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Market Update

• US Treasuries open NY higher and flatter, 10-year note. 1.659%. TOKYO saw mkt supported as WSJ/Hilsenrath said Sept. rate hike unlikely. Intermediates Tsys bought early, while Asian banks bought 10Y notes. Japanese insurers did Tsy flatteners. Fast money and Asian real money also did Tsy 5/30Y flatteners, and fast money also did 10/30Y flatteners. Today’s 30Y auction mops up the last of the week’s coupon auctions after Monday’s unusual combo of 3Y and 10Y auction done at the same moment.

 News headlines                                                                                              

• Global stocks dip as Fed view only partly soothes markets (Reuters) Stocks dipped and the dollar edged up on Tuesday after a Federal Reserve official’s remarks appearing to make a near-term rise in U.S. interest rates less likely only partially calmed investor nerves before a speech from ECB chief Mario Draghi. Fed Governor Lael Brainard on Monday cautioned against removing support for the U.S. economy too quickly. Her words weakened the dollar and sent U.S. stocks soaring.
• IEA Changes View on Oil Glut, Sees Surplus Enduring in 2017 (Bloomberg) The surplus in global oil markets will last for longer than previously thought, persisting into late 2017 as demand growth slumps and supply proves resilient, the International Energy Agency said.
• Fed looks unlikely to hike next week after Brainard warning (Reuters) The Federal Reserve should avoid removing support for the U.S. economy too quickly, Fed Governor Lael Brainard said on Monday in comments that solidified the view the central bank would leave interest rates unchanged next week.
• China’s economy perks up in August, thanks to housing boom, gov’t spending (Reuters) China’s factory output and retail sales grew faster than expected in August as a strong housing market and a government infrastructure spending spree underpinned growth in the world’s second-largest economy. Industrial output grew the fastest in five months as demand for products from coal to cars rebounded, though analysts warned the outlook is clouded by weakness in manufacturing investment and a lack of spending by private firms.
• UK consumer inflation holds steady despite Brexit pressure (Reuters) British inflation unexpectedly held steady in August, keeping the chance of another Bank of England rate cut on track despite a big rise in raw material costs after June’s vote to leave the European Union. The annual rate of consumer price inflation was unchanged at 0.6 percent in August, compared with economists’ forecast for it to increase to 0.7 percent, the Office for National Statistics said on Tuesday.
• Bank of England to Start Corporate-Bond Purchases on Sept. 27 (Bloomberg) The Bank of England will begin a 10 billion-pound ($13 billion) corporate-bond buying program on Sept. 27 as it seeks to bolster the U.K. economy. The central bank will hold reverse auctions to buy notes on Tuesdays, Wednesdays and Fridays, it said in a statement detailing plans first announced last month. The 18-month program will cover sterling bonds from investment-grade non-financial issuers based in the U.K. or with sizable operations in the country.
• Libor’s Reaching Point of Pain for Companies With Big Debt Loads (Bloomberg) Short-term borrowing rates are rising to the point where some heavily indebted U.S. companies can no longer ignore them. A benchmark for near-term borrowing, the three-month U.S. dollar London interbank offered rate, has risen above 0.75 percentage point. That’s a key threshold for junk-rated companies with about $230 billion of loans outstanding according to data compiled by Bloomberg — with Libor above that level, the borrowers will have to pay more interest over time. The increase so far could amount to about an extra $250 million of total interest expense annually for the companies.

Overnight markets

• Overview: US 10yr note futures are down 0% at 130-16, S&P 500 futures are down -0.8% at 2134.75, Crude oil futures are down -2.53% at $45.12, Gold futures are up 0.14% at $1327.5, DXY is up 0.24% at 95.323.

