US tsys trading slightly higher , TY futures traded in 3 tick range overnite on low volume before FOMC this aft – US 10Y 2.03 (-0.5bps), curve 1bp flatter led by longs. Euro stocks higher, USD weaker and Euro govt bonds in bull flattener on Riksbank QE (see below). Swedish 10Y 11bps lower @ 0.50%. Riksbank announced plans to expand QE by SEK65bln (CAD10.2bln), kept repo rate at -0.35% to counter appreciation of the Krona, even as GDP running at ~3.0%. US auctions $15bln in 2Y FRN & $35bln 5Y notes at 1:00PM with FOMC at 2:00. Yesterday’s tsy rally was led by the belly of the curve so expect some concession building into this aft 5Y auction. GOCs are unch, provis opening unch with focus on FOMC. Alberta 43/Ont43 rl unch @ 0.0/-0.3 – Alberta budget yest: govt expected to run a $6.1bln deficit this fy, get to surplus by 2019-20, capital plan $34bln from $29.5 in prev budget, projected borrowings to increase net $6bln over three years.
- Sweden’s Riksbank Expands QE Program as ECB Stimulus Weighs (Bloomberg) The Riksbank expanded its bond-purchase plan for a fourth time since February as policy makers in Sweden struggle to keep pace with stimulus measures in the euro zone.
- Fed Seen as Unlikely to Raise Rates, as Pressures Mount From Both Sides (NYT) Federal Reserve officials, wrapping up a two-day policy meeting on Wednesday, are still thinking about raising the Fed’s benchmark interest rate in 2015, in part because they see strategic advantages in moving earlier than necessary.
- For Fed, a Rates Puzzle Looms (WSJ) Surging levels of cash in U.S. money markets threaten to undermine the Federal Reserve’s control over short-term interest rates, some market participants said, citing forces in an obscure corner of the markets that could complicate a move to tighten monetary policy.
- Canadian oil groups wary of Justin Trudeau’s administration (FT) Justin Trudeau’s rise to power has met with anxiety in Canada’s beleaguered oil patch, where the legacy of his father’s wildly unpopular energy policy still incites “riots at cocktail parties”.
- Lane Says Bank of Canada May Adjust Core CPI Measure in 2016 (Bloomberg) Canada’s central bank may adjust the way it measures “core” consumer prices when it renews an inflation-targeting agreement with the government next year.The Bank of Canada’s current benchmark of core prices that excludes eight volatile items such as fresh fruit is underperforming relative to other indexes under consideration for next year, deputy governor Tim Lane said Tuesday in Halifax, Nova Scotia. The current index, known as CPIX, has been the central bank’s main guide since 2001 on whether the total inflation rate will stay near the bank’s 2 percent target.
- Overview: IG24 5Y 74.001/74.684 (+0.078), US 10yr note futures are down -0.06% at 128-27, S&P 500 futures are up +0.10% at 2062.5, Crude oil futures are up +0.69% at 43.50$, Gold futures are up +0.71% at $1174.1, DXY is down -0.18% at 96.728.
US Economic Data
- MBA mortgage applications came in this morning at -3.5% for the week ending October 23th, versus prior week 11.8% increase.
- FOMC Rate Decision is schedule at 14:00.
Canadian Economic Data
- There is no major economic data today.
Disclosure and Disclaimer
Ivan Greenstein, Stephan Buu, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240