Commentaires

Market Update

Treasuries open NY weaker after overnight drift into US 30Y $15B auction; 10Y note is at 1.515%. Traders believe Japanese interest could still show at today’s 1pm ET 30Y Us Tsy auction if say Japanese lifers left orders with the overseas desks given Japan holiday (they need duration). New Zealand central bank cut US key rate to an all time low of 2%; it also has an explicit easing bias. German govt debt and UK gilts mixed. German govt debt at first improved then saw sellers in light action. 

News headlines                                                                                        

• Stocks choppy, Kiwi soars after rate cut (Reuters) World shares hovered close to one-year highs on Thursday as oil prices dropped for a third straight day and the latest interest rate cut in a developed market – this time New Zealand – got a lukewarm reaction from investors. The slip in crude markets left energy firms backpeddling, weighing on European equities .FTEU3 which, after early declines, nudged higher on sharp gains by consumer goods stocks. Asia and Wall Street had drifted lower overnight [.N].
• IEA Sees Oil Glut Easing (Bloomberg) Global oil markets will continue to re-balance this year as a pick-up in demand from refiners absorbs record output from several Persian Gulf producers, the International Energy Agency predicted. Refiners around the world will process record volumes of crude this quarter as their intake rebounds after falling in the second quarter by the most since 2009, the Paris-based adviser said in its monthly report. That will shrink brimming crude stockpiles even as Saudi Arabia, Kuwait and the United Arab Emirates pump at all-time highs amid competition between OPEC nations to secure market share, according to the agency.
• Exclusive: Iraq, oil companies agree to restart investment, boost output (Reuters) Iraq has reached agreement with BP, Shell and Lukoil to restart stalled investment in oil fields the firms are developing, allowing projects that were halted this year to resume and crude production to increase in 2017, Iraqi oil officials said. The agreements, reached in July and August, effectively delay to the second half of the year projects that the three companies had planned to carry out in the first half, which had been suspended because of low oil prices.
• Valeant Slides on Report of Criminal Probe into Philidor Ties (Bloomberg) Valeant Pharmaceuticals International Inc. fell 9 percent in trading before U.S. exchanges opened following a report that it’s the target of a criminal probe. Federal prosecutors are investigating whether the drugmaker defrauded insurers by hiding its ties to a mail-order pharmacy, the Wall Street Journal reported Wednesday. Prosecutors are pursuing an unusual legal theory that Valeant and its mail-order pharmacy, Philidor Rx Services LLC, allegedly defrauded insurers by concealing their close relationship, the Journal said, citing unidentified people familiar with the matter.
• Investors Have $100 Billion to Spend on Oil Assets No One Else Wants (Bloomberg) Since the great crash of oil in mid-2014, more than $100 billion has been raised by buyout firms and distressed-debt funds eager to scoop up energy assets on the cheap. But as the months rolled by, few opportunities cropped up as cash-starved drillers limped along with the help of their bankers. Not any more. What started out as a trickle has now turned into something much more, with Blackstone Group LP, Apollo Global Management LLC and WL Ross & Co. all jumping in this year to buy a grab bag of assets at discounted prices. Precise numbers are hard to come by, but in conversations with investors, bankers and analysts across the industry, there’s little doubt that private equity firms are ramping up their investments in everything from undrilled and developed oil and gas acreage to troubled loans.
• EU’s bank rescue chief sees no exceptions to bail-in rules (Reuters) Creditors will be hit if a European bank fails and no exceptions to this ‘bail-in’ rule are being considered, the chief of the European Union’s bank rescue body said. Aimed at ending taxpayer-funded bail-outs, the bail-in regime, which could wipe out a bank’s debts and some deposits if a bank fails, caused a popular backlash even before it came into effect on Jan. 1, when some creditors of four Italian banks lost their savings when the lenders had to be rescued late last year.

Overnight markets

• Overview: US 10yr note futures are down -0.0235% at 132-23, S&P 500 futures are up 0.21% at 2177.25, Crude oil futures are down -0.22% at $41.62, Gold futures are down -0.04% at $1351.3, DXY is up 0.14% at 95.784.

US Economic Data

• 8:30 AM: Import Price Index, m/m, July, 0.1%, est. -0.40% (prior 0.20%)
  •      Import Price Index, y/y, July, -3.70%, est. -4.30%, (prior -4.80%)
  •      Initial Jobless Claims, August 6^th,266k , est. 265k (prior 269k)
  •     Continuing Claims, July 30^th, 2155k, est. 2133k (prior 2138k)
• 9:45 AM: Bloomberg Consumer Comfort, August 7^th, (prior 43)

Canadian Economic Data

• 8:30 AM: New Housing Price Index, m/m, June, 0.1%, est. 0.30% (prior0.70%)

