Market Update US tsys lower, curve steeper with the US 10Y 2.982(+2.8bps), close to lows of Friday post GDP, weakening in Europe with bunds/gilts. Below avg volume in TY futures ahead of busy week in terms of central bank mon pol & data with non-farm payrolls Friday. WTI 2.0% higher, above $70 for the first time in a week. UK gilt yields 2-6bps higher, 10Y gilt 1.34% highest since June 14th. BOE only central bank expected to hike rates this week (90%). Key BOJ meeting tomorrow with JGB yields having leapt higher over the past two weeks on speculation the BOJ could adjust its bond buying and/or yield curve targets. GOCs trading well offered, 0.5bps wider vs tsys, 10Y above 2.30% for the first time since late May. Corporate spreads grinding tighter last week on lack of issuance, provis 2bps tighter.
News headlines
BOJ Steps In to Buy Bonds Again as Traders Don’t Heed Signal (Bloomberg) The Bank of Japan offered to buy an unlimited amount of bonds for a third time in a week after the benchmark 10-year yield rose to an almost 18-month high ahead of the central bank’s policy decision on Tuesday. The offer, made at 0.1 percent for the five-to-10 year maturities, drew some 1.6 trillion yen ($14.4 billion) of bids which were all accepted, according to the central bank. The 10-year yield pared the day’s advance after the move was announced.
Storm of News to Hit Global Economy This Week Before August Calm (Bloomberg) People charged with running or monitoring the world economy are set for a busy week before those in the Northern Hemisphere get to enjoy their summer vacations. Central bankers in the U.S., Japan, the U.K., Brazil and India all meet to set their respective monetary policies at a time when Eric Oynoyan, senior European interest-rate strategist at BNP Paribas SA, is telling clients that “central banks are back in the bond market driving seat.”
Stocks Slip Amid Earnings Deluge; Bonds Retreat: Markets Wrap (Bloomberg) Stocks began the week on the back foot as investors weighed earnings results against lofty expectations and prepared for key policy meetings from some of the world’s biggest central banks. Treasuries and European sovereign bonds fell. Miners and food and beverage makers were among the biggest losers in the Stoxx Europe 600 Index, as metals dropped and brewer Heineken reported disappointing results. Futures on the S&P 500 and Nasdaq pointed to a softer open following declines across most Asian markets, while those on the Dow were little changed. The euro and Swedish krona climbed, putting pressure on the dollar.
Canada to host meeting on WTO reform, U.S. and China left out for now (Reuters) Canada plans to convene a meeting of trade ministers to discuss how to reform the troubled World Trade Organization but the United States and China will be left out for now, an official said on Friday. The WTO is facing an increasingly serious crisis amid complaints by U.S. President Donald Trump that the body is biased against the United States. Joseph Pickerill, a spokesman for Canadian Trade Minister Jim Carr, said the meeting would take place in October in Ottawa and played down the suggestion Beijing and Washington were being snubbed.
Pompeo to announce U.S. economic initiatives in ‘Indo-Pacific’ (Reuters) Building on President Donald Trump’s “Indo-Pacific” strategy, U.S. Secretary of State Mike Pompeo will announce a series of investment initiatives in Asia on Monday focusing on digital economy, energy and infrastructure. The announcement, to be made at a U.S. Chamber of Commerce forum in Washington, comes at a time when trade frictions with China have given U.S. trade diplomacy a sharper edge. “The Indo-Pacific is an absolute priority of U.S. policymakers in the executive branch and in Congress,” Brian Hook, Pompeo’s senior policy advisor, told journalists in a conference call.
RBC fund urges Aimia to accept bid to avoid ‘existential crisis’ (BNN) One of Aimia Inc.’s biggest investors has some simple advice for the frequent-flyer program: Say yes to an unsolicited takeover from a group led by Air Canada to escape an “existential crisis.” “It behooves the board to negotiate the very best deal they can for shareholders and other parties, but at the end of the day to not consummate something here would be suicidal,” said Hanif Mamdani, who runs a hedge fund at a unit of Royal Bank of Canada. Mamdani, the Vancouver-based head of alternative investments at Phillips, Hager & North, described the $250 million cash offer for the Aeroplan loyalty program as a “turn-key solution” to most of Aimia’s biggest problems.
Italy Threatens to Bring Down EU-Canada Free Trade Deal (WSJ) Italy’s new government wants to reject a painstakingly negotiated trade deal between the European Union and Canada, and that is welcome news to Ettore Prandini, a small farmer in Italy’s fertile north. Mr. Prandini, who sells milk to producers of the famed Grana Padano cheese, says his revenue is set to fall by a fifth this year compared with last. He blames the Comprehensive Economic and Trade Agreement, or CETA, which late last year eliminated tariffs between the EU and Canada on many products. The dairy farmer objects to his Canadian counterparts now being able to compete more aggressively in Europe by offering cheeses similar to Italy’s. “The food industry is a key asset for this country,” Mr. Prandini said. “It must be protected.”
Overnight markets
Overview: US 10yr note futures are down -0.105% at 119-10, S&P 500 futures are down -0.04% at 2816.5, Crude oil futures are up 2.14% at $70.16, Gold futures are down -0.15% at $1230.8, DXY is down -0.17% at 94.509, CAD/USD is down -0.07% at 0.7662.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.069% | 2 Year | 2.676% |
| 5 Year | 2.223% | 5 Year | 2.858% |
| 10 Year | 2.319% | 10 Year | 2.98% |
| 30 Year | 2.35% | 30 Year | 3.106% |
US Economic Data
| 10:00 AM | Pending Home Sales MoM, Jun est 0.2% (-0.5% prior) |
| Pending Home Sales NSA YoY, Jun (-2.8% prior) | |
| 10:30 AM | Dallas Fed Manf. Activity, Jul est 31.0 (36.5 prior) |
Canadian Economic Data
| 10:00 AM | Bloomberg Nanos Confidence, Jul 27th (54.3 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
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230