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Market update

US tsys trading sharply lower after Housing Starts surprised to the upside, rising 6.5% in Sep vs 1.4% exp – US 10Y 2.066 (+4.3bps). Core Euro bonds lower underperforming tsys, German 10Y bund ~5bps higher @ 0.62% as hopes fade for further ECB stimulus (see above). UK gilt curve flatter as longs drew support from record bids for new 50Y gilt sale. GOCs  are lower marginally wider vs tsys  after surprise Liberal majority, with the CAD also reversing early morning weakness, trading below 1.30. Provis opening tighter again, despite 3bp narrowing yest – supply expected but heavy tone in GOCs may upend plans to issue. Long onts have now retraced 60% of  the widening since mid Sep. Levels: Ont  25s 96.5/95.5, Ont 46s 106.5/105.5, QC 48 112/111, QC/ON 25 rl  5.8/5.5 –unch from last week.

News headlines

• European Stocks Decline, Euro Rallies as ECB QE Optimism Fades (Bloomberg) European stocks fell for the first time in four days and the euro strengthened after lending data dented speculation that quantitative easing will be increased. Government bonds dropped.

• Canada’s Trudeau topples PM Harper in shock election win (Reuters) Canada’s Liberal leader Justin Trudeau rode a late surge to a stunning majority election victory on Monday, toppling Prime Minister Stephen Harper’s Conservatives with a promise of change and returning a touch of glamor, youth and charisma to Ottawa.

• The bright side of a majority Liberal government for Alberta’s energy sector (FP) A second wave of change hit Alberta Monday as Justin Trudeau’s Liberals won a surprise majority mandate, promising less favourable energy policies and stepped up environmental stewardship.

• Treasuries Defy Goldman Call as Returns Beat German, U.K. Bonds (Bloomberg) Treasuries have outperformed German and U.K. government bonds in October, defying Goldman Sachs Group Inc., which stuck to its call that the U.S. bonds were expensive, saying investors underestimated the outlook for inflation.

• With all this talk of headwinds and tech threat, are the Canadian banks really in trouble? (FP) There is no shortage of warning signs for the Canadian banks. Economic headwinds and technological threats are regular topics of discussion in the media, and at the banks’ own investor meetings. Yet amid all the doom and gloom, the banks continue to deliver solid results.

 Overnight markets 

• Overview: IG24 5Y 76.288/76.908 (+0.758), US 10yr note futures are down -0.24% at 128-21, S&P 500 futures are down -0.16% at 2024.25, Crude oil futures are up +0.04% at 45.91, Gold futures are up +0.17% at $1174.8, DXY is down -0.24% at 94.698.

 US Economic Data

• Housing starts came in at 1206K (+6.5% MoM) in September versus August 1132K (-1.7% MoM).
• Building permits increase to 1103K (-5.0% MoM) in September compared to previous month 1161K (2.7% MoM).

Canadian Economic Data

•  Wholesale trade sales came in at -0.1% MoM in August equal to July -0.1% decrease and lower than expected (0.2%).

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 opening slightly higher after being lower during the o/n session, US 10Y 2.03 (-0.5bps). Euro stocks slightly lower, S&P futs in the red, commodities lower with crude reacting to news Iran is looking to boost production to pre sanctions level (see above). GOCs are lower, slightly underperforming tsys as the latter have rebounded since ~8:00EST.  Focus this week on election today and BOC this Wed, with IOS mkt pricing out any chance of another rate cut before y/e. Provis spds still well bid, Ont 22s 79.5/ from 81 at issue on Friday, Ont 45/25 bx 0.3bps tighter 9.7/9.5 as longs outperform.

News headlines

• Morgan Stanley posts earnings of 42 cents a share vs 62 cents expected (CNBC) Morgan Stanley delivered quarterly earnings that fell well short of analysts’ expectations on Monday, as investors fled the bond, currency and commodity markets amid uncertainty about the timing of a U.S. interest rate hike and concerns about China’s cooling economy.

• China third-quarter GDP growth beats expectations at 6.9% (FT) The Chinese economy grew faster than expected in the third quarter, as resilient growth in the emerging services sector helped compensate for weakness in manufacturing and property.

