Market update

US tsys lower, curve ~3bps steeper, US 10Y 2.15 (+8bps) after surge in Durable Goods. Global stocks mixed, China was lower again, yet Euro stocks have reversed declines while DOW futures are ~300 pts higher. US auctions $35bln in 5Y notes with the belly of the curve looking fairly expensive on the curve even after taking into acct latest steepening due to Fed repricing. Core Euro bonds mixed lagging the move in tsys, German bunds slightly lower while UK gilts ~3bps 10Y higher – ECB Praet leaving the door open for further QE as downside risks to inflation goal have increased. In Canada, GOCs are sharply lower led by 10s which are 4bps wider on the curve. Provis opening 0.5bps tighter, long Onts trading up at 100, Qc 45s @ 106. BOC auctions $3.3bln in reopened Nov 17s with the roll 3.0/2.5 – ~1bp cheaper since last auction so relatively cheap in context of a flatter 2s/5s curve.

News headlines

  • Rise in durable-goods orders points to business investment perking up (Marketwatch) Orders for long-lasting U.S. goods rose in July, and a key measure of investment posted the biggest gain in 13 months, a sign that companies continue to spend despite a tougher business climate.
  • October Fed Rate Increase Suddenly on Some Investors’ Radar (Bloomberg) October is a long shot, but Wall Street isn’t ruling it out. Traders and investors have been betting for months that the Federal Reserve will raise interest rates in September or December. October — the only other meeting on the 2015 calendar — wasn’t part of the conversation, mainly because there’s no press conference scheduled along with the central bank’s interest-rate decision that day.
  • For Oil Producers Cash Is King, and That’s Why They Just Can’t Stop Drilling (Bloomberg) Investors sent a surprising message to U.S. shale producers as crude fell almost 20 percent in August: keep calm and drill on. While most oil stocks have fallen sharply this month, the least affected by the slump share one thing in common: they don’t plan to slow down, even though a glut of supply is forcing prices down.
  • Credit Market Opportunities Seen After Ugly Selloff (Bloomberg) While investor sentiment remains fragile after Monday’s incredibly ugly selloff, underlying fundamentals are generally stable and further fallout may be limited by seasonal considerations. With many traders and portfolio managers away on vacation, corporate bond trading volumes, new issue activity and generic liquidity remain muted for now.
  • RBC profit climbs 4%; raises dividend (G&M) Royal Bank of Canada said Wednesday that its profits in the third quarter rose 4 per cent from a year earlier to nearly $2.5-billion or $1.66 a share. The bank also boosted its quarterly dividend by 2 cents a share, to 79 cents.

Overnight markets

  •  Overview: IG24 5Y 85.75/86.5 (-1.12), US 10yr note futures are down -0.06% at 127-31+, S&P 500 futures are up +2.43% at 1918.25, Crude oil futures are up +1.02% at 39.71, Gold futures are down -0.68% at $1130.60, DXY is up +0.25% at 94.769.
  • US BANK CDS (5yr): BAC 81/86 (-1), GS 101/106 (+0), MS 92/97 (+0), C 91/96 (-1), JPM 81/86 (-1), WFC 60/65 (+0)

 US Economic Data

  • MBA mortgage applications came in this morning at +3.6% for the week ending August 14, versus prior week 0.1% increase.
  • Durable goods orders increased in July by 2.0%, above expectations of -0.4% MoM (0.6% vs 0.3% Ex Trans.) versus revised June 4.1% MoM (1.0% Ex Trans.).
  • Nondefense capital goods ( New Orders)  raised by 2.2% in July,  they were expected to increase 0.3% MoM (0.6% MoM vs 0.4% for Shipped) this is compared to -1.4% (NO) and 0.9% (S) for the previous month revised data.

Canadian Economic Data

  • There is no major 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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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