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Market Update

• US tsys trading lower after CPI came in above exp (core 2.3% vs 2.2% exp), unwinding gains after ‘risk off’ o/n session and follow thru buying after yest weak US retail sales data. Core European bonds higher, curves flatter, the 10Y bund close to zero from high of 0.07% Tuesday.  Euro stoxx down 1.25% on ~8.0% plunge in Deutsche Bank – the WSJ reporting the Bank may have to pay as much as $14bln in fines related to its sale of mortgage backed securities. DB had set aside ~$5bln for legal costs so this latest demand from the US govt is a real shocker. GOCs higher led by the 10Y sector in a directional move, 5s10s ~2bps flatter after steepening ~11bps since the end of August. Provis opening firm after closing 1bp tighter yest despite $1.225 bln in supply and CMB 5Y.  Cominar Reit in the news yest after  $200mln equity financing in bought deal with proceeds to pay down debt – spds in 20-30 bps.

 News headlines                                                                                     

• Stocks Weighed Down by Deutsche Bank, Oil; Russian Bonds Drop (Bloomberg) European shares slid as a $14 billion U.S. Justice Department claim against Deutsche Bank AG and weakening oil prices dragged lenders and energy companies lower. All but two of the 19 industry groups on the Stoxx Europe 600 Index declined and S&P 500 Index futures also fell. Russia’s ruble and bonds slipped after its central bank cut interest rates and said the move would be its last of the year. U.S. crude traded below $44 a barrel amid concern rising exports from Nigeria and Libya will add to a glut. A rally government bonds sent German’s 10-year yields below zero for the first time in a week. The pound fell versus all its major peers.
• Oil hits two-week lows as growing supplies stoke glut concerns (Reuters) Oil prices fell to roughly two-week lows on Friday as news of rising Iranian exports and returning supplies from Libya and Nigeria fueled concerns that the global glut will persist. Benchmark Brent crude futures fell below the $46-a-barrel mark, trading down 1.7 percent at $45.79 a barrel, down 80 cents, at 1045 GMT. U.S. West Texas Intermediate futures were down 73 cents, or 1.7 percent, at $43.18 a barrel, a two-week low.
• Deutsche Bank to fight $14 billion demand from U.S. authorities (Reuters) Deutsche Bank (DBKGn.DE) said it would fight a $14 billion demand from the U.S. Department of Justice to settle claims it missold mortgage-backed securities, a shock bill that raises questions about the future of Germany’s largest lender. The claim against Deutsche, which is likely to trigger several months of talks, far exceeds the bank’s expectations that the DoJ would be looking for a figure of only up to 3 billion euros ($3.4 billion).
• Bank of England aims to revamp interbank payment system by 2020 (Reuters) The Bank of England said on Friday it aimed to revamp Britain’s interbank payment system by 2020, and that future users would pay for this through a temporary increase in charges. The BoE’s real-time gross settlement system (RTGS) suffered a major outage in October 2014, and in June BoE Governor Mark Carney said he wanted to make it easier for smaller financial firms to access the system directly rather than going through large incumbent banks.
• Ottawa making housing fix a top priority, minister says (The Globe And Mail) The minister responsible for drawing up a national housing strategy says he and other senior cabinet members are having extensive discussions about how Ottawa should act to bring Canada’s housing market under control. Jean-Yves Duclos said he is “in direct and intense contact over those issues” with Finance Minister Bill Morneau and Revenue Minister Diane Lebouthillier as the government prepares for Monday’s return of Parliament.
• Johnson Said to Tell Italy Exit Talks Likely to Start Early 2017 (Bloomberg) Foreign Secretary Boris Johnson told his Italian counterpart that the U.K. will likely begin formal Brexit negotiations early next year, according to an official briefed on the conversation. Johnson, who campaigned for Britain to leave the European Union, met with Paolo Gentiloni  in Florence on Thursday, telling reporters afterward that the U.K. “must supply clarity, certainty” on its plans. Gentiloni said, “We need certainty on timings for Brexit.”

Overnight markets

• Overview: US 10yr note futures are up 0.1318% at 130-20, S&P 500 futures are down -0.12% at 2135.5, Crude oil futures are down -2.16% at $42.96, Gold futures are down -0.36% at $1313.3, DXY is up 0.51% at 95.774.

