Comments

Market Update

• Tsys basically unch from after volatile overnite session following BOJ’s policy announcement, the 10Y yield rising sharply by ~4bps to 1.74% then falling back close to unch @ 1.68%. The BOJ left rates unch, deciding instead to target the yield curve – the 10Y JGB yield rose to 0% for the first time since March, yet ended at -0.04%. The Yen fell initially yet is now sharply higher with USDJPY below 101.40 support – clearly the mkt remains unconvinced as far as the BOJ’s new ‘tweaking’ measures. GOCs slightly lower in line with tsys, provis opening 0.5bps weaker with supply less likely prior to FOMC this aft. In corps we have seen buying in 5Y NVCC and bank FRNS lately, expect that a status quo FOMC this afternoon will be supportive for credit in general, higher beta in part.

 News headlines                                                                                                

• Banks Emerge as Winners From BOJ With Bonds, Yen Erasing Losses (Bloomberg) The Bank of Japan shifted the focus of its monetary stimulus Wednesday from expanding the money supply to controlling interest rates, which some economists deemed as further evidence that BOJ policy had reached the limits of its effectiveness. The central bank said it would adjust the volume of its asset purchases, the core of its framework until now, as necessary in the short term to control bond yields, while keeping it at about 80 trillion yen ($780 billion) annually over the long term.
• Oil jumps after surprise drop in U.S. crude inventories (Reuters) Oil prices jumped 2 percent on Wednesday after a surprisingly large drop in U.S. crude inventories and as an oil services workers strike in Norway threatened to cut North Sea output. Brent crude futures LCOc1 were up 91 cents at $46.79 per barrel by 1113 GMT, while West Texas Intermediate (WTI) crude futures CLc1 rose by 96 cents to $45.01 a barrel.
• Fed expected to keep rates unchanged, may signal year-end hike (Reuters) The U.S. Federal Reserve is expected to keep interest rates unchanged on Wednesday amid tepid inflation and recent weak economic data, but could signal an increased likelihood of a hike by the end of the year. The U.S. central bank raised its benchmark overnight interest rate to a range of 0.25 percent to 0.50 percent in December, the first hike in nearly a decade, but has held rates steady this year.
• German retail, construction associations lift 2016 sales forecasts (Reuters) Germany’s HDE retail association and the HDB construction association on Wednesday raised their sales forecasts for 2016 in a further sign that private consumption and building activity will propel growth in Europe’s biggest economy this year.
• BoE paper says system-wide stress-testing would bring benefits (Reuters) Extending bank stress testing to the wider financial system could be the next step by regulators to root out weaknesses that undermine stability, a Bank of England paper said on Wednesday. The Bank has been conducting its own stress test of banks since the 2007-09 financial crisis, supplementing European Union tests. The aim is to spot flaws in business models and check if lenders are holding enough capital to withstand big market shocks.
• OECD Sees Globalization Stalling as Weak Trade Hurts Economy (Bloomberg) A collapse in trade growth suggests that globalization may be stalling and is contributing to a stagnation in world economic output, the Organization for Economic Cooperation and Development said. The OECD trimmed its global growth forecasts by 0.1 point for this year and next to 2.9 percent and 3.2 percent, respectively. The volume of world trade declined in the first quarter and will fall short of overall output growth in the full year, the Paris-based organization said Wednesday in a report.
• Expect lower interest rates for some time to come, Bank of Canada signals (Financial Post) The Bank of Canada governor is not alone in warning that weak economic growth and low interest rates have been with us for far longer than anticipated, and that trend is unlikely to change any time soon. It’s not just a domestic concern either, Stephen Poloz said Tuesday, but a global one that requires a lot of economic repairs across borders.

Overnight markets    

• Overview: US 10yr note futures are down -0.0479% at 130-14, S&P 500 futures are up 0.29% at 2137.25, Crude oil futures are up 1.66% at $44.78, Gold futures are up 1.12% at $1332.9, DXY is down -0.17% at 95.856.

