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Market update

Market update

US tsys opening lower, curve steeper, US 10Y 2.173 (+2.8bps), Euro stocks higher, USD lower for a third day. Tsys rose initially on weak China Oct PMI which came in below forecast at 49.8 (see above). Tsys slid in Europe on ECB Draghi & Nowotny QE comments. GOCs are trading lower, curve ~1bp steeper led by 10s. RBC Man PMI scheduled for 9:30 before key US ISM Man PMI.  Provi spreads maintaining positive tone on ‘risk on’ to start the week, Ont 46s 102.5, 25s trading up @ 92 earlier this morn, QC lagging a bit 48s 108.5/107.5, 25s 98.5/97.5

News headlines

• China factory activity contracts for third straight month (FT) Manufacturing activity in China contracted for the third consecutive month in October, in the latest sign of the country’s economic slowdown.

• German Bonds Decline Along With Peers as Draghi Cools QE Talk (Bloomberg) German bonds fell with their euro-zone peers after European Central Bank President Mario Draghi said further stimulus may not be necessary in December, little more than a week after he signaled a boost to quantitative easing.

• ECB says Greece’s banks need more than €14bn in fresh capital (FT) The European Central Bank has said Greece’s troubled banks need more than €14bn in fresh capital to survive.

• Pound jumps as UK manufacturing hauls itself out of doldrums (Telegraph) Britain’s manufacturers bounced back in October, as a rise in new orders and “surging growth” at larger companies pushed up activity at one of the fastest rates on record.

• Bonds Send Same Ominous Signs No Matter Where in World You Look (Bloomberg) Ask any bond trader in Tokyo, London or New York what their view on the global economy is, and you’re likely to get a similar, decidedly downbeat answer.

Overnight markets

• Overview: IG24 5Y 74.240/74.957 (-0.351), US 10yr note futures are down -0.15% at 127-16, S&P 500 futures are up +0.16% at 2077.0, Crude oil futures are down -1.52% at 45.88$, Gold futures are down -0.45% at $1136.3, DXY is down -0.24% at 96.712.

US Economic Data

• Markit US Manufacturing PMI (Final) is forecast at 54.0 in October, equal to preliminary report.
• ISM Manufacturing is forecast at 50.0 in October versus September 50.2.
• Construction spending is forecast at 0.5% MoM in September versus 0.7% in August.

Canadian Economic Data

• RBC Canadian Manufacturing PMI will be released at 9h30am.
• Bloomberg Nanos Canadian Confidence Index will be released today at 10:00am.

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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Market update

US tsys trading lower despite in line ECI, weaker per inc/spending data, US 10Y 2.175, curve ~2bps flatter. Month end index extension in the Barclays Tsy index (0.10yrs) should provide some support and could exert further flattening pressure. Core EGBs lower, bunds ~1bp tighter vs tsys after 10Y bund/tsy spd reached six month high yest @ 166 on diverging Fed/ECB. GOCs slightly higher – well bid in longs with 10/30s @ 77 from 81 pre FOMC. Little reaction to weaker GDP Provis well bid, int’l buying o/n.

News headlines

• Fed’s Lacker says U.S. labor market has tightened ‘considerably’ (CNBC) Richmond Federal Reserve President Jeffrey Lacker on Friday said he favored raising interest rates at the Fed’s policy meeting earlier this week because steady growth in the economy has helped labor markets to tighten “considerably.”

• BoJ holds course despite deepening gloom (FT) The Bank of Japan has kept monetary policy on hold even as it slashed its economic forecasts and said it did not expect to hit its 2 per cent inflation target until the start of 2017.

• China’s Onshore Yuan Posts Biggest Daily Gain Since 2014 (WSJ) China’s onshore yuan posted its biggest one-day gain since March 2014 on Friday, as the central bank appears to be boosting the currency before the International Monetary Fund’s meeting next month.

• Britain’s credit rating could be cut by two notches if it leaves EU, warns S&P (Telepgraph) Britain’s credit rating could be slashed below Austria and Finland’s if it leaves the European Union, Standard & Poor’s has warned. Moritz Kraemer, the agency’s chief sovereign rating officer, said Britain would be stripped of its top AAA rating with a one-notch downgrade if it voted to leave the bloc, and possibly double that if relations between Britain and Brussels soured.

• Bears hit City and Street for Halloween (FT) This weekend millions will dress up as ghouls, vampires, aliens, goblins and Justin Bieber to celebrate all things scary and horrific for Halloween. For the finance industry’s small cabal of “perma-bears” it is also celebration time.