US Economic Data

• 8:30 AM: CPI, m/m, Aug, 0.2%, est. 0.1% (prior 0.0%)
  •    CPI Ex Food and Energy, m/m, Aug, 0.3%, est. 0.2% (prior 0.1%)
  •    CPI, y/y, Aug, 1.1%, est. 1.0% (prior 0.8%)
  •    CPI Ex Food and Energy, y/y, Aug, 2.3%, est. 2.2% (prior 2.2%)
• 10:00 AM: University of Michigan, Sep P,  est. 90.6 (prior 89.8)
• 16:00 AM:  Total Net TIC Flows, Jul, (prior -202.8b)
  •      Net Long-term TIC Flows, Jul, (prior -3.6b)

Canadian Economic Data

• 8:30 AM : Manufacturing Sales, m/m, July, 0.1%, est. 1.0% (prior 0.8%)
• Int’l Securities Transactions, July,  5.23b (prior 9.02b)

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 trading higher since mix of 8:30 data, US 10Y 1.675 (-2.4bps). Core PPI 0.3% vs unch exp, while retail sales -0.3% weaker than exp. Prices off the lows since Europe after BOE left rates as well as its gilt purchase program unch. Core Euro bond curves steeper, as the BOE left the door open for a rate cut in Nov while acknowledging the improvement in recent data since Brexit. GOCs lower, spds wider vs tsys as GOCs resist steepening in the US. Provi supply rumoured this morn (Ont, QC), CMB 5Y pricing as well. In corps, quiet yest in terms of domestic issuance thou Telus issued USD $600mln 10Y @ 120 bps – 30 bps tighter than IPT! Which led to narrowing in CAD telco. Ventas Realty (Baa1/BBB+) returned to the mkt for the second time this yr with $300mln in 10Y notes at 158 or 25 bps inside of IPT. The USD 10Y swaps back to CAD at GOCs + ~150, making the domestic VTR 3.3 22 look relatively cheap at ~160.

News headlines                                                                                         

• Global stocks struggle for footing after bond slip (Reuters) World stocks steadied at two-month lows on Thursday though bond markets stayed firmly in the red, as eight years on from the collapse of Lehman Brothers two of Europe’s top central banks prepared to keep their interest rates pointing down. Europe’s main stock markets in London .FTSE, Frankfurt .GDAXI and Paris .FCHI dipped in and out of positive territory as the region struggled to pull out of a five-day losing streak.
• Bank of England signals new rate cut despite Brexit bounceback (Reuters) The Bank of England said it was still likely to cut interest rates to just above zero later this year, even though the initial Brexit hit to Britain’s economy would be less severe than it expected only last month. The Bank said on Thursday its nine rate-setters were unanimous in their decision to keep Bank Rate at its new record low of 0.25 percent, the lowest in the BoE’s 322-year history.
• Volatility Erupts in Currencies as Stimulus Appetite Seen Waning (Bloomberg) Volatility has reawakened in the $5.1 trillion foreign-exchange market, as traders start to imagine life without ultra-easy monetary policy. The impact is greatest in the currencies with most at stake from an end to years where stimulus only got more generous — the so-called high yielders. A gauge of expected swings in emerging-market currencies has surged above an equivalent measure for developed markets by the most since May.
• Swiss National Bank keeps expansive policy to check overvalued franc (Reuters) Switzerland’s central bank on Thursday kept its expansive monetary policy intact, holding its negative interest rates at record low levels despite mounting criticism of the policy that has hurt banks and pensions.
• Canadian homes are still cheap, at least in foreign currency: Bank of America (Financial Post) A major U.S. financial institution is telling clients that the Canadian housing market is still cheap — especially if you’re not using loonies to buy. Bank of America Merrill Lynch Global Research on Wednesday launched coverage of Canada’s mortgage finance system, policy infrastructure and securitization channels and one of its findings, which may shock some Canadians in Toronto and Vancouver, is that the market is not all that pricey.
• Amaya CEO maintains innocence after investigator admits no direct proof in insider trading case (The Globe And Mail) Former Amaya Inc. chief executive officer David Baazov maintains that he’s innocent on charges of illegal insider trading following the admission by an investigator for Quebec’s securities watchdog that it has no direct proof of privileged information being shared over the phone about several corporate takeovers.

Overnight markets

• Overview: US 10yr note futures are down -0.0599% at 130-12, S&P 500 futures are up 0.17% at 2116.75, Crude oil futures are up 0.32% at $43.72, Gold futures are down -0.17% at $1323.8, DXY is up 0.06% at 95.385.