• Canadian Oil Sands rejects Suncor’s $4.5-billion ‘exploitive’ hostile bid (G&M) Canadian Oil Sands Ltd. has formally rejected Suncor Energy Inc.’s $4.5-billion hostile bid, saying it “substantially undervalues” the company. Calgary-based COS said on Monday that its board has unanimously recommended that shareholders reject the “undervalued, opportunistic and exploitive Suncor offer.”

• Iran vows to reach pre-sanctions oil output (FT) Iran’s energy minister has vowed to reclaim the country’s share of global crude oil exports within months of sanctions being lifted and said Tehran will move quickly to open the doors to international oil companies to help boost production.

• Debt, Growth Concerns Rain on Deficit Parade (WSJ) The U.S. budget deficit is lower than before the 2008 financial crisis. But the good news is tempered by concerns on two fronts, one about the nation’s debt load and the other about the economy.

 Overnight markets 

• Overview: IG24 5Y 77.398/77.986 (+0.709), US 10yr note futures are down -0.06% at 128-30+, S&P 500 futures are down -0.36% at 2018.5, Crude oil futures are down -1.64% at 46.53, Gold futures are down -0.69% at $1174.9, DXY is up +0.29% at 94.816.

 US Economic Data

• NAHB housing market index is forecast at 62.0 in October equal to August.

Canadian Economic Data

• 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 drifting lower at NA , pressured by gains on overseas equity mkts, higher commodities – US 10Y back over 2.0%. No tier1 data today so tsys will likely follow stocks lead, US stock futs are small lower after yest aft rally brought the S&P back to the highest lvls since August. Thursday saw the US tsy curve bear flatten in reaction to stronger core CPI  with longs outperforming ~4bps. TIPs breakevens bounced briefly but were unable to retain any momentum – 30Y brkevens are ~1bp lower this morning @ 165. GOCs are higher after better than exp Manuf Sales, longs well bid on the curve for a second day, yest saw 2bp narrowing in 10/30 curve despite long end provi & corp supply. Ontario spds opening unch after trading up yest aft, Ont 46 111/110 , whats even more remarkable five yr CMBs are 10bps off the wides of last week@ 51/50 making 5Y Onts @ 68.5 look cheap.

News headlines

• Investors lurch backwards on US rate rise expectations (FT) The US economy may be slowing, a top Federal Reserve policymaker conceded, as investors have ratcheted back bets on when the US central bank will finally begin to tighten monetary policy.

• GE posts earnings beat; revenue misses (CNBC) General Electric on Friday delivered quarterly earnings that surpassed analysts’ expectations, as its businesses producing jet engines and power turbines offset declines in its oil and gas segment, but revenue fell short of estimates.

• Banks’ Record Treasuries Stockpile Boosts Case for Fed to Hold (Bloomberg) U.S. banks are gorging on Treasuries in the latest sign investors expect the Federal Reserve to postpone raising interest rates. Commercial lenders boosted their holdings to a record $2.15 trillion at the end of last month, based on Fed data. The stake is almost double the amount owned by China, the biggest U.S. foreign creditor.

• S. Posts Smallest Annual Budget Deficit Since 2007 (WSJ) A strengthening economy drove the nation’s budget deficit to the lowest level of Barack Obama’s presidency, but the improvement has done little to ease the latest fight over federal spending.

 Overnight markets

• Overview: IG24 5Y 77.973/78.617 (-0.250), US 10yr note futures are up +0.05% at 129-06, S&P 500 futures are down -0.1% at 2017.0, Crude oil futures are up +0.86% at 46.78, Gold futures are down -0.46% at $1182.0, DXY is up +0.29% at 94.645.

 US Economic Data

•  Industrial production is expected at -1.0% MoM in September compared to August 1.7%.
• Capacity utilization is forecast at 77.3% in September, 0.3% lower than previous month.
• Manufacturing production is expected at -0.2% MoM in September compared to -0.5% in August.
• JOLTs job openings are forecast at 5580 in August compared to July 5753.
• University of Michigan confidence (P) is expected at 89.0 in October 0.8 point higher than previous month.
• Net long-term TIC flows for August will be release at 16:00.

Canadian Economic Data

• Int’l securities transactions for August came in at 3.11B, lower than previous month (-10.09B).
• Manufacturing sales decreased -0.2% MoM in August compared to 1.7% 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