Market Update

US tsys moving higher after lower August PCE (0.1% vs 0.2% exp) after quiet overnite session, US 10Y 2.30% (-0.5bps) , avg volume in TY futures (250k) after two heavy session s Wed & Thurs.  Core Euro bonds outperforming, bund yields 2-3bps lower gilts moving lower since mid morning despite downward revision to Q2 GDP. Carney said the BOE is set to raise rates for the first time in a decade.   GOCs sharply higher after July GDP miss  – 0.0% vs 0.1% exp, curve 3bps steeper , 2s ~11bps lower since Wed Poloz.

News headlines  

Most Economists Agree: Trump Tax Plan Will Widen Budget Deficit (Bloomberg) Twenty-one of 26 economists surveyed by Bloomberg News after Trump and Republican congressional leaders rolled out their tax plan this week predicted it will widen the budget gap over the next 10 years. That forecast flies in the face of Treasury Secretary Steven Mnuchin’s assertion that the program will slash deficits by spurring faster economic growth and thus more federal revenue.

Euro-Area Inflation Stuck Too Low as ECB Debates Stimulus (Bloomberg) Inflation in the euro area failed to pick up in September and underlying price growth weakened, keeping the European Central Bank waiting for the last chapter in the story of the region’s recovery.

UK growth slows to four-year low as BoE prepares rate rise (Reuters) Britain’s economy grew at its slowest pace since 2013 in the 12 months after last year’s Brexit vote, data showed on Friday, painting a subdued picture as the Bank of England prepares to raise interest rates for the first time in a decade.

Exporters, traders feel Canadian dollar pain as Bank of Canada avoids guidance (Reuters) The Bank of Canada’s journey from dove to hawk and back again this year has sent the currency market on a wild ride and put pressure on the central bank to provide better direction, despite eschewing its forward guidance policy years ago.

BlackBerry shares soar by 12% as software sales hit record (The Guardian) The transformation of BlackBerry from a bombed-out, loss-making smartphone maker to a new-look software firm appears to be working: the Canadian business has reported better-than-expected quarterly profits, boosting its shares by more than 12%.

VW’s dieselgate bill hits $30 billion after another charge (Reuters) Volkswagen (VOWG_p.DE) is taking another $3 billion charge to fix diesel engines in the United States, lifting the total bill for its emissions test cheating scandal to around $30 billion.

U.S. economy accelerates in second quarter; hurricanes expected to slow growth (Reuters) The U.S. economy expanded a bit faster than previously estimated in the second quarter, recording its quickest rate of growth in more than two years, but the momentum likely slowed in the third quarter due to the impact of Hurricanes Harvey and Irma. Gross domestic product increased at a 3.1 percent annual rate in the April-June period, the Commerce Department said in its third estimate on Thursday.

Overnight markets 

Overview: US 10yr note futures are up 0.012% at 125-18, S&P 500 futures are down -0.06% at 2506.25, Crude oil futures are up 0.14% at $51.63, Gold futures are up 0.03% at $1289.1, DXY is up 0.02% at 93.105, CAD/USD is up 0.17% at 0.8033.  

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.504% 2 Year 1.451%
5 Year 1.758% 5 Year 1.888%
10 Year 2.1% 10 Year 2.301%
30 Year 2.487% 30 Year 2.863%

US Economic Data

8:30 AM Personal Income, Aug 0.2%  est 0.2% (0.4% prior)
Personal Spending, Aug 0.1% est 0.1%  (0.3% prior)
PCE Deflator YoY, Aug 1.4%  est 1.5%  (1.4% prior)
PCE Delator MoM, Aug 0.2% est 0.3% (0.1% prior)
PCE Core MoM, Aug 0.1% est 0.2% (0.1% prior)
PCE Core YoY, Aug 1.3% est 1.4% (1.4% prior)
9:45 AM Chicago Purchasing Manager, Sep est 58.7 (58.9 prior)
10:00 AM University of Michigan Sentiment, Sep est 95.3 (95.3 prior)

Canadian Economic Data

8:30 AM GDP MoM, Jul 0.0% est 0.1% (0.3% prior)
GDP YoY, Jul 3.8% est 3.9% (4.3% prior)
Industrial Product Price MoM, Aug est 0.5% (-1.5% prior)


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, Hugues Savard

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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