Market update
US tsys rising off the lows with EGBs as Draghi says ECB will re-examine level of existing stimulus, US 10Y 2.027 (+0.3bps). German bunds outperforming, curve sharply steeper with 2Y at record low below -0.30% (-8bps), 10Y 0.54 (-2.7bps). Draghi seeing some risks to inflation expectations, could lower deposit rate again and/or expand QE pgrm beyond Sep 16 if needed. GOCs are higher, lagging the move higher in tsys by ~2bps in the short end, 10/30 back to recent steeps 81bps. Cda retail sales rose 0.5% in Aug vs 0.1% thou core sales were below exp @ 0.0% vs 0.2% exp. Provi spds wider , Ont 25s traded down @ 95 (+0.5bps), Ont 45/25 10/9.8 . Big move in NVCC yest ~5bps – TD 2.982/20 @ 236 from 252 last week – much of the move attributed to lack of supply and general tightening in credit (IG has narrowed 15 bps since Oct 1st).
News headlines
- ECB Haunted by Paradox as Draghi Weighs Risk of QE Signaling (Bloomberg) Mario Draghi’s challenge on Thursday is to show that he’s readier than ever to step up stimulus, without panicking investors over the euro area’s health.
- VW issues raise questions about ABS (FT) When Volkswagen’s emissions scandal broke in late September, the carmaker’s stock and bond prices plummeted. Yet a day later, almost unnoticed in the furore, it sold more than €800m of securities backed by Spanish loans.
- Why the shift in Treasury bond ownership matters (FT) Who is buying US government bonds and what are the market implications, ask strategists at TD Securities.
- TPP Is Surprising Vote of Confidence in Globalization (WSJ) Globalization has looked pretty sickly of late. Immigration, multinational companies and free trade are under fire from populists on both the left and right in Europe and the U.S. Trade activity is stagnant, with total exports and imports recently growing more slowly than global output.
- Don’t blame oil prices for Alberta’s deficit (FP) Alberta’s budget, to be unveiled Oct.27, will contain the province’s seventh deficit in the last eight years, most recently projected at $5.9 billion. A popular narrative blames declining oil prices for the government’s deteriorating financial situation.
- TransAlta Said to Have Talked to Potential Buyers for Months (Bloomberg) TransAlta Corp., the embattled Alberta power generator under pressure from regulators and because of its indebtedness, has held talks with more than one potential suitor in the past several months, people familiar with the matter said.
Overnight markets
- Overview: IG24 5Y 77.214/77.846 (-0.894), US 10yr note futures are down -0.01% at 128-27+, S&P 500 futures are up +0.42% at 2017.0, Crude oil futures are up +1.44% at 45.85, Gold futures are up +0.06% at $1167.8, DXY is up +0.13% at 95.159.
US Economic Data
- Initial jobless claims came in at 259K for the week ending October 17th, lower than expected (265K) but slightly higher than prior week (256K).
- Continuing claims increased to 2170K from 2164K but was lower than expected (2186K).
- Chicago Fed National activity index came in at -0.37 in September (-0.20 expec.) and better than August revised number of -0.39.
- FHFA House price index is forecasted to increase 0.5% MoM in August versus previous month +0.6%.
- Existing home sales are forecast at 5.39M (+1.5% MoM) in September versus August 5.31M (-4.8% MoM).
- Leading index is forecast at -0.1% in September less than August 0.1% increase.
- Kansas City Fed manufacturing index is forecast at -9 in October lower than September level (-8).
Canadian Economic Data
- Retail sales went up 0.5% MoM in August, better than expectations of a 0.1% increase, after increasing 0.6% the previous month (revised 0.1% upward).
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