Market Update

US tsys jumping in NY trading as mkts react to Trump’s threat of a govt shutdown should the border wall not be funded, Trump also indicated the US could pull out of NAFTA., US 10Y 2.19 (-2.3bps), curve 1bp flatter. Overnight tsys pressured by stronger Markit Euro PMI, aslo supply from the UK & Germany with the latter selling E3bln of 10Y bonds which was barely covered (E3.086bln). A speech by Maro Draghi yesterday gave no further insight on ECB monetary policy.  Peripherals weaker, 10Y BTP-bund spread another 5bps wider @ 174bps.  In Canada, GOCs are higher in line with the risk off tone in tsys, 10Y 1.885 (-2.6bps).  Five year supply today – $3.9bln in Sep 22s which should become benchmark (out $15.6bln). The Sep 22/Mar 22 roll 4.4/4.3 – the low of the three month range , while the Mar22/Sep21 (5Y) roll has cheapened ~2bps to 6.5bps since the last 5Y auction on July 5th  – so the current 5Y looks relatively cheap on the fly.

News headlines

Euro Gains on Strong Manufacturing Data; Oil Falls: Markets Wrap (Bloomberg) The euro was one of the standout gainers in an otherwise listless day in markets, as strong European data boosted confidence in the region’s growth. Gold and yen benefited as comments from President Donald Trump provoked another bout of investor caution.

Trump Threatens Government Shutdown Over Border Wall Funding (Bloomberg) President Donald Trump threatened Tuesday to bring the U.S. government to the brink of a shutdown if needed to pressure Congress into funding the border wall that was a centerpiece of his 2016 campaign.

Euro perched near day’s highs on PMI data (Reuters) The euro held near the day’s highs on Wednesday, propped up by strong readings on German and French PMI surveys though analysts warned the single currency’s gains could be short-lived due to concerns about heavy one-sided bets.

Oil prices fall on oversupply concern as Libyan output seesaws (Reuters) Oil prices fell on Wednesday, weighed down by concerns about rising production from Libya feeding into an oversupplied market and a surprise increase in U.S. gasoline inventories.

UK employers’ hiring confidence lowest since Brexit vote, say recruiters (Reuters) British employers’ willingness to hire and invest has fallen to its lowest since last year’s vote to leave the European Union, a survey by the recruitment industry showed on Wednesday.

Royal Bank of Canada Follows U.S. Rivals as Trading Declines (Bloomberg) Royal Bank of Canada showed it’s not immune to the trading slowdown that affected U.S. rivals. Revenue from trading at Royal Bank fell 15 percent to C$835 million ($664 million) in the fiscal third quarter, led by declines in fixed income, currency and commodities, the Toronto-based firm said Wednesday in a statement.

Overnight markets 

Overview: US 10yr note futures are up 0.16% at 126-25, S&P 500 futures are down -0.39% at 2443.25, Crude oil futures are down -0.29% at $47.69, Gold futures are up 0.4% at $1296.1, DXY is down -0.29% at 93.276, CAD/USD is up 0.23% at 0.7944.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.265% 2 Year 1.313%
5 Year 1.52% 5 Year 1.76%
10 Year 1.895% 10 Year 2.187%
30 Year 2.304% 30 Year 2.762%

US Economic Data 

7:00 AM MBA Mortgage Applications, Aug 18, -0.5% (prior 0.1%)
9:45 AM Markit US Manufacturing PMI, Aug P, est. 53.5 (prior 53.3)
Markit US Services PMI, Aug P, est. 55.0 (prior 54.7)
Markit US Composite PMI, Aug P, (prior 54.6)
10:00 AM New Home Sales, Jul, est. 610k (prior 610k)
New Home Sales, m/m, Jul, est. 0.0% (prior 0.8%)

Canadian Economic Data

There is no major economic data 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