US Economic Data

• 8:30 AM: Empire Manufacturing, Sep, -1.99, est. -1 (prior -4.21)
  • Current Account Balance, 2Q, est.  -121.0b (prior -124.7b, revised -131.8b)
  • Retail Sales Advance, m/m, Aug, -0.3%,est. -0.10% (prior 0.0%, revised 0.1%)
  • Retail Sales Ex Auto, m/m,  -0.1%, est. 0.20% (prior -0.30%, revised -0.4%)
  • Initial Jobless Claims, Sep-10, 260k, est. 265k, (prior 259k)
  • Continuing Claims, Sep-3, est. 2150k, (prior 2144k, 2142k)
  • PPI Final Demand, y/y, Aug,  0.0%, est. 0.10% (prior -0.30%)
  • PPI Final Demand Ex Food & Energy, y/y, Aug, 1.00%, est. 1.00% (prior 0.70%)
  • Philadelphia Fed Business Index, Sep, 12.8, est. 1.0 (prior 2.0)
• 9:15 AM: Industrial Production, m/m, Aug, est. -0.20% (prior 0.70%)
  • Capacity Utilization, Aug, est. 75.70% (prior 75.90%)
• 10:00 AM: Business Inventories, Jul, est. 0.10%  (prior 0.20%)

Canadian Economic Data

• 9:00 AM: Existing Home Sales, m/m, Aug, (prior -1.30%)

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 Treasuries open NY higher and flatter, 10-year note 1.709%. Rates trading firmer, near top end of range — recovering fraction of Tue’s sell-off, decent volume. Early Asian market flow included fast$ rate and spd paying in 5s, Asian commercial bank sales in 10s, Asian insurance portfolio and credit desk buying in 30s. Buying in 5s, 10s and 30s from domestic and Asian real$ on the follow though latter turned sellers in same not long after. More paying in 5Y Swaps by Asian commercial banks while credit desks sold 5s and bought 30s. Japanese banks, real$ and insurance portfolio returned to buy 7s, 10s and 30s while N.Asian bank bought 10Y notes. Long end JGBS hurt as curve steepened on more talk BOJ will trim its bond purchases and MOF will increase 40Y issuance.

News headlines                                                                                       

• Stocks Halt Selloff in Europe as Commodities Gains Lift Miners (Bloomberg) A rout in financial markets that’s wiped some $2 trillion off the value of global equities over the past week showed signs of easing, with European stocks climbing for the first time in five days as oil and metals prices gained.
• Bond sell-off keeps investors on edge (Reuters) Rising bond yields, triggered in part by deepening worries over the difficulty of the world’s major central banks to stimulate growth, kept investors in broadly risk-off mode on Wednesday. The possible spillover effects of the rises into stock and commodity markets has hit financial assets as funds, who have been betting on a long period of low volatility and suppressed yields, are being forced to reassess positions.
• Global oil demand growth shrinks, appeal of cheaper fuel prices loses lustre (Financial Post) Oil prices tumbled Tuesday on a report from the International Energy Agency that global demand growth is shrinking, raising concerns over whether the economic boost from low fuel prices has run its course. In its latest monthly oil report, the Paris-based agency signaled that the economy may have wrung dry any savings from prolonged low prices, saying “stimulus from cheaper fuel is fading” as the global supply glut persists.
• EU restates positions on Brexit talks, market access (Reuters) EU chief executive Jean-Claude Juncker warned London again on Wednesday that it could not have access to Europe’s single market if it bars some EU citizens from working in Britain after Brexit.
• Wage growth slows after Brexit vote (The Guardian) A slide in wages growth in the month after the Brexit vote appeared to give the first warning sign that the uncertainty surrounding the outcome of the referendum could harm the UK labour market. The Office for National Statistics said wages growth slipped to 2.1% in the three months to July, from a revised 2.4% a month ago. When bonuses are added to the wage total, earnings rose by 2.3% during the quarter, down from 2.5%.
• Trudeau Said to Plan Pipeline Approval, Favor Kinder Morgan (Bloomberg) Canadian Prime Minister Justin Trudeau plans to approve at least one new oil pipeline project in his first term, with Kinder Morgan Inc.’s Trans Mountain expansion to the Pacific Coast the most likely candidate, people familiar with his plans said. The prime minister is seeking to strengthen environmental standards and build confidence in new regulatory rules while also stoking growth in Canada’s sluggish economy by backing a pipeline.
• Bayer says clinches $66 billion Monsanto takeover (Reuters) Bayer said on Wednesday it won over Monsanto’s management with a $128 per share offer in cash, worth about $66 billion including debt, to take over the global seed market leader. The companies have agreed on an antitrust break fee of $2 billion and the deal is expected to be closed by the end of 2017, the German group said in a statement.

Overnight markets

• Overview: US 10yr note futures are up 0.1563% at 130-6, S&P 500 futures are up 0.19% at 2126.25, Crude oil futures are down -0.67% at $44.6, Gold futures are up 0.14% at $1325.6, DXY is down -0.11% at 95.529.

US Economic Data

• 8:30 AM: Import Price Index, m/m, August, -0.2%, est. -0.1% (prior 0.1%)
  •     Import Price Index, y/y, August, -2.2%, est. -2.2% (prior -3.7%)

Canadian Economic Data

• There is no major economic news 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