Market Update

US tsys trading weaker, yields ~1bp higher curve 0.5bps steeper, US 10Y 2.175%, heavy volume in TY futures (>400k) mostly Sep/Dec roll. Equities basically unch in Europe, London on holiday, S&P futures +1.5, gold higher, WTI crude weaker (47.50 -0.35). Heavy auction calendar with the US selling $26bln in 2Y & $34bln in 5Y notes today.  Yet IG issuance expected to be quiet with Europe on holiday and in lead up to Labour Day holiday. German bunds mixed, bund curve steeper with longer maturities ~1bp higher in yield.  Yellen & Draghi’s lack of insight on monetary policy direction has kept the USD on the backfoot vs the euro, thou this week’s heavy data calendar including non farm payrolls Friday could change perceptions for future fed policy, considering that odds of a Dec rate hike have faded since July from over 50% to 30%.  In Canada, GOCs are lower in line with tsys, Q2 GDP the highlight this week scheduled for Thursday, with expectations of a solid 3.5-4.0% gain on top of Q1 3.7% increase.  On Tuesday the BOC auctions $750mln in ultra long bonds, reopening of the Dec 1 2064s – the roll at -3.5/-4.0bps vs Dec 48s has cheapened by ~1bp since mid August.

News headlines 

Europe Stocks Drop on Euro Strength; Dollar Steady: Markets Wrap (Bloomberg) European stocks started the week firmly on the back foot, with every sector retreating following Friday’s euro surge. U.S. equity futures and the dollar struggled and gold rose as investors weighed the damage from Tropical Storm Harvey.

Oil markets roiled as Harvey hits U.S. petroleum industry (Reuters) Oil markets were roiled on Monday after Tropical Storm Harvey wreaked havoc along the U.S. Gulf Coast over the weekend, crippling Houston and its port, and knocking out several refineries as well as some crude production.

China says sanctions won’t help as Trump targets Venezuela (Reuters) Venezuela’s close ally China said on Monday that history shows external interference and unilateral sanctions only make things more complex and will not help resolve problems, after the United States imposed new sanctions on Venezuela.

Don’t count on Canada’s over-the-top economic growth continuing for much longer (Financial Post) Blink and you may miss it, but the beginning of the end of over-the-top economic growth is just around the corner. That might sound alarmist, but most economists and policymakers are setting the stage for a weaker performance in the second half of 2017 and beyond.

Central Bankers Shun Policy Clues as Trade Pervades Jackson Hole (Bloomberg) Leaders of the world’s most powerful central banks defended post-crisis reforms at their annual retreat in Jackson Hole, Wyoming, while discussing the causes and consequences of populist waves that have reshuffled the political order in the U.S. and Europe.

Cohn or Yellen? Bond Traders Say Same Difference (Bloomberg) Bond traders are betting that no matter who’s leading the Federal Reserve come February, policy makers won’t stray from the path they’ve been laying out for months. With Janet Yellen coming off what may have been her final address as Fed chair at the central bank’s annual Jackson Hole gathering, investors are starting to look ahead to who might follow her.

Overnight markets 

Overview: US 10yr note futures are down -0.012% at 126-28, S&P 500 futures are up 0.17% at 2446.75, Crude oil futures are down -0.71% at $47.53, Gold futures are up 0.48% at $1304.1, DXY is down -0.33% at 92.438, CAD/USD is down -0.24% at 0.8031.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.271% 2 Year 1.329%
5 Year 1.551% 5 Year 1.757%
10 Year 1.885% 10 Year 2.173%
30 Year 2.31% 30 Year 2.762%

US Economic Data 

8:30 AM Wholesale Inventories, m/m, Jul P, 0.4%, est. 0.3% (prior 0.7%)
Advance Goods Trade Balance, Jul, -$65.1b, est. -$64.5b (prior -$63.9b, revised -$64.0b)
Retail Inventories, m/m, -0.2%, Jul (prior 0.6%, revised 0.6%)
10:30 AM Dallas Fed Manufacturing Activity, Aug, est. 16.8 (prior 16.8)

Canadian Economic Data 

10:00 AM Bloomberg Nanos Confidence, Aug 25, (prior 61.0)


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