- Market Update
- US tsys higher after weak durable goods orders (-4.0% vs -1.4% exp), curve flatter, US 10Y 1.57%, on average volume in TY futures. Tsys pressured lower following announcement of Japan fiscal stimulus package by PM Abe which was not expected and comes at the high end of speculation at Y28T (USD 265B). JGB curve 6bps steeper with 5Y yields at record low -0.38% while the long end pressured by expectations of increased long issuance, with the WSJ citing the possibility of a new 50Y JGB. German govt bonds slightly higher, UK gilts sharply higher – solid 30Y German bund auction fully covered (b/c 1.2x vs 1.6x in June) @ 0.45% vs 0.65%. Also talk of negative net supply in Europe over next several weeks due to large EU cpns & redemptions (~85bln) FOMC this aft with the no change in FF rate expected thou the statement expected to reflect improved financial conditions (i.e. payrolls) since the June meeting. GOCs higher with the 10Y outperforming and the 10Y roll (26/25) 0.5bps tighter from yest at 10.8/10.6 – lots of trade yest at 11.1 on screens. Tomorrow the BOC auctions a new June 27 bond with the WI roll 12.5/12 – a new 2027 bond with a coupon of ~1.15% would have a modified duration of 10.2 close to the June 29 bond (the 29/26 roll is 28bps). Provi spds 0.5bps tighter to start – yesterday Ont issued $750mln in 2048s with a $450mln carve out at 97bps, now 96.5 bid.
- Stocks Gain as Apple Earnings Boost Sentiment; Yen Drops on Abe (Bloomberg) European stocks rose with U.S. equity-index futures as Apple Inc.’s earnings fueled optimism over the outlook for the global economy. The yen weakened and Japanese shares rallied after the prime minister signaled he was committed to a $265 billion stimulus package.
- PM Abe’s plan for $265 billion stimulus puts pressure on BOJ to ease (Reuters) Japan’s prime minister unveiled a surprisingly large $265 billion stimulus package on Wednesday to reflate the world’s third-largest economy, adding pressure on the central bank to match the measures with monetary stimulus later this week. The earlier-than-expected announcement to boost the flagging economy sent Japanese and other Asian stock markets higher while it weighed on the safe-haven yen, but lacked crucial details on how much of the package would be direct government spending.
- K. Retail Sales Slump Most in Four Years After Brexit Vote (Bloomberg) U.K. retail sales fell at the fastest pace in more than four years in July, signaling caution among consumers after the Brexit vote last month. The Confederation of British Industry said its monthly retail sales index dropped to minus 14 — the lowest since January 2012 — from 4 in June. A gauge of the outlook showed stores anticipate a similar decline next month.
- Deutsche Bank Flags Deeper Cuts as Trading Drop Hits Profit (Bloomberg) Deutsche Bank AG Chief Executive Officer John Cryan signaled the German lender may have to deepen cost cuts after second-quarter profit was almost wiped out by a slump in trading and restructuring costs.
- Hong Kong June exports fall for 14th month, Brexit to deepen pain (Reuters) Hong Kong’s total exports in June fell for the 14th straight month, dampened by a slowdown in China, with the city’s factories bracing for more pain in coming months from the impact of Brexit. Open and trade-dependent economies in Asia such as Hong Kong are expected to be among the most vulnerable to a slowdown in global trade from Britain’s shock vote to leave the European Union as the effects filter through factory supply chains, analysts say.
- UK’s Hammond says will take whatever action needed to support economy (Reuters) British finance minister Philip Hammond reiterated on Wednesday that he and the Bank of England would take whatever action was needed to support the economy as it entered “a period of adjustment” after the June 23 vote to leave the European Union.
- BOE Flirts With Dating Website Algorithms to Sort Housing Data (Bloomberg) That’s according to a staff blog posted Wednesday that shows the Bank of England is borrowing from online dating apps to help assess its numbers. While the central bank’s economists have access to more data than ever, they sometimes struggle to sort it.
- Overview: US 10yr note futures are up 0.0473% at 132-6, S&P 500 futures are up 0.25% at 2168.75, Crude oil futures are down -0.07% at $42.89, Gold futures are up 0.07% at $1329.2, DXY is up 0.11% at 97.259.
US Economic Data
- 8:30 AM: Durable Goods Orders, June, -4.0%, est. -1.4% (prior -2.3%, revised -2.8%)
Durables Ex Transportation, June, -0.5%, est. 0.3% (prior 0.3%, revised -0.4%)
- 10:00 AM : Pending Home Sales, m/m, June, est. 1.2% (prior -3.7%)
- 14:00 AM: FOMC Rate Decision, July 27th, est. 0.25%-0.50% (prior 0.25%-0.50%)
Canadian Economic Data
- There is no major economic news 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