US Economic Data

• 8:30 AM : Wholesale Trade Sales, m/m, Jul, 0.3%, est. 0.3% (prior 0.7%)
• 14:00 AM : FOMC Rate Decision, Sep 21th, est. 0.25%-0.50% (prior 0.25%-0.50%)
  •         Fed Summary of Economic Projections

Canadian Economic Data

• There is major economic data release for today

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

Market Update

• Tsys higher & flatter, yields 2-4 bps lower led by the long end, US 10Y 1.688 (-2.4), volumes light in tsy futures (191k in TY1) as Japan returns from vacation. Core Euro bonds higher, bund & gilt curves both sharply flatter as well – strong demand seen at UK 30Y gilt auction. GOCs higher, spds ~1bp wider vs tsys, yields ~2bps lower with the 10Y 1.17%. Poloz scheduled to deliver a speech entitled ‘lower for longer’ in Quebec City at 12:50PM. More buying of long provis yest left spreads 2-3bps tighter led by the long end the and Ont 10/30 credit curve 1bp flatter 13.4/13 from 14.5 on Friday. Ont 26s lifted late in the day at 83, Ont 48s closed 96 bid. Spds opening firm despite lower Cda yields, could still see some supply ahead of FOMC.

 News headlines                                                                            

• Dollar Falls With Treasuries Amid Fed, BOJ Countdown; Oil Rises  (Bloomberg) The dollar dropped with Treasuries as traders braced for key policy decisions in the U.S. and Japan. Oil rallied. The dollar dropped with Treasuries as traders braced for key policy decisions in the U.S. and Japan. Oil rallied.
• Fed again poised to cut longer-run interest rate forecast (Reuters) U.S. Federal Reserve policymakers are set this week to again cut their forecasts for how high interest rates will need to go in an economy where output, productivity and inflation are growing at a slower pace than in past decades. It would be the fourth time in 15 months that the U.S. central bank has been forced to admit its estimate of this so-called neutral rate was too optimistic, raising questions about the health of the economy in the coming years.
• Two of Fed’s Own Primary Dealers Warn Shock Hike Awaits Markets (Bloomberg) There’s uncommon dissent in the ranks of the Federal Reserve’s primary dealers over the central bank’s interest-rate decision this week. Two of the Fed’s 23 preferred bond-trading partners — Barclays Plc and BNP Paribas SA — are betting against their peers and the bond market by forecasting officials will raise rates Wednesday. It’s the first time more than one dealer has gone against the consensus during the week of a policy meeting since last September, data compiled by Bloomberg show. Economists at both banks say traders have too steeply discounted officials’ intent to hike after the Fed has remained on hold for longer than expected.
• BOJ seen easing policy on Wednesday; economists split on next move (Reuters) The Bank of Japan is expected to further ease its ultra-loose policies at this week’s meeting, a Reuters poll of economists found on Tuesday, as it struggles to overcome chronic stagnation and quell speculation that it is running out of options. The economists polled Sept. 14-20 were largely split over whether the BOJ’s next move would be to cut its negative interest rate even deeper, or to ramp up or recalibrate its asset purchase program, or even do both.
• OPEC may decide on extra meeting immediately after Algiers: Algeria (Reuters) OPEC members could decide to hold an extraordinary meeting to discuss oil prices immediately after an informal gathering in Algiers next week, Algerian Energy Minister Noureddine Bouterfa said on Tuesday. Bouterfa told local radio he was optimistic that participants would reach a consensus on how to stabilize the oil markets at the Algiers meeting of OPEC and non-OPEC producers on Sept. 26-28.
• Encana unveils stock sale to pay down debt, fund spending (The Globe And Mail) Encana Corp. is raising more than $1-billion (U.S.) in a marketed share issue, a departure from priced bought deals that are more often used to raise money in the oil patch. Encana plans to use half the proceeds from the sale of 107 million shares to help fund its 2017 capital spending, much of which will be in the Permian shale oil play in Texas. The rest will be used to reduce debt, which has hovered slightly above industry norms.
• Export Development Canada sets up shop in London in Brexit’s wake (The Globe And Mail) Export Development Canada is opening an office in London and hopes to take advantage of opportunities created by Brexit. “Some people may be asking why EDC would choose the U.K. at this time. The answer is simple: Where some see risk and volatility after the Brexit vote, EDC sees opportunity,” said Mairead Lavery, EDC’s senior vice-president of business development.

Overnight markets

• Overview: US 10yr note futures are up 0.0479% at 130-16, S&P 500 futures are up 0.35% at 2140.5, Crude oil futures are down -1.18% at $42.79, Gold futures are down -0.08% at $1316.8, DXY is up 0.1% at 95.936.

