Market Update

Tsys down sharply in early NA trade on heavy volume, falling with bunds on stronger Euro PMIs & earnings (GM, MCD), US 10Y above 2.40% (2.41%, +4bps) for the first time since May. Bunds (10Y 0.477% +5bps) also heavy ahead of Thursday’s ECB meeting and tapering decision where bond purchases are widely expected to be cut to 30bln/mnth with a nine month extension. GOCs opening lower in line with tsys, GOC curve ~2bps steeper 2s10s, 10Y 2.07%. BOC decision tommorrow likely to keep prices farely range bound with risk to short end unperrformance given that the pendulum has swung back to barely 15 chance of a hike from 50% a  month ago, meanwhile the BOC’s core measures of inflation have been moving higher along with wages (AHE 2.2% in Sep). In corps, Toromont Industries (BBB) in the mkt with a 10Y @ 180 (+/- 5). Provis opening 0.5-1 bp tighter led by longs, Ont 48s 74.5 new low, Ont 48/27 curve continuing to compress 8bps from 12bps at the start of the month. 

News headlines 

House Conservatives Say Tax Bill Draft Is Coming Within Days (Bloomberg) House and Senate leaders laid out an ambitious schedule for drafting and releasing tax legislation over the next few weeks — a set of deadlines that must be met to try to achieve President Donald Trump’s goal of delivering major tax-rate cuts by year’s end.

Trump Says He’s ‘Very, Very Close’ to Naming Fed Chair Nominee (Bloomberg) President Donald Trump told reporters Monday he is “very, very close” to announcing his nominee for chairman of the Federal Reserve. Trump said in an interview with Fox Business Network aired Sunday and Monday he’s considering Stanford University economist John Taylor and Federal Reserve Governor Jerome Powell for the top job at the central bank, and indicated Fed Chair Janet Yellen remains in the running for renomination to a second four-year term.

Euro-Area Companies Expand Workforce as Order Growth Picks Up (Bloomberg) The euro-area economy maintained its strong momentum at the start of the final quarter of this year, with rising workloads encouraging companies to take on new staff at the sharpest pace in more than a decade.

For Markets, It’s the ECB’s QE Exit That May Matter Most (Bloomberg)  When it comes to the market impact of central banks scaling down their balance sheets, it’s the European Central Bank that may matter more than the Federal Reserve and other peers.

Ex-HSBC Currency Trader Convicted of Fraud for Front-Running (Bloomberg) Former HSBC Holdings Plc currency trader Mark Johnson was found guilty of fraud for front-running a $3.5 billion client order, a victory for U.S. prosecutors as they seek to root out misconduct in global financial markets.

Bonds Slide, Euro Gains Before ECB; Gold Retreats: Markets Wrap (Bloomberg) A lack of conviction was on display in many areas of global markets on Tuesday, with investors eyeing a slew of catalysts stretching from the impending ECB meeting and the crisis in Catalonia to the odds of U.S. tax reform and the next Fed chair. Bonds stood out amid the drift, retreating as the dollar steadied and the euro advanced

China’s Xi Elevated in Party Constitution, Joining Mao, Deng (Bloomberg) China’s ruling Communist Party approved a revised charter that enshrined President Xi Jinping’s name under its guiding principles, elevating him to a status that eluded his two immediate predecessors.

Euro zone business remained strong as prices rise sharply: PMI (Reuters) Private sector growth across the euro zone slowed more sharply than predicted this month, a survey showed on Tuesday, but activity remained strong even though firms increased prices at the steepest rate in over six years.

Overnight markets 

Overview: US 10yr note futures are down -0.188% at 124-22, S&P 500 futures are up 0.18% at 2568, Crude oil futures are up 0.56% at $52.19, Gold futures are down -0.23% at $1277.9, DXY is down -0.02% at 93.913, CAD/USD is up 0.05% at 0.7903. 

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.5% 2 Year 1.573%
5 Year 1.729% 5 Year 2.029%
10 Year 2.066% 10 Year 2.404%
30 Year 2.406% 30 Year 2.923%

US Economic Data

9:45 AM Markit US Manufacturing PMI, Oct est 53.5 (53.1 prior)
Markit US Services PMI, Oct est 55.2 (55.3 prior)
Markit Us Composite PMI, Oct (54.8 prior)
10:00 AM Richmond Fed Manufact. Index, Oct est 17 (19 prior)

Canadian Economic Data

There is no Canadian 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, Hugues Savard

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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