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Market Update

Tsys lower, extending declines in recent trade after BOE policy announcement and hawkish minutes, market discounting threats from N. Korea to ‘sink Japan and reduce US to ashes’ –  US 10Y 2.208 (+2bps). Tsys traded in narrow range overnite until BOE,  then fell with gilts after BOE minutes suggested some removal of stimulus would be appropriate, despite a 7-2 vote to leave rates unchanged as expected. A full rate hike is now priced in by February from July pre-meeting based on short sterling futures. Gilt yields sharply higher 4-9 bps and the curve 5bps flatter. GOCs lower in line with tsys, the 10Y @ 2.09% now firmly above 2.07% resistance from July 31st. On the curve, notable flattening in 10s30s late yest 34.5 one-month lows, seemed to be short covering driven by new issue pricing.  Provis continue to be well bid, spds 3bps tighter on the week – Alberta/Ont 48 roll 7.5/7.0  lows since Jan. Active in corps yesterday with over $2bln in primary issuance including $450mln (upsized) Capital Power 7Y @ 235 & $200mln 5Y Morguard 5Y @ 255 – both of which were 5bps tighter on the break. Weve traded the MRCCN 20s recently in the 220 context.

News headlines 

Bank of England hints that interest rate rise is coming, sending pound soaring – business (TheGuardian) The central bank is expected to keep both its key interest rate and QE unchanged as rhetoric takes a hawkish tilt to warn on rate hikes.

US intelligence shows North Korean preparations for a possible missile test (CNN) CNN has learned that US intelligence indicates that North Korea is making preparations for another intercontinental ballistic missile (ICBM) or intermediate range missile test. Two administration officials familiar with the latest intelligence confirm there are indicators of test preparations that could lead to a potential launch in about two weeks.

Saudi Aramco says IPO on track after report it is preparing for possible delay (Reuters) Saudi Aramco’s planned initial public offering remains on track, the company said on Thursday, after Bloomberg reported that the oil company is preparing contingency plans for a possible delay by a few months into 2019. Saudi authorities are aiming to list up to 5 percent of the world’s largest oil producer on both the Saudi stock exchange inRiyadh, the Tadawul, and one or more international markets in anIPO that could raise $100 billion.

U.S. consumer prices accelerate in August (Reuters) U.S. consumer prices accelerated in August amid a jump in the cost of gasoline and rents, signs of firming inflation that could allow further monetary policy tightening from the Federal Reserve this year. The Labor Department said on Thursday its Consumer Price Index rose 0.4 percent last month after edging up 0.1 percent in July. August’s gain as the largest in seven months and lifted the year-on-year increase in the CPI to 1.9 percent from 1.7 percent in July.

Trump Bars Chinese-Backed Firm From Buying U.S. Chipmaker Lattice (NYTimes) U.S. President Donald Trump blocked a Chinese-backed private equity firm from buying a U.S.-based chipmaker on Wednesday, sending a clear signal to Beijing that Washington will oppose takeover deals that involve technologies with potential military applications.

Overnight markets 

Overview: US 10yr note futures are down -0.086% at 126-11, S&P 500 futures are down -0.06% at 2493.25, Crude oil futures are up 1.12% at $49.85, Gold futures are down -0.32% at $1323.7, DXY is down -0.22% at 92.315, CAD/USD is up 0.2% at 0.8198. 

US Economic Data 

Canadian Economic Data 

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

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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

Market Update

Tsys unch, 10Y 2.167%, low volume in TY futures o/n (~230k), with core European bonds underperforming slightly on supply, 10Y bund 0.403 (+0.5bps).  Germany sold ~E2.5bln 10Y bunds at 0.39% with a b/c 1.6x vs 1.3x August 23rd. Bund futures lower with a big spike in volume ~7:45am as the contract fell below 161.80. UK gilts lower, paring earlier gains after hourly earnings rose less than exp in July 2.1% vs 2.3% thou the unemployment rate fell to 4.3% the lowest since 1975. The Bank of England meet tomorrow and is not expected to hike rates as wage growth has fallen further behind inflation in recent months. GOCs lower, underperforming tsys for the first day in three, 1-2bps across the curve, 10Y 2.054% edging closer to 2.06% July 31st intraday. Provinicials well bid yest , most of the action after Ontario reopened their 2048s @ 83.5 with a carve out, ended 82/. The City of Montreal issued  $250mln in 27s @ QCs + 25

News headlines 

Unemployment rate falls to 4.3% as wages stagnate (BBC) UK unemployment fell by 75,000 in the three months to July, bringing the jobless rate down to 4.3% from 4.4% in the previous quarter. The rate remains at its lowest since 1975, but a squeeze on real incomes continues, according to the Office for National Statistics figures. Wages in the period were 2.1% up on a year earlier, little changed from the previous months’ growth rates. With inflation hitting 2.9% in August, wages are failing to keep up. In real terms, wages have fallen by 0.4% over the last year.

Goldman Sachs lowers U.S. third-quarter GDP forecast after Harvey, Irma (Reuters) Goldman Sachs economists lowered their forecast for U.S. economic growth in the third quarter by 0.8 percentage point to 2.0 percent, based on an expected slowdown in business activity due to damage from Hurricanes Harvey and Irma. “If damages are significantly higher — or if Florida flooding continues to weigh on consumer spending and housing/investment activity into late September and October — we would expect additional downside to near-term growth,” they wrote in a research note released late on Monday.

Global oil demand to exceed expectations in 2017, says IEA; OPEC cuts supply (CNBC) Global oil demand is set to accelerate faster than anticipated this year, according to the International Energy Agency (IEA), which has revised up its 2017 growth estimates. Strong second-quarter demand has buoyed oil markets, which have been struggling to rebalance as a supply glut has weighed heavily on prices, the IEA said in its September report released Wednesday.