Overnight markets 

• Overview: IG24 5Y 74.554/75.220 (+0.328), US 10yr note futures are down -0.06% at 127-17, S&P 500 futures are up +0.20% at 2087.25, Crude oil futures are down -0.13% at 46.00$, Gold futures are down -0.58% at $1140.6, DXY is down -0.28% at 97.006.

 US Economic Data

• Employment cost index increased 0.6% in 3Q 2015 better than 2Q 0.2%.
• Personal income came in at 0.1% MoM in September compared to August 0.4%.
• Personal spending grew 0.1% MoM in September versus previous month 0.4%.
• PCE came in at -0.1% MoM (0.2% YoY) in September versus August 0.0% MoM (0.3% YoY).
• PCE core increased 0.1% MoM (1.3% YoY) in September compared to 0.1% MoM (1.3% YoY) in August.
• ISM Milwaukee is expected at 44.0 in October versus 39.44 in September.
• Chicago purchasing manager index is forecast at 49.5 in October higher than September 48.7.
• University of Michigan confidence (Final) is expected at 92.5 in October 0.4 point higher than preliminary report.

Canadian Economic Data

•  GDP in August increased 0.1% MoM (+0.9% YoY) compared to 0.3% MoM (+0.7% YoY) in July.

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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Market update

US tsys trading extending o/n declines despite weaker Q3 GDP (1.5 vs 1.6) & core PCE (1.2 vs 1.4) – US 10Y 2.115 (+1.5bps), curve steeper longs giving back ~1.5bps of yest post FOMC flattening. Asian CB buying tsys across the curve overnite (MNI), Core Euro bonds much weaker led by 7bp rise in 10Y gilts, despite Euro bank weakness (-2%) weighing heavily on stocks. GOCs slightly lower, curve flatter outperforming tsys by ~1bp. Provis opening with bid tone after narrowing 1bp yest on higher Cda yields and m/e buying – supply a real possibility from Ont/Qc esp in longs with 10s/30s ~3 bps flatter.

News headlines

• U.S. Economy Grew at 1.5% Rate in Third Quarter (NYT) Despite still-healthy spending by consumers, the American economy slowed significantly last quarter, the government saidThursday. At an annualized rate of 1.5 percent, the tempo of growth in July, August and September represents a marked drop from the 3.9 percent pace of expansion in the spring.

• Deutsche Bank to cut 9,000 jobs and exit 10 countries in overhaul (FT) Deutsche Bank is to exit 10 countries and cut 9,000 jobs as part of a sweeping strategic overhaul designed to help restore the German lender’s profitability. In addition to the cuts in its own staff, Deutsche also aims to cut the army of consultants advising the bank by 6,000. Through selling its Postbank subsidiary, Deutsche will shed another 15,000 staff.

• Fed puts December rate hike firmly on the agenda (Reuters) The U.S. Federal Reserve kept interest rates unchanged on Wednesday and in a direct reference to its next policy meeting put a December rate hike firmly in play.

• Bombardier Inc to get US$1 billion from Quebec government to rescue troubled CSeries (FP) Bombardier Inc. will get a US$1 billion investment from the Quebec government as the tardy, over-budget CSeries jetliner drains cash at the country’s biggest aerospace company.

Overnight markets

• Overview: IG24 5Y 74.475/75.182 (+1.379), US 10yr note futures are down -0.18% at 127-31, S&P 500 futures are down -0.41% at 2076.0, Crude oil futures are down -1.20% at 45.39$, Gold futures are down -1.75% at $1155.5, DXY is down -0.33% at 97.459.

 US Economic Data

• Initial jobless claims came in at 260K  for the week ending October 24th, lower than expected (265K) but slightly higher than prior week (259K).
• Continuing claims decreased to 2144K from 21814K and was lower than expected (2160K).
• GDP annualized QoQ came in at 1.5% for 3Q 2015 versus 3.9% for the previous quarter.
• Personal consumption grew 3.2% for 3Q 2015 after 3.6% in 2Q 2015.
• GDP price index and Core PCE QoQ came in at 1.2% and 1.3% for 3Q 2015 compared to 2.1% and 1.9% during 2Q.
• Pending home sales are forecast at 1.0% MoM (7.3% YoY) in September versus August -1.4% MoM (6.7% YoY).

Canadian Economic Data

• Industrial product price decrease -0.3% MoM in September after going down -0.3 in August.
• Raw materials price index came in at 3.0% MoM in September versus -6.8% for previous month.

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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230