US Economic Data

• 8:30 AM: Housing Starts, Aug, 1142k , est. 1190k (prior 1211k, revised 1212k )
  • Housing Starts, m/m, Aug, , est. -1.7% (prior 2.1%, 1.4%)
  • Building Permits, Aug, , est. 1165k (prior 1152k, 1144K)
  • Building Permits, m/m, Aug, , est. 1.8% (prior -0.1%, -0.8%)

Canadian Economic Data

• There is major economic data release for today

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

Market Update

• US tsys advancing in NY trade after quiet, range bound o/n session on extremely light volume (135k TY), with Japan closed today and the mkt setting up for the Fed and BOJ on Wednesday. German govt bonds lower, yield curve steeper. MNI story quoted ECB sources as saying ECB will stay put until the end of the year. Belgium long dated supply also weighed on l.t. bunds – E850mln 2047 bonds at 1.136% vs 1.09% in July. European stocks up 1.2% led by financials, crude rebounding 1.3% at 43.60 on escalating conflict in Libya preventing the resumption of exports. GOCs off slightly, curve unch – 2s/10s ~6bps steeper over the week with the BOC set to auction 2s this thurs – $3.9bln reopened Nov 18s. Provi spds in 0.5bps this morn after closing 1bp tighter Friday – supply less likely before Fed and BOJ meetings on Wed. Ont 10/30 credit curve ~0.5bps flatter since reaching new wides on Thursday at 14.5bps – decent buying of longs seen on Friday supported by $4.25bln CMB 26s dropping out of the long index as well.

 News headlines                                                                                        

• Stocks Rally as Crude Rebounds; Dollar Slides Before Fed Meeting (Bloomberg) Stocks rose around the world, buoyed by higher commodities prices, and the dollar weakened before central bank policy meetings this week. The Stoxx Europe 600 Index gained the most in more than two weeks. Crude rebounded from a one-month low as fighting disrupted supplies from Libya, boosting the currencies of oil-exporting nations.
• For Yellen, a September Fed surprise could close confidence gap (Reuters) Market volatility is low, U.S. census data shows income gains have reached the middle class, and workers are clawing back a larger share of national income. For now, at least, no international risk stands out and inflation may even be picking up.
• Oil climbs as Venezuela sees output deal (Reuters) Oil prices rose on Monday from multi-week lows after Venezuela said OPEC and non-OPEC producers were close to a deal to stabilize the market and as clashes in Libya disrupted attempts to boost crude exports. Brent crude futures were at $46.32 per barrel at 1043 GMT, up 55 cents from their previous settlement and off an earlier peak of 46.62. U.S. crude was up 61 cents, or 1.4 percent, at $43.64 a barrel.
• China big city home prices surge in August adding to worries (Reuters) Shenzhen lost its place as the hottest spot in China’s property market in August, but the tech boomtown bordering Hong Kong remained one of the major cities driving rapid price growth as concerns mount over funds pouring into property. Prices for new homes rose 36.8 percent in Shenzhen from a year ago, cooling from 40.9 percent in July, allowing the coastal city of Xiamen to take over as the city in China with the fastest rising prices.
• Hard Brexit will cost City of London its hub status, warns Bundesbank boss (TheGuardian) The head of Germany’s central bank has warned that London’s position as a financial centre would be dealt a severe blow if the UK left the single market because banks would be denied the right to operate across the 27 remaining members of the EU.
• Ottawa to impose a national carbon price on the provinces (The Globe And Mail) The Liberal government will move this fall to impose a minimum, national carbon price on provinces that fail to adopt their own pricing system for reducing greenhouse-gas emissions, a plan that is adamantly opposed by some key premiers.
• Quebec pension fund ups stakes in infrastructure test case (Reuters) Quebec’s public pension fund, the Caisse, is about to take on one of its toughest investment challenges yet – helping the commuters of Montreal. Keen to boost returns, Canada’s second-biggest pension fund is financing and overseeing the construction of a new 67 kilometer (41.6 miles) public transit system in Montreal, the third largest automated transportation system in the world behind those in Dubai and Vancouver.

Overnight markets

• Overview: US 10yr note futures are up 0.0479% at 130-15, S&P 500 futures are up 0.41% at 2141.25, Crude oil futures are up 1.46% at $43.66, Gold futures are up 0.48% at $1316.5, DXY is down -0.27% at 95.847.

US Economic Data

• 10:00 AM: NAHB Housing Market Index, Sep, est. 60 (prior 60)

Canadian Economic Data

• 10:00 AM: Bloomberg Nanos Confidence Index, Sep 16 (prior 57.7)

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