US Economic Data

• Monthly Budget Statement, August, est. -107.0b (prior -64.4b)

Canadian Economic Data

• There is no major economic data 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 slightly lower, yields ~1bp higher, US 10Y 1.68%, despite a steep decline in European and Asian stock markets, while crude fell 2.0%. Tsys off the lows in NA trade rebounding from losses in Europe. Mkts await important speech from Fed Brainard (voter) in Chicago before the blackout period commences tomorrow. Brainard, relatively dovish in the past, could add to calls for a rate hike next week as a no. of FOMC members have come out in favor of raising rates to prevent overheating. German govt bonds lower, the 10Y bund at 0.023% the highest since June 27th, bund curve 2bps steeper at 125. The US Tsy is scheduled to sell $44bln in  3Y & 10Y notes at the same time today 1:00 EST; European sov supply also picks up this week – E24.5bln vs E7.8bln last week. GOCs opening weaker, spds wider vs tsys by 1bp in 5s and 30s. Provis opening wider, Ont 48s 98/97.5, Ont 26 86/85 – provis have hardly budged despite GOC yields in the 10Y area being ~15bps higher.  Despite a steeper 5s10s, the 10Y roll continues to flatten and June 25s are starting to look cheap in that respect – this doubtlessly reflects selling in CGBs as 25s are CTD.

 News headlines                                                                                                

• Selloff gathers pace as stimulus pullback fears deepen (Reuters) European stocks and bonds fell in a volatile market on Monday, hit by growing concerns that global central banks’ commitment to the post-crisis orthodoxy of super-low interest rates and asset purchase programs may be waning. German Bund yields DE10YT=TWEB rose further above zero to as high as 0.06 percent, their highest since Britain’s Brexit vote in late June, and the rise in lower-rated euro zone countries’ yields was even sharper.
• Oil falls as U.S. drills more (Reuters) Oil fell for a second trading day in a row on Monday, after speculators cut their bullish bets by the most in three months last week and U.S. crude drillers added more rigs for a tenth week running. Brent crude oil futures LCOc1 fell 53 cents on the day to $47.48 a barrel, by 0830 GMT, while U.S. West Texas Intermediate futures CLc1 fell 66 cents to $45.22 a barrel.
• OPEC points to larger 2017 oil surplus as rivals keep pumping (Reuters) OPEC raised its forecast of oil supplies from non-member countries in 2017 as new fields come online and U.S. shale drillers prove more resilient than expected to cheap crude, pointing to a larger surplus in the market next year. Demand for crude from the Organization of the Petroleum Exporting Countries will average 32.48 million barrels per day (bpd) in 2017, OPEC said in a monthly report on Monday. That is down from the previous forecast of 33.01 million bpd.
• German economic growth to be slower in second half of 2016: ministry (Reuters) German economic growth will be slower in the second half of 2016 than in the first six months of this year, the Economy Ministry said on Monday, adding that the downside risks abroad had increased due to Britain’s decision to leave the European Union.
• Atlanta Fed’s Lockhart: ‘Serious discussion’ over rate rise warranted (Reuters) Current economic conditions warrant a “serious discussion” of whether to raise interest rates at next week’s Fed meeting, Atlanta Federal Reserve Bank president Dennis Lockhart said on Monday in remarks that may raise the likelihood of Fed action.
• Basel Capital Revamp Endorsed Without Assurance Sought by EU (Bloomberg) The central bank governors overseeing the Basel Committee on Banking Supervision backed the “broad direction” of the regulator’s bank capital-rule revamp, while stopping short of providing assurances sought by Europe on the overhaul’s impact.
• Potash Corp and Agrium agree to merge to create global agricultural giant worth $36 billion (Financial Post) Potash Corp. of Saskatchewan and Agrium have agreed to merge in a deal that would create a global agricultural giant worth an estimated US$36 billion. The deal would bring together Saskatoon-based PotashCorp’s huge fertilizer mining operations — the world’s largest by capacity — with Calgary-based Agrium’s extensive global direct-to-farmer retail network.

Overnight markets

• Overview: US 10yr note futures are down -0.024% at 130-11, S&P 500 futures are down -0.14% at 2113, Crude oil futures are down -1.96% at $44.98, Gold futures are down -0.42% at $1328.9, DXY is down -0.08% at 95.262.

