Market update
US tsys sharply lower, curve steeper, US 10Y 2.09 (+6bps) after China surprised mkts with a surprise rate cut, the fifth this year. Tsys were already lower pre PBOC decision, accelerating downward on heavy selling in 10Y futs ~8:30 (~15k contracts). Core Euro bonds lower led by 10Y gilts (+6.7bps) on retail sales/ supply indigestion as sales of GBP denominated debt were the highest since July with this week’s 50Y tap. GOCs lower with tsys, spds marginally tighter after weaker Sep CPI after gas prices fell 19% y/y. Provis opening 0.5bps tighter – Ont 46 106/105, Ont 45/25 bx 10.3/9.8. Royal Bank plans to issue USD 5Y fixed/FRN in the area of T+100, JPM also doing a USD 5Y fixed/FRN @ T+123.
News headlines
- China’s central bank cuts rates for sixth time since November (Reuters) China’s central bank cut interest rates for the sixth time since November on Friday in another attempt to jumpstart a slowing economy.
- Global stocks hit two-month high on dovish Draghi message (Reuters) The prospect of yet more European Central Bank stimulus pushed world stocks to a two-month high, the euro to a two-month low and left investors paying for the privilege of owning short-term Italian and Spanish bonds.
- US investors plough into high-yield junk bonds (FT) Investors are racing into higher-yielding junk bond funds at the fastest pace in four years, following a broad rally in equity and fixed income markets as concern that the US Federal Reserve will tighten policy this year is fading.
- Canadians stay home (and pay more) as loonie stumbles (G&M) The weak loonie is keeping more Canadians home. But if you’re sitting around reading, it’s costing you more. So is the shirt on your back. And just wait for higher car prices.
Overnight markets
- Overview: IG24 5Y 73.103/73.886 (-2.493), US 10yr note futures are down -0.48% at 128-11, S&P 500 futures are up +0.78% at 2069.0, Crude oil futures are down -0.13% at 45.32, Gold futures are up +1.06% at $1178.5, DXY is up +0.36% at 96.726.
US Economic Data
- Markit US Manufacturing PMI (Preliminary) is forecast at 52.7 in October, 0.4 point lower than prior month.
Canadian Economic Data
- CPI is down -0.2% MoM (+1.0% YoY) in September (-0.1% MoM and 1.1% YoY Expec) versus August 0.0% MoM (1.3% YoY).
- CPI core came in at 0.2% MoM (2.1% YoY) in September (0.3% MoM and 2.2% YoY Expec) compared to previous month 0.2% MoM (2.1% YoY).
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