Will Trump Target Muni-Bond Tax Break? Market Sees Little Chance (Bloomberg) Donald Trump and Treasury Secretary Steven Mnuchin have expressed support for maintaining the tax break on municipal bonds. The market takes them at their word. As the Republican president embarks on a push for tax cuts, top-rated state and local government bonds due in five years are yielding just 65 percent of comparable Treasuries, holding near a more than seven-year low, according to data compiled by Bloomberg. That shows that investors are still placing a high value on the tax exemption. If they expected the tax break to be eliminated — or chipped away at — municipal yields would rise closer Treasuries to compensate for that risk.

Gundlach: Equity investors to see change in dynamic with QE reversal (Reuters) Investors in equities and risk assets should brace themselves for the end of quantitative easing, given the high correlation it has to high stock and junk bond prices, Jeffrey Gundlach, chief executive at DoubleLine Capital, warned Tuesday. Equity and risk-asset investors are “unfortunately about to see the first change in dynamic in years” with the end of QE, Gundlach said on a webcast. Jeffrey Gundlach sees ‘short term’ bottom in the US dollar (CNBC) DoubleLine’s Gundlach calls German bond yields ‘crazily low’ (FT)

EU’s Juncker: seize Brexit chance to forge tighter union (Reuters) European Commission chief Jean-Claude Juncker called on EU governments on Wednesday to seize a window of opportunity from Brexit and economic growth to forge a tighter union built around the euro currency and a pivotal role in global trade. In his annual State of the European Union speech, Juncker sketched out a vision of a post-2019 EU where some 30 countries would form a euro zone, with an EU finance minister running key budgets to help states in trouble.

Robots are an ETF’s new best friend, but some need convincing (Globe and Mail) It’s time for exchange-traded funds to start wooing the robots. But the asset management industry isn’t quite so sure. Automated advice platforms — known as robo advisers — are poised to expand their investments in ETFs over the next five years, boosting their assets to more than $800-billion, according to a report by PricewaterhouseCoopers. Overall, digital advice is likely to grow to $1-trillion by 2020, a separate study by Aite Group showed.

Cities Swimming in Raw Sewage as Hurricanes Overwhelm Systems (Bloomberg) Hurricane Harvey took aim at one of the nation’s most industrial regions, releasing a stream of toxic pollutants from chemical plants, refineries and Superfund sites in Texas. But when its bigger sister Irma slammed into Florida, environmental alarms rang over a different kind of discharge: raw sewage. Millions of gallons of poorly treated wastewater and raw sewage flowed into the bays, canals and city streets of Florida from facilities serving some of the nation’s fastest-growing counties. More than 9 million gallons of releases tied to Irma have been reported as of late Tuesday as inundated plants were submerged, forced to bypass treatment or lost power.

Overnight markets 

Overview: US 10yr note futures are up 0.037% at 126-22, S&P 500 futures are down -0.13% at 2491, Crude oil futures are up 0.97% at $48.7, Gold futures are up 0.35% at $1337.4, DXY is down -0.09% at 91.799, CAD/USD is down -0.36% at 0.8236.

US Economic Data 

Canadian Economic Data 

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

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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

Market Update 

Tsys lower, prices gapping lower overnite on ‘risk-on’ after Hurricane Irma weakened and N. Korea did not fire a missile on Saturday as expected, the US 10Y 5bps higher @2.10% with the tsy curve ~1bp steeper.  Global equities higher, Euro stoxx +1.0%, S&P futures +11pts. Core Euro bonds also weaker lead by  UK gilts yields ~5bps higher, bunds outperforming bund/gilt spd 2bps wider –  mkt looking ahead to heavy data week in the UK with CPI/PPI Wed followed by BOE on Thursday. Also Austria is looking to issue 5Y and 100Y bonds in the near future. In Canada, GOCs are lower, lagging the pullback in tsys slightly (1-2bps), after spreads blew out ~20-30bps last week, GOC 10Y 2.02% highest since July 31^st.  Provis opening unch after spds widened 3bps last week despite higher all in yields. Quebec fiscal update released Friday showed a surplus for the three months ended June 30^th 2017 of $98mln vs a deficit of $529mln last yr. For 2017-18 Quebec forecasts a balanced budget. The province also announced plans to issue ultra long bonds.

News headlines 

Irma Weakens as It Heads Past Tampa, Cutting Damage Forecast (Bloomberg) Hurricane Irma weakened as it moved past Tampa, leaving in its wake at least 4.7 million without power, millions temporarily displaced and a forecast for as much as 15 inches of rain in what may go down as one of the worst storms in Florida’s history.

Hurricanes Irma and Harvey to hit oil demand – Goldman Sachs (CNBC) Oil demand is likely to fall by about 900,000 barrels per day (bpd) in September due to the combined impact of hurricanes Harvey and Irma, Goldman Sachs said on Monday.

Trump Debt Limit Deal Undermines Trust Among GOP on Tax Overhaul (Bloomberg) The White House said President Donald Trump cut a short-term debt ceiling and government spending deal with Democrats to clear the deck for a major tax bill. But the agreement could be complicating tax efforts by eroding trust within his own party. Not only has the deal sowed doubt among the GOP about its unpredictable president, but it’s also driving a wedge between Republicans and their leaders in Congress, just as the party is desperate to deliver on one of its top priorities.

U.N. Security Council to vote Monday on weakened North Korea sanctions: diplomats (Reuters) The U.N. Security Council is set to vote on Monday on a watered-down U.S.-drafted resolution to impose new sanctions on North Korea over its latest nuclear test, diplomats said, but it was unclear whether China and Russia would support it.

US Economic Data 

There is no economic data scheduled for today.

Canadian Economic Data 

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

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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