US Economic Data

• There is no major economic data for today

Canadian Economic Data

• 10:00 AM: Bloomberg Nanos Confidence Index, September 9^th, (prior 58.4)

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 getting crushed for a second day, yields 2-6bps higher & the curve steeper with the US 10Y firmly above 1.60%, now 1.65 (+5bps). German govt bonds lower, yield curve steeper in follow thru to yest ECB decision. JGB curve ~8bps steeper – Reuters story on BOJ studying options to steepen yield curve as curve flattening has hurt bank profits. European stocks lower, financials bucking the trend – Deutsche Bank up 4% on reports the bank is near a settlement with the US on its sale of RMBS leading up the financial crisis. GOCs lower, curve steeper led by 10s with the 10Y at 1.13% the highest since June 30th. Cda Employment rose 26.2k in August vs 14k exp led by 52.2k full time jobs. Alberta long deal at 17 over Ontarios well received, now 16.8 bid on screens. Three corp deals yesterday all did well in secondary (Suncor & CWB breaking 10bps tighter), with more supply expected (reits & utilities, banks, Couche Tard).

 News headlines                                                                                                         

• Bond, Stock Slide Deepens as Stimulus Outlook Wanes; Oil Falls (Bloomberg) Selloffs in bonds and stocks around the world deepened on signs central banks are starting to question the benefits of further monetary easing. Oil pared a weekly gain, leading commodities lower.
• German exports plummet in July, hit trade surplus (Market Watch)  Germany’s trade surplus in July came in lower than expected as exports plummeted, the latest in a string of weak economic data from Europe’s industrial powerhouse at the start of the third quarter. Germany’s trade surplus, adjusted for seasonal swings and calendar effects, fell to 19.4 billion euros ($21.9 billion) from a revised EUR21.4 billion in June, the Federal Statistical Office, Destatis, said Friday. Economists polled by The Wall Street Journal had forecast a surplus of EUR22.7 billion.
• China’s Aug inflation trends point to stabilizing economy (Reuters) China’s consumer price inflation slowed to its weakest pace in almost a year in August, pulled down by abating food costs, although an encouraging moderation in producer price deflation added to growing evidence of a steadying economy. Indeed, the broader inflation trends shown in Friday’s data confirm recent signs of a more sure-footed recovery in the world’s second-biggest economy, allowing authorities to resist any fresh monetary easing as they move to curb an unsustainable build up of credit in the financial system.
• Wells Fargo will pay $190 million to settle customer fraud case (Reuters) Wells Fargo has long been the envy of the banking industry for its ability to sell multiple products to the same customer, but regulators on Thursday said those practices went too far in some instances.
• Canada’s economy could take 15 years to ‘reinvent’ itself, warns head of Royal Bank of Canada (Financial Post) Canada’s economy could take 15 years to reinvent itself after manufacturing and service industries began to shrink in the wake of the financial crisis, Royal Bank of Canada CEO David McKay said.
• Canada’s new housing prices rise more than expected on Toronto strength (Financial Post) Canadian new housing prices rose more than expected in July, climbing 0.4 per cent from June on continued strength in the hot market of Toronto, Statistics Canada data indicated on Thursday. The monthly increase, the 16th in a row, was greater than the 0.2 per cent advance forecast by analysts in a Reuters poll.

Overnight markets

• Overview: US 10yr note futures are down -0.2391% at 130-13, S&P 500 futures are down -0.56% at 2158.75, Crude oil futures are down -2.35% at $46.5, Gold futures are down -0.07% at $1340.6, DXY is up 0.17% at 95.186.

US Economic Data

• 10:00 AM: Wholesale Inventories, m/m, July F, est. 0.1% (prior 0.0%)
  Wholesale Trade Sales, m/m, July, est. 0.2% (prior 1.9%)

Canadian Economic Data

• 8:30 AM: Unemployment Rate, August, 7.0%, est. 7.0% (prior 6.9% )
  Net Change in Employment, August, 26.2k, est. 14.0k (prior -31.2k)

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