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 opening higher on avg volume in TY futures (226k), US 10Y 1.53 (-2bps),curve 0.5bps flater. Tsy prices higher yet in a narrow range overnite, supported by weakness in Asian stocks. German bunds higher, curve bull flattening after German 10Y auction was sold at -0.09% – a record low yield on strong demand as it was the first covered auction since May (E5.7bln bid vs 5bln target). Gilts also continue to drive higher since yest BOE’s buyback yest and MPC comments. Long term Gilt yields hit another record low earlier with the 10Y at 0.527%. The US Treasury auctions $23bln in 10Y notes at 1PM after a very strong 3Y yest with indirect demand at 56.9% and a 2.98 b/c. With UK 10Y gilts ~100bps below tsys and the tsy/bund spread ~163bps this aft 10Y auction should go reasonably well. GOCs trading higher, the 10Y yield below 1.05 at 0.97% for the first time since July 13th. The 10Y sector is trading at the richest levels since late Feb after this week’s rally. The BOC auctions $3.9bln in new 2Ys at noon, Nov 2018s with the WI roll 0.6/0.3 and the Aug 18s at 0.505 the lowest in a month. Provis unch after corp supply yest weighed on spreads which closed 1.5bps wider. Next week’s CMB 10Y expected to be reopening of the Sep 26s for $2bln, mkt 57.5/56.5 vs 59.5 at May’s auction.

News headlines                                                                            

• Dollar Weakens, Bonds Rally on Muted Prospects for Fed Rate Hike (Bloomberg) The dollar weakened and government bonds advanced on speculation the Federal Reserve will be slow to raise interest rates amid uneven global growth. The greenback slid against all of its major peers, dragging the Bloomberg Dollar Spot Index down to a six-week low. A gauge of emerging-market currencies climbed to the highest level since July 2015. Metals were also boosted by the dollar’s retreat, with palladium, tin and zinc rising to the highest in a year. Oil fell as U.S. stockpiles expanded and Saudi Arabia was said to have raised July production to a record. U.K. government bonds extended gains after the Bank of England indicated it will stick with its current quantitative-easing plans. European stocks were little changed and most Asian shares fell.
• Exclusive: BOJ to defend QQE in Sept policy assessment – sources (Reuters) The Bank of Japan has already prepared a preliminary outline of a « comprehensive » assessment of its policies due next month that will maintain a pledge to hit its 2 percent inflation target at the earliest date possible, sources familiar with its thinking said.
• Iran Expects $25 Billion Oil Contracts Signed Within Two Years (Bloomberg) Iran expects foreign oil companies to sign deals valued at $25 billion over the next one to two years under the terms of a new contract model approved last week, the managing director of the National Iranian Oil Co. said. The state energy producer plans to tender contracts over a period of six months to a year to develop several oil and gas fields, the oil ministry’s news service Shana reported Tuesday, citing Ali Kardor. NIOC has identified 34 foreign companies as suitable bidders, he said. NIOC is also seeking investments under existing models, he said.
• Soaring Debt Has U.S. Companies as Vulnerable to Default as 2008 (Bloomberg) U.S. companies have taken on so much debt that they’re at least as vulnerable to defaults and downgrades as they were leading up to the 2008 financial crisis, according to a report by S&P Global Ratings Tuesday. Corporate leverage in the U.S., excluding financial firms, is at the highest level in 10 years, driven by a combination of low interest rates and slowing profits, S&P analysts Jacob Crooks and David Tesher wrote. This has resulted in record leverage ratios across a universe of 2,200 companies, they wrote.
• Brazil’s Senate indicts Rousseff, opens impeachment trial (Reuters) Brazil’s Senate voted early on Wednesday to indict President Dilma Rousseff on charges of breaking budget laws and put her on trial in an impeachment process that has stalled Brazilian politics since January. With the eyes of the world on the Olympic Games in Rio de Janeiro, senators in the capital Brasilia voted 59-21 against the suspended leftist leader in a raucous, 20-hour session presided over by Chief Justice Ricardo Lewandowski.
• No Need to Be So Negative on Sub-Zero Rates, Mr Carney (Bloomberg) The Bank of England governor said last week he was « not a fan' » of negative interest rates and had no intention of going below zero, unlike his peers in Europe or Japan. In fact, he accused them of getting it « a bit wrong. » Carney’s argument: Some banks have raised mortgage rates in response to central banks going negative. But what might be true for individual lenders doesn’t hold up for the entire 19-nation euro region. In fact, the transmission of the European Central Bank’s monetary policy has never worked better in the past decade – despite a deposit rate of minus 0.4 percent, according to calculations by JPMorgan economist David Mackie.
• Delinquency rates are rising in oil-dependent provinces, according to new report (Financial Post) Declining oil prices helped drive double-digit annual increases in delinquency rates in Alberta and Saskatchewan, according to a credit agency report out Wednesday. TransUnion said the percentage of people delinquent on debt for more than 90 days rose to 3.08 per cent in Alberta — a 14.7 per cent jump from a year ago. In Saskatchewan the rate rose to 3.38 per cent, an increase of 11.59 per cent during the same period.

Overnight markets

• Overview: US 10yr note futures are up 0.1535% at 132-18, S&P 500 futures are up 0.14% at 2180.5, Crude oil futures are down -0.23% at $42.67, Gold futures are up 1.14% at $1362, DXY is down -0.73% at 95.477.

