Market Update

US tsys higher, yields 1-4bps lower led by the long end, 2s10s 5bps inverted, 10Y 1.45%, 30Y 1.904% a record low, reflecting strong demand during the Asian session (MNI). In Europe, UK gilts leading core Europe higher after PM Johnson suspended parliament. Italian 10Y record low yield, 1.01% on talks to form a coalition govt resume, possibly avoiding snap election. German 10Y auction posted record low yield -0.7%. In Canada, quiet on the data front until Friday’s Q2 GDP. The BOC auctions $3bln in reopened Nov 21s at noon with the Nov 21/Aug 21 (2Y) roll -1.8/-2.0bps.  Nov 21s have narrowed ~-0.6bps vs 2s since the last 2Y auction August 7th, while the current 2Y roll (Aug 21/May 21) has widened (disinverted) 0.5bps to -3.5bps.  The divergence can be explained by the 5bp flattening in 2s5s to -17bps inverted consistent with relentless flattening seen in global bonds driven by trade concerns. 

News headlines

Stocks Decline, Bonds Rise as Trade Feud Lingers: Markets Wrap (Bloomberg) U.S. index futures slipped with stocks in Europe Wednesday as investors awaited new developments in the increasingly unpredictable Sino-American trade war. Treasuries and the dollar were steady.

Global stocks under pressure as bond markets ring recession alarms (Reuters) World stocks slipped on Wednesday as a deepening inversion of the U.S. bond yield curve a day earlier reignited worries over the possibility of recession, sending investors towards perceived safe-haven assets from the Japanese yen to gold.

TSX futures slightly higher as oil prices rise (Reuters) Futures for Canada’s main stock index inched higher on Wednesday as oil prices rose after industry data showed a fall in stockpiles of U.S. crude.

Oil Rises After Report Shows Steep Decline in U.S. Inventories (Bloomberg) Oil rose for a second day after an industry report showed a bigger-than-expected drop in American crude inventories, allaying concerns that the market is poised to tip back into oversupply.

U.S. yield curve inverts further, 30-year yields hit new record low (Reuters) A key part of the U.S. yield curve, a closely-followed recession indicator, inverted further on Wednesday while 30-year Treasury yields fell to a few record low on growing concern about the fallout from a bitter global trade conflict.

‘No need’ for Bank of Canada to cut rates, National Bank says (BNN) With one week to go until the Bank of Canada’s next interest rate decision, National Bank of Canada has emerged as an outlier amid a growing number of voices predicting that the central bank will cut rates this fall amid mounting global trade tension.

Alberta deficit shrinks 30% after election delayed city grants (BNN) Alberta’s new United Conservative government is painting a gloomy picture of the province’s finances as it prepares to release its first budget in the coming months.

South Korea summons Japan ambassador as export trade curbs take effect (Reuters) South Korea summoned Japan’s ambassador to protest against a decision to remove Seoul’s fast-track export status, which took effect on Wednesday amid a deepening political and economic feud.

EU-Mercosur trade deal could be ready by late 2020 in best case: EU official (Reuters) The European Union should be able to conclude a free-trade agreement with the Mercosur bloc of South American countries by late 2020 in an optimistic scenario, a senior EU trade official said, adding that much would ride on Brazil’s attitude.

Market Overview: US 10yr note futures are up 0.203% at 131-13, S&P 500 futures are down -0.26% at 2858, Crude oil futures are up 1.4% at $55.7, Gold futures are up 0.25% at $1555.7, DXY is up 0.13% at 98.13, CAD/USD is up 0.21% at 0.7512.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.328% 2 Year 1.498%
5 Year 1.16% 5 Year 1.363%
10 Year 1.11% 10 Year 1.449%
30 Year 1.369% 30 Year 1.909%

US Economic Data

07:00 AM MBA Mortgage Applications, Aug 23  Survey: — Actual: -6.20% Prior: -0.90%

Canadian Economic Data

There is no Canadian economic data 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, Émile Bordeleau

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.

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