Market Update

Treasuries open higher after Tuesday selloff after overnight two-way flows and a market creep up since about 2:30am ET; Tsys curves mixed after Tuesday steepen. Tsy will sell 11:30am ET US$13B 2Y FRN auction and a 1pm ET US$34B 5Y note auction, which occurs one hour before 2pm ET FOMC post-meeting announcement. Australia’s ASX (+0.97%) led the overnight charge, and Britain’s FTSE (+0.66%) is out front in Europe. The S&P 500 is on track to open little changed near 2,478. Markets are pricing in a 0% chance that the Federal Reserve will hike interest rates at Wednesday’s meeting, according to World Interest Rate Probability data provided by Bloomberg. Instead, market participants will be looking for details about the Fed’s plan to unwind its massive balance sheet.

News headlines

Stocks Lifted by Earnings, Commodities; Bonds Gain: Markets Wrap (Bloomberg) Gains in commodities from oil to copper lent momentum to European stocks as positive corporate results continued to feed into markets. Bonds bounced as investors waited for clues on the fate of the Federal Reserve balance sheet.

Fed expected to leave rates unchanged; balance sheet in focus (Reuters) The Federal Reserve is expected to hold interest rates unchanged on Wednesday and possibly hint that it will start winding down its massive holdings of bonds as soon as September in what would be a vote of confidence in the U.S. economy.

Oil bounce, results keep stocks on high (Reuters) Oil’s rise back above $50 a barrel helped prod stock markets higher on Wednesday and company results and economic data continued to soothe worries that the world economy may be ripe for a another slowdown. European stock markets were mainly higher, led by energy and commodity-linked companies after Brent crude topped the $50 mark for the first time since early June.

Petronas Deals Fresh Blow as World Exits Canada’s Energy Patch (Bloomberg) Petroliam Nasional Bhd.’s decision to back out of a giant gas-export project on Canada’s Pacific Coast is the latest hit to the country’s energy sector — and to Prime Minister Justin Trudeau’s plan of balancing energy exports and climate action.

Home Capital Repays C$2 Billion Credit Line From Berkshire (Bloomberg) Home Capital Group Inc. said it repaid the balance on a C$2 billion ($1.6 billion) credit line from Warren Buffett’s Berkshire Hathaway Inc. after the Canadian mortgage lender sold assets.

U.K. Joins France in Bidding Goodbye to Fossil-Fuel Cars by 2040 (Bloomberg) The U.K. became the latest European country to mark the end of the line for diesel and gasoline fueled cars as automakers such as Volvo race to build electric vehicles or face the consequences of getting left behind.

Overnight markets 

Overview: US 10yr note futures are up 0.062% at 125-18, S&P 500 futures are up 0.19% at 2478.75, Crude oil futures are up 0.9% at $48.32, Gold futures are down -0.44% at $1252.9, DXY is up 0.08% at 94.128, CAD/USD is up 0.09% at 0.7988.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.317% 2 Year 1.379%
5 Year 1.629% 5 Year 1.872%
10 Year 2.004% 10 Year 2.316%
30 Year 2.357% 30 Year 2.906%

US Economic Data 

7:00 AM MBA Mortgage Applications, Jul 21, est. 0.4%, (prior 6.3%)
10:00 AM New Home Sales, Jun, est. 615k (prior 610k)
New Home Sales, m/m, Jun, est. 0.8% (prior 2.9%)
2:00 PM FOMC Rate Decision, Jul 26, est. 1.00-1.25%, (prior 1.00-1.25%)

Canadian Economic Data

There is no major economic new 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