Market Update
Treasuries opened NY lower across the curve with the US intermediates now leading lower esp. 5Y note amid 5/30Y curve flattening; 10Y yield is now at 2.334% vs. 2.309% at 3pm ET Thursday. Traders await 8:30am ET US Q2 GDP report; MNI poll median estimate is for 2.7% gain. US stock index futures lower on soft tech stocks; but Amazon shares lower while Intel higher. Analysts at Societe Generale eyed the “debt ceiling vs balance-sheet unwinding” and quipped, “let the games begin.” They say that the Fed “is likely to announce a change in its reinvestment policy at the September meeting. The debt ceiling deadline in late September might throw a wrench in the Fed’s plans. We look at the debt ceiling playbook and trades likely to perform if the negotiations are contentious. While we still favor summer carry trades, we remain on guard, and hold 6-9m forward 5s/30s and 3m forward 5s10s bear steepeners.”
News headlines
Tech, Automakers Drag Down Stocks as Euro Climbs: Markets Wrap (Bloomberg) A selloff in global technology shares sent benchmark indexes tumbling from Sydney to Paris amid heightened concerns about corporate earnings. The dollar halted a rebound.
Obamacare Repeal Collapses as Senate GOP Blocks Health Bill (Bloomberg) A months-long effort by Senate Republicans to pass health legislation collapsed early Friday after GOP Senator John McCain joined two of his colleagues to block a stripped-down Obamacare repeal bill.
Oil extends gains, on track for biggest weekly gains this year (Reuters) Oil prices edged higher on Friday, reaching fresh two-month highs and on track to post the strongest weekly gains this year as investors digested signs of an easing oversupply picture.
Japan household spending jumps but weak inflation weighs on BOJ (Bloomberg) Japanese household spending hit its highest for two years in June as unemployment fell and job availability reached a 43-year peak, official figures showed, but inflation gave little sign of getting much closer to the Bank of Japan’s price target.
Alberta Is About to Be Canada’s Fastest Growing Economy Again (Bloomberg) Alberta’s economy is more than just back on its feet, it’s about to run faster than any other region in Canada. Gross domestic product in the western province will rise by 2.9 percent this year, according to a Bloomberg survey of economists, up from an April estimate of 2.5 percent. That matches forecasts for neighboring British Columbia, and in 2018 Alberta comes out on top with a 2.4 percent expansion that would be tops among Canada’s 10 provinces.
Swiss franc set for biggest monthly drop versus euro in divergence trades (Reuters) The Swiss franc fell for a fourth consecutive day on Friday and is on track to post its biggest monthly drop in six years against the euro EURCHF= as some hedge funds sold the currency after it broke through major technical levels this week.
Overnight markets
Overview: US 10yr note futures are down -0.186% at 125-19, S&P 500 futures are down -0.26% at 2465.5, Crude oil futures are up 0.1% at $49.09, Gold futures are down -0.09% at $1265.4, DXY is down -0.2% at 93.672, CAD/USD is down -0.06% at 0.7971.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.303% | 2 Year | 1.371% |
| 5 Year | 1.622% | 5 Year | 1.872% |
| 10 Year | 2.021% | 10 Year | 2.332% |
| 30 Year | 2.445% | 30 Year | 2.934% |
US Economic Data
| 8:30 AM | GDP Annualized, q/q, 2Q A, est. 2.7% (prior 1.4%) |
| GDP Price Index, 2Q A, est. 1.3% (prior 1.9%) | |
| Personal Consumption, 2Q A, est. 2.8% (prior 1.1%) | |
| Core PCE, q/q, 2Q A, est. 0.7% (prior 2.0%) | |
| Employment Cost Index, 2Q, est. 0.6% (prior 0.8%) | |
| University of Michigan Sentiment, Jul F, est. 93.2 (prior 93.1) |
Canadian Economic Data
| 8:30 AM | GDP, m/m, May, est. 0.2% (prior 0.2%) |
| GDP, y/y, May, est. 4.1% (prior 3.3%) |
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