Market Update

US tsys sharply higher on geopol risk after North Korea missile launch, US 10Y  2.105% (-5.2bps) ,  core Euro bonds also sharply higher on risk off, German bunds lagging the rally in gilts after a technically uncovered German Schatz auction.   In Canada, GOCs are higher, in line with tsys except in longs which are lagging by 1bp, curve 1bp steeper 10s30s @ 44.5.  The BOC will auction $750mln in Dec 2064 bonds at noon , followed by 2Y auction tomorrow –  $3.9bln in reopened Nov 19s (second auction of Nov 19s). The 64/48 is quoted @ -3.5/-4.0  which is 0.5bps richer than yest but in line with the -3bp average over the past yr. Provis opening another 0.5bps wider after closing 0.5bps weaker yest, Ont 48s traded 83.5, Ont 27s 72.5.  QC 48s 84/83 las trade 82.5 yest.  Alberta rumoured yest, could come this morning before ultra auction at noon.

News headlines 

North Korea Fires Missile Over Japan, Renewing Tensions in Asia (Bloomberg) North Korea fired an unidentified ballistic missile over Japan on Tuesday, rattling Asian markets as the U.S. and its allies weighed a response to Kim Jong Un’s latest provocation. The missile landed in the Pacific Ocean about 1,200 kilometers (745 miles) east of Japan’s northern island of Hokkaido, Chief Cabinet Secretary Yoshihide Suga told reporters. South Korean President Moon Jae-in ordered a show of force in response, with four F-15K jet fighters conducting bomb-dropping drills.

Oil prices dip as market grapples with hurricane damage (Reuters) Crude prices dipped on Tuesday as the market grappled with the shutdown of some 13 percent of refining capacity in the United States after a hurricane ripped through the heart of the country’s oil industry. The refinery closures helped push U.S. gasoline futures RBc1 to a two-year high of $1.7799 per gallon on Monday, although they had receded to $1.7078 by 0957 GMT on Tuesday.

Canadian oil producers and consumers set to feel Harvey’s wrath (Financial Post) Canadian oil producers and consumers are set to be lashed by the powerful storm that has battered Houston and the wider Gulf Coast region, a key oil and natural gas refining and processing hub.

Gold Is Shaken by a Mysterious 2 Million-Ounce Trade (Bloomberg) After weeks of relative slumber, gold traders were rudely awoken to a surge in volume and volatility. In a span of one minute, gold futures contracts equaling more than 2 million ounces traded — about 20 minutes before Federal Reserve Chair Janet Yellen was to address a gathering of policy makers in Jackson Hole, Wyoming.

Scotiabank joins peers with dividend hike as profit rises (TheGlobeAndMail) Bank of Nova Scotia hiked its dividend by nearly 4 per cent as third-quarter profit climbed faster than expected. Canada’s third-largest lender by assets reported profit of $2.1-billion for the quarter that ended July 31, up 7 per cent from $1.96-billion a year ago.

Bank of Montreal quarterly earnings beat expectations (TheGlobeAndMail) Bank of Montreal, Canada’s fourth-biggest lender, on Tuesday reported third-quarter earnings which were ahead of expectations, driven by strong growth from its Canadian retail and wealth management businesses.

Overnight markets 

Overview: US 10yr note futures are up 0.381% at 127-16, S&P 500 futures are down -0.61% at 2428.75, Crude oil futures are up 0.06% at $46.6, Gold futures are up 0.97% at $1328, DXY is down -0.41% at 91.826, CAD/USD is down -0.16% at 0.8008.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.233% 2 Year 1.3%
5 Year 1.485% 5 Year 1.676%
10 Year 1.812% 10 Year 2.096%
30 Year 2.257% 30 Year 2.699%

US Economic Data 

9:00 AM S&P Case-Shiller Home Price Index, m/m, Jun, est. 0.10% (prior 0.10%)
S&P Case-Shiller Home Price Index, y/y, Jun, est. 5.60% (prior 5.69%)
10:00 AM Conference Board Consumer Confidence Index, Aug, est. 120.7 (prior 121.1)

Canadian Economic Data 

8:30 AM Industrial Product Price, m/m, Jul, -1.5%,  est. -0.7% (prior 1.0%, revised -1.1%)
Raw Materials Price Index, m/m, Jul, -0.6%, est. -0.3% (prior -3.7%, revised -3.6%)

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