Comments

Market Update

US tsys lower, US 10Y 1.58 (+2bps), core Euro bonds higher led by 10Y UK gilts, German bunds also higher on lower CPI. Tsys mostly lower overnite on highe than avg volume, but cut losses after Fed Fischer admitted pace of rate increases depends on data.  GOCs lower, lagging the rebound in tsys after July IPPI cam ein above exp at +0.2% (-0.1% exp), yet the current account came in at $19.9bln, the widest since 2010 showing ongoing weakness in goods and services exports. Ontarios getting hit to start, Ont 46s @ 100.5 after widneing 0.5bps yest, longs underperforming. Supply expectations and lower cda yields weighing on spreads here.

News headlines                                                                                        

• Dollar Advances as Treasuries Drop on Rate Outlook; Stocks Rise (Bloomberg) The dollar strengthened and Treasuries fell as Federal Reserve Vice Chairman Stanley Fischer said the U.S. economy was close to full employment, reinforcing speculation that policy makers are moving toward raising interest rates. The Bloomberg Dollar Spot Index climbed to a three-week high as Fischer, who last week suggested that interest rates may rise as soon as September, said Tuesday in a Bloomberg Television interview that officials can choose the pace of rate increases based on economic data.
• Fed’s Fischer says U.S. job market ‘very close’ to full strength (Reuters) The U.S. job market is nearly at full strength and the pace of interest rate increases by the Federal Reserve will depend on how well the economy is doing, Fed Vice Chairman Stanley Fischer said on Tuesday. In an interview with Bloomberg TV, Fischer did not comment on the timing of the next Fed rate hike but said “we choose the pace on basis of data,” and that U.S. “employment is very close to full employment.”
• Japanese household spending, joblessness fall (Market Watch) Japanese household spending fell again in July despite continued improvement in the labor market, underlining the conflicting signs of progress in Prime Minister Shinzo Abe’s efforts to generate sustained growth. Spending fell 0.5% from a year earlier in July, down for the fifth month in a row and the 10th time in the past year, according to data released Tuesday by the internal affairs ministry. The figure is adjusted for price changes. Economists surveyed by The Wall Street Journal and the Nikkei expected a 1.0% contraction from a year earlier.
• Euro zone monthly economic sentiment falls more than expected (Reuters) Economic sentiment in the 19 countries sharing the euro fell in August to its lowest level since March, a further indication that morale is weakening after Britain voted to leave the European Union. The European Commission’s euro zone Economic Sentiment Indicator (ESI) fell to 103.5 in August from 104.5 in July, its lowest level since March and well below the 104.1 forecast in a Reuters poll of 38 economists. Estimates ranged from 103.0 to 104.9.
• China’s Xi urges boost to economic reforms (Reuters) China’s key reforms have been smooth over the last three years, but implementation needs to be faster, Xinhua news agency said, citing a statement from a meeting chaired by President Xi Jinping on Tuesday. Xi called for solid efforts to advance reforms, with more focus needed on the economy, at the meeting of the Central Leading Group for Deepening Overall Reform. Some analysts say China’s reforms, particularly those of state firms, have been slower than expected.
• France, joining German Economy Minister, urges halt to trade talks with U.S. (Reuters) Current transatlantic trade talks should be halted and a new set started, France’s trade minister said on Tuesday, adding his voice to calls from within Germany for an end to the negotiations. Matthias Fekl said he would request a halt to negotiations with the United States over the Transatlantic Trade and Investment Partnership (TTIP) on behalf of France at next month’s meeting of European Union trade ministers in Bratislava.
• Bank of Nova Scotia hikes dividend as third-quarter profit rises to $1.9 billion, credit losses decline (Financial Post) Bank of Nova Scotia  reported on Tuesday third-quarter earnings that were ahead of market expectations, driven by growth in its domestic and international banking businesses. Canada’s third-biggest lender reported earnings per share of $1.55, up from $1.46 the year before. Analysts had on average expected earnings of $1.48 per share, according to Thomson Reuters I/B/E/S.

Overnight markets

• Overview: US 10yr note futures are down -0.0829% at 131-27, S&P 500 futures are down -0.06% at 2178, Crude oil futures are up 0.55% at $47.24, Gold futures are down -0.41% at $1321.6, DXY is up 0.3% at 95.862.

