% (prior 1.8%, 1.9%)
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, David Leclair-Legault
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230