Market Update

US tsys slightly lower, flatter, 10Y 2.374%, on above avg volume in TY futures (370k). Prices fairly flat in Asia but faded in Europe with EGBs, gilts lower despite weaker Eurozone inflation data, thou flows light with Germany out for one day holiday. GOCs higher, spds 1-2bps narrower vs tsys after August GDP came fell 0.1% (+0.1% exp) – the first decline since Oct ‘16, while Producer Prices & Raw Material prices also came in below expectations. Provis starting former, Ontarios trading up in tens & longs. 

News headlines 

House Panel’s Talk of Phased-In Tax Cut Counters Trump’s Wishes (Bloomberg) House tax writers are discussing a gradual phase-in for President Donald Trump and Republican leaders’ proposed corporate tax-rate cut — on a schedule that would put the rate at 20 percent in 2022, according to a member of the chamber’s tax-writing committee and a person familiar with the discussions.

Trump Plans to Announce Fed Chair Nominee on Thursday (Bloomberg) The president is leaning toward picking Federal Reserve Governor Jerome Powell to lead the U.S. central bank, according to three people familiar with the the matter. Other candidates on his shortlist include current Fed Chair Janet Yellen, Stanford University economist John Taylor, former Fed governor Kevin Warsh and National Economic Council Director Gary Cohn.

Mueller’s Opening Moves Show Focus on Trump-Russia Collusion (Bloomberg) The first charges unsealed in Special Counsel Robert Mueller’s probe of the presidential election suggest a sweeping investigation, but one focus is clear: He’s building a case that Donald Trump’s campaign was in close touch with Russian officials who aimed to defeat Hillary Clinton.

Catalonia’s Independence Movement Unravels as Rajoy Prevails (Bloomberg) Catalan leader Carles Puigdemont kept his followers guessing as to the next step in his pursuit of an independent republic, after fleeing to Belgium where he’s expected to emerge on Tuesday. As Spain consolidated its grip on Catalonia’s once semi-autonomous government, Catalan separatists were left leaderless after Puigdemont fled without even telling senior members of his party of his plans, according to a party official. Facing the threat of up to 30 years in a Spanish jail, he is expected to seek asylum in Belgium along with key members of the ousted administration, the official said

BNP Paribas Posts Lower Trading Revenue on Fixed-Income Drop (Bloomberg) BNP Paribas SA couldn’t avoid the trading slump that dragged down results at its biggest U.S. and European competitors in the third quarter, as low interest rates and tepid demand from clients curbed activity.

BOJ Keeps Stimulus Unchanged as It Trims Inflation Outlook (Bloomberg) The Bank of Japan left its massive monetary stimulus program unchanged even as it trimmed its inflation forecasts, signaling further divergence ahead from its global peers. Governor Haruhiko Kuroda and the board voted on Tuesday to maintain the central bank’s yield curve control program and asset purchases, a result predicted by all 43 economists surveyed by Bloomberg. The vote was 8-1, with new board member Goushi Kataoka dissenting.

U.S. Stocks Drop at Start of Big Week for Earnings: Markets Wrap (Bloomberg) U.S. stock indexes saw their first declines in more than a week as investors prepared for a big week of earnings reports and monitored the progress of tax legislation. “Earnings will be center stage, and then tax reform,” Ernie Cecilia, the chief investment officer at Bryn Mawr Trust Co. in Pennsylvania, said by phone. “Those are the two, whatever order you want to put them in.”

Euro-Area Inflation Unexpectedly Slows as Economy Powers On (Bloomberg) Euro-area inflation unexpectedly slowed in October despite the bloc’s strengthening economy, underlining why the European Central Bank last week kept its exit from monetary stimulus wide open.

WestJet Q3 profit up from year ago as it carries more passengers (BNN) WestJet Airlines Ltd. saw its third-quarter profit grow by about 20 per cent compared with a year ago as it increased capacity and traffic.

U.S. business group worries Trump unprepared for commercial talks with China (Reuters) A top U.S. business lobby in China said on Tuesday it was concerned U.S. President Donald Trump’s administration was not making sufficient preparation for talks on imbalances in the bilateral economic relationship ahead of his November visit.

Canada foreign minister says NAFTA talks feature ‘troubling proposals’ (Reuters) Negotiations over a deal to update the North American Free Trade Agreement (NAFTA) have included some “troubling proposals” from the United States, Canada’s Foreign Minister Chrystia Freeland said on Monday.

Up to 200 killed at North Korea’s nuclear test site: report (USA Today) Up to 200 workers could have been killed after a tunnel collapsed at North Korea’s nuclear test site, according to a media report. Japanese broadcaster TV Asahi said around 100 people were trapped when the unfinished tunnel caved in at the Punggye-ri site, which lies south of the Mantapsan mountain, 50 miles from the border with China. The Telegraph reported that the incident occurred on Oct. 10, citing South Korean news agency Yonhap.

Overnight markets

Overview: US 10yr note futures are down -0.037% at 124-31, S&P 500 futures are up 0.18% at 2572.75, Crude oil futures are up 0.07% at $54.19, Gold futures are down -0.21% at $1275, DXY is up 0% at 94.563, CAD/USD is up 0.49% at 0.7754.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.392% 2 Year 1.58%
5 Year 1.617% 5 Year 2.003%
10 Year 1.949% 10 Year 2.372%
30 Year 2.311% 30 Year 2.879%

US Economic Data

8:30 AM Employment Cost Index, 3Q 0.7% est 0.7% (0.5% prior)
9:00 AM S&P Corelogic CS 20-City MoM SA, Aug est 0.4% (0.35% prior)
S&P Corelogic CS 20-City YoY NSA, Aug est 5.93%  (5.81% prior)
S&P Corelogic CS 20-City NSA Index, Aug (201.99 prior)
S&P Corelogic CS HPI NSA, Aug (5.94% prior)
S&P Corelogic CS HPI NSA Index, Aug (194.1 prior)
9:45 AM Chicago Purchasing Manager, Oct est 60.0 (65.2)
10:00 AM Conf. Board Consumer Confidence, Oct est 121.3 (119.8 prior)
Conf. Board Present Situation, Oct (146.1 prior)
Conf. Board Expectations, Oct (102.2 prior)

Canadian Economic Data

8:30 AM GDP MoM, Aug -0.1% est 0.1% (0.0% prior)
GDP YoY, Aug 3.5% est 3.6% (3.8% prior)
Industrial Product Price MoM, Sep -0.3% est 0.2% (0.3% prior)
Raw Materials Price Index MoM, Sep -0.1% 0.3% (1.0% 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