US Economic Data

• 10:00 AM:  Consumer Confidence Index, August, est. 97.0 (prior 97.3)

Canadian Economic Data

• 8:30 AM: Industrial Product Price Index, m/m, July, 0.2%, est. -0.3% (prior 0.6%)
  •     Raw Material Price Index, m/m, July, -2.7%, est. -1.2% (prior 1.8%)

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 higher, recovering some of Friday’s late selloff, with the US 10Y 1.615 (-1.5bps), and longs outperforming. Prices rising off the lows despite July PCE core coming in @1.6% vs 1.5% exp and June Personal Spending revised higher to 0.5%.  Bear flattening on Friday after Yellen raised odds of a rate hike at the Sep meeting to ~30%. This Friday’s August employment report is in focus and could easily tip the scales to a Sep hike should the figure come in above the 160k after the solid 255k rise in July. GOCs higher after the US data led by 10s which are ~1bp tighter on the curve, 5s lagging after Friday’s 3bp cheapening which accelerated in the selloff during the aft session. We put out a comment late Friday noting how cheap 5s were on the curve in the face of deteriorating fundamentals – action seems to be driven more by the repricing in the US. Quiet in provis on Friday with spds firmly in a range. CIBC & TD both issuing in USD this morn: CIBC 3Y @~85  over tsys  & TD 2Y @~70.

News headlines                                                                                                          

• European Stocks Fall as Fed Outlook Lifts Dollar; Oil Declines (Bloomberg)  The Fed effect reverberated through markets, sending stocks in Europe and developing economies lower while the dollar gained for a second day. Gauges of stocks and currencies in emerging markets sank to their lowest levels in at least three weeks after Federal Reserve officials spurred bets on a U.S. interest-rate increase in September. The Bloomberg Dollar Spot Index extended its biggest jump since June, while oil led declines in commodities. Japan’s Topix index of shares rose after central bank chief Haruhiko Kuroda reiterated a pledge to boost monetary stimulus if needed.
• Oil falls towards $49 on high output, strong dollar (Reuters) Oil fell towards $49 a barrel on Monday, pressured by high output from Middle East OPEC members and as a stronger U.S. dollar weighed on commodities. Iraq, which has exported more crude from its southern ports in August, will continue ramping up output, its oil minister said on Saturday. Top exporter Saudi Arabia has kept output at around record levels this month.
• Currency Traders Can’t Lose as Strategies Reap Big Gains (Bloomberg) Everyone’s a winner in the $5.3 trillion-a-day global currency market this year. For just the second time in the past decade, three major foreign-exchange trading strategies are all producing positive returns. The carry trade, in which investors borrow in Group of 10 currencies with low interest rates and use the proceeds to buy assets with higher yields, is on pace for its biggest annual gain since 2012, according to Deutsche Bank AG index data. Trades that buy undervalued currencies and sell expensive ones, and tactics that latch onto foreign-exchange trends, are also making money.
• Central Bankers Spurn Call for Radical Approach at Jackson Hole (Bloomberg) Central bankers aren’t retreating from the fight against low inflation, although they’re wary of launching a fresh assault on any daring new fronts. Faced with disappointing growth after years of ultra-low interest rates, Federal Reserve Chair Janet Yellen and her peers who met this weekend in Jackson Hole, Wyoming, re-affirmed their belief in power of monetary policy to stop economies from slipping into deflation. They were less keen on academic proposals that included the abolition of cash, raising their inflation targets, or keeping permanently large balance sheets.
• S. SEC paid $3.75 million to BHP Billiton whistleblower: report (Reuters) The U.S. Securities and Exchange Commission paid a BHP Billiton (BHP.AX) (BLT.L) insider $3.75 million for detailed information in an investigation into alleged bribery of Asian and African officials, the Australian Financial Review reported on Monday. Citing legal sources, the newspaper report said it was the first time an employee of an Australian company had received a U.S. whistleblower bounty.
• Canadian farmers, already facing low commodity prices, confront China threat to canola exports (Financial Post) Canadian farmers are facing an uncertain global economic climate. Even as China — this country’s No. 2 export market — tightens rules on shipments of canola over contamination concerns, commodity prices are dipping at home, which will cut into the profits of both Canadian growers and equipment makers. But even before there were concerns over a canola crunch, North America’s agricultural sector was already exhibiting signs of growing pains. Agricultural costs had been going up over the past 10 years, pushed higher by land prices and construction activity, as well equipment upgrades.

Overnight markets

• Overview: US 10yr note futures are up 0.226% at 131-22, S&P 500 futures are up 0.1% at 2170.75, Crude oil futures are down -1.66% at $46.85, Gold futures are down -0.16% at $1323.8, DXY is up 0.21% at 95.764.

US Economic Data

• 8:30 AM: Personal Income, July, 0.4%, est. 0.4% (prior 0.2%, revised 0.3%)
  •    Personal Spending, July, 0.3%, est. 0.3% (prior 0.4%, revised 0.5%)
  •    PCE Core, m/m, July, 0.0%, est. 0.1% (prior 0.1%)
  •    PCE Core, y/y, July, 0.8%, est. 1.5% (prior 1.6%)
• 10:00 AM : Dallas Fed Manufacturing Activity, August, est. -3.9 (prior -1.3)

Canadian Economic Data

• There is no major economic data release 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/ GOCs slightly higher in another quiet overnite session as mkts await Fed Yellen’s speech at Jackson Hole at 10:00EST. US Q2 GDP in line with exp, the GDP deflator revised higher to 1.8% from 1.7%Fed Bullard on the tape saying inflation is low but not that low, and that it is ‘time to rethink normalization’. Core Euro bonds higher, 10Y bund -0.078% on light volume. Euro stocks flat, the Nikkei fell 1.0% on financials & healthcare, the USDJPY in close to weekly resist ~100.37. Provis opening unch after closing unch yest, sprds have been in a narrow 2bp range over the last two weeks – no issuance yest thou QC 10Y still rumored. Impressive results for Q3 from Cdn banks so far, TD &CM both beat exp this morn joining RY & BMO. We tradedthe new Manu Bank 5Y yest in context of issue spread, and are buyers of VSNCN 19s, TD 4.859 (NVCC).