US Economic Data

• 10:00 AM: JOLTS Job Openings, June, est. 5588, (prior 5500)
• 14:00 AM: Monthly Budget Statement, July, est. -115.0b (prior -149.2b)

 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

Tsys slightly higher, off the o/n lows after Q2 Productivity fell 0.5% vs 0.4% exlow volume overnite in TY futures, prices under pressure since Europe after giving up earlier gains. German 10Y bunds moving lower, curve 1bp steeper and the 10Y bund fut trading below its 30d ma (167.01). BOE member McCafferty said the UK may require more stimulus in the coming months. The 10Y gilt yield fell to a record low 0.592% as the BOE gilt buying program resumed but has since reversed with the yield 0.7bps higher 0.619%. European stocks slightly higher, the Nikkei rose another 0.69%. Ten yr Japan govt futures have retraced lower despite a decent 30Y JGB auction. In Canada, GOCs higher after the 8:30 data. Yesterday Can/US spds closed another 1bp tighter across the curve to the tightest lvls since mid June. Light buying from domestics recently according to Candeal, foreign CB buying part in the overnite session a factor recently. In corps, Pembina priced a 10Y deal at 264.8 which was a blowout (CIBC/RY leads deal) with low fills reportedly and which opened ~7bps tighter. There last 10Y issue priced at 225 in Jan of last yr.

News headlines                                                                                            

• Futures flat a day after S&P touches record high (Reuters) U.S. stock index futures were little changed on Tuesday as investors looked for market-moving catalysts, a day after the S&P 500 index touched a record intraday high. On Monday, Wall Street closed down in one of its lowest volume trading day this year, after the S&P slipped from its record high as healthcare stocks weighed.
• China’s slowing wholesale deflation takes pressure off central bank (Reuters) China’s factory price deflation moderated further in July, with prices falling at their slowest pace in two years, taking pressure off the central bank to cut rates as policymakers turn their focus to structural reforms and ballooning credit. A government-led building spree has increased demand for construction materials, but higher prices are also due in part to speculation in China’s commodities futures market, which has pushed up Shanghai rebar futures up by 50 percent this year.
• Oil Steady as OPEC Discussions Seen Unlikely to Result in Action (Bloomberg) Oil traded near the highest close in two weeks as investors weighed OPEC’s plans to hold informal talks next month. Futures gained 0.4 percent in New York after rising 2.9 percent Monday. Members of the Organization of Petroleum Exporting Countries are in “constant deliberations” on stabilizing the market, said Mohammed Al Sada, Qatar’s energy minister and the group’s president.
• Pound Tumbles Below $1.30 as Traders Await More Brexit Bad News (Bloomberg) The pound fell below $1.30 for the first time in almost a month as investors prepared for data that will give further clues on the state of the U.K. economy in the wake of the decision to quit the European Union. Britain’s currency dropped for a fifth day and ceded ground to all of its 16 major peers amid speculation the reports, due next week, will show an economy reeling from the Brexit vote on June 23.
• S. housing agencies would need more taxpayer funds in a crisis: regulator (Reuters) Fannie Mae and Freddie Mac, two government-controlled housing finance agencies, would need a big cash injection to weather another financial meltdown, a government regulator said on Monday. Fannie and Freddie would need as much as $126 billion in taxpayer funds to come through a serious downturn, according to a ‘stress test’ from the Federal Housing Finance Agency.
• Valeant says to reorganize; maintains full-year forecast (Reuters) Valeant Pharmaceuticals International Inc (VRX.N) (VRX.TO) said on Tuesday it would reorganize, and stood by its full-year forecast, as it attempts to restore investor confidence after facing a storm of criticism over its business practices. The Canadian drugmaker has faced intense political and investor scrutiny in the past year for its steep drug price increases and unorthodox use of a specialty pharmacy.
• Canadian auto industry faces biggest existential threat since 2009 crisis as labour talks begin (FinancialPost) The Canadian auto industry is facing its biggest existential threat since the 2009 crisis, with the future of at least three plants at risk as autoworkers gear up to begin labour negotiations this week. Unifor, which represents more than 6,000 Canadian autoworkers, will open talks with General Motors of Canada on Wednesday and with Ford Motor Co. of Canada and Fiat Chrysler Automobiles (FCA) Canada on Thursday. The existing contracts expire on Sept. 19 and the union is already talking openly about the possibility of a strike.

Overnight markets 

• Overview: US 10yr note futures are down -0.071% at 131-31, S&P 500 futures are up 0.08% at 2177.25, Crude oil futures are down -0.53% at $42.79, Gold futures are down -0.19% at $1338.7, DXY is up 0.03% at 96.429.

US Economic Data

• 8:30 AM: Nonfarm Productivity, 2Q P, -0.5%, est. 0.4% (prior -0.6%)
  •      Unit Labor Costs, 2Q P,  2.0%, est. 1.8% (prior 4.5%, revised -0.2%)
  •      IBD/TIPP Economic Optimism, August, est. 47.3% (prior 45.5)

Canadian Economic Data

• 8:15 AM: Housing Starts, July, 198.4k, est. 191.0k (prior 218.3k)

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