22/09/2015

Market update

US tsys  trading higher, US 10Y 2.17 (-3bps) on global equity weakness with Volkswagen shares down another 18% and resource stocks down sharply – the FTSE metals & mining index -5.5%. 10Y US swap spreads narrowed to the lowest since Sep 2010 on corp issuance with ~$19bln expected to price today compared to $10bln for all of last week. Core European bonds higher, spds tighter vs tsys led by 10Y bunds on speculation ECB will extend QE. Buy stops triggered in bunds break above 155.51 according to MNI, with a spike in volume ~6:00EST (20k contracts). VW emissions probe is impacting the broader auto sector – VW CDS +130 since yest, BMW 105/115 (+34) and DAIGR 100/110(+35). Today’s focus on $26bln 2Y note auction with the WI 0.722%. GOCs are higher led by 10s (~3bps on the curve), spds tighter vs tsys reversing yesterday’s Poloz related cheapening. Provi spds are wider again, after widening 0.5bps yest – Ont 46 rumoured (102/101)as well as new QC 48. CHT 5Y pricing this morning @48.

News headlines

  • Global Stocks Turn Sharply Lower (WSJ) Global stocks turned sharply lower on Tuesday, as worries about the pace of global growth and uncertainty about the Federal Reserve’s plans to raise interest rates continued to fuel big swings in markets.
  • VW to set aside €6.5bn over emissions scandal (FT) Shares in Volkswagen tumbled nearly 20 per cent after it revealed it will set aside €6.5bn in its third quarter to deal with a sprawling emissions scandal that the carmaker now says affects some 11m vehicles worldwide.
  • Credit markets suffering from indigestion (FT) A flurry of European and US debt sales earlier this month has left companies facing a higher price of funding as capital markets suffer indigestion. Hefty debt sales during September pushed Moody’s Baa credit average yield above 5.40 per cent last week, the highest level since late in 2013 and the measure remained elevated on Monday at 5.31 per cent.
  • Forecast for economic growth in 2016 gets gloomier (G&M) For the third month in a row, economists are lowering their expectations for growth in 2016, adding pressure on federal finances at a time when party leaders are crisscrossing the country promising billions in new spending and tax cuts.

Overnight markets

  • Overview: IG25 5Y 82.704/83.087 (+1.682), US 10yr note futures are up +0.33% at 127-25+, S&P 500 futures are down -1.71% at 1929.5, Crude oil futures are down -2.83% at 45.36, Gold futures are down -0.43% at $1127.9, DXY is up +0.22% at 96.106.

US Economic Data

  • FHFA House price index is forecasted to increase 0.4%  MoM in July versus previous month +0.2%.
  • Richmond Fed Manufacturing activity index is expected at 2 in September higher than August (0).

Canadian Economic Data 

  • There is no major economic data 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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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