News headlines                                                                                                   

• Global equities set 2-week low before Yellen speech, dollar dips (Reuters) Global shares slipped to a two-week low and the dollar edged down on Friday as investors turned cautious before a keynote speech by Federal Reserve Chair Janet Yellen that could map out a clearer path for U.S. interest rates. The MSCI All-Country World index .MIWD00000PUS was down 0.1 percent by 1041 GMT, after slipping to its lowest level since Aug. 9 earlier in the session. The pan-European STOXX 600 index also fell 0.1 percent.
• Oil prices dip as Saudi Arabia dampens prospects of output freeze (Reuters) Oil prices dipped in early trading on Friday after the Saudi energy minister tempered expectations of strong market intervention by producers during talks next month. International benchmark Brent crude oil prices were trading at $49.55 per barrel at 0114 GMT, down 12 cents from their previous close.
• All quiet before Yellen: dollar dips as Fed speech approaches (Reuters) The dollar inched down on Friday to leave it little changed on the week, with investors focused on a speech later in the day by the chair of the Federal Reserve that may signal whether U.S. interest rates will rise this year. Janet Yellen’s keynote address at a global gathering of central bankers in the U.S. mountain resort of Jackson Hole is due at 1400 GMT.
• Euro zone lending picks up, easing pressure on ECB to act (Reuters) Lending to euro zone companies and households grew steadily in July, suggesting the region’s modest economic recovery remains on track after the Brexit vote and easing pressure on the ECB to provide more stimulus. Loans to companies rose 1.9 percent year-on-year in July, up from 1.7 percent a month earlier and the fastest rate in five years, European Central Bank data showed. Household lending grew by 1.8 percent, matching a June reading that was revised up from 1.7 percent.
• CIBC says it could weather housing crash of up to 30% in Canada as earnings beat expectations (Financial Post) A steep drop in home prices of 30 per cent and a spike in unemployment to 11 per cent across the country would cost Canadian Imperial Bank of Commerce less than $100-million in mortgage losses, according to the bank’s stress tests. On a conference call with analysts Thursday, where the topic of a potential housing downturn was raised, CIBC’s chief risk officer Laura Dottori-Attanasio told analysts that the bank assumes losses in such a scenario would include some insured mortgages where claims would be denied by overwhelmed insurers.
• Canada — and particularly Alberta’s oil industry — paying higher price for climate change policy than U.S. (Financial Post)  As Alberta struggles with its most devastating recession ever, a new study highlights why different climate change policy choices made by Canada and the United States point to continued hardship for Canada’s top oil producing province. The two trading partners are focusing on different areas for GHG reductions and are using different policy tools because of their unique resource endowments, geography, climate, history and politics, according to the study by IHS Energy, led by Kevin Birn.
• Canada’s Harper, Iconic Conservative Leader, to Quit Politics (Bloomberg) Stephen Harper, who united and revived Canada’s conservative movement and led it to three election victories, will resign as a lawmaker Friday to work as a consultant, a person familiar with his plans said. Harper, 57, will launch a Calgary-based consulting firm, Harper and Associates, providing strategic advice with a focus on developing international business, according to the person, who was not authorized to speak publicly about the matter.

Overnight markets

• Overview: US 10yr note futures are up 0.071% at 132-5, S&P 500 futures are up 0.01% at 2173.75, Crude oil futures are up 0.3% at $47.47, Gold futures are up 0.68% at $1333.6, DXY is down -0.27% at 94.516.

US Economic Data

• 8:30 AM: Wholesale Inventories, m/m, July P, 0.0%, est. 0.1% (prior 0.3%, revised 0.2%)
  • GDP Annualized, q/q, 2Q S, 1.1%, est. 1.1% (prior 1.2%
  • GDP Price Index, 2Q S, 4.4%, est. 2.2% (prior 2.2%)
  • Personal Consumption, 2Q S, 2.3%, est. 4.2% (prior 4.2%)
  • Core PCE, q/q, 2Q S, 1.8%, est. 1.7% (prior 1.7%)
• 10:00 AM: University of Michigan Sentiment, August F, est. 90.8 (prior 90.4)

Canadian Economic Data

• There is no major economic data release 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