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Market update

US tsys trading higher , US 10Y 2.06 (-1bp), giving up slight o/n gains after initial claims fell to lowest level since July . Tsy curve ~2bps flatter before $13bln 30Y auction this aft & FOMC minutes. Big news o/n was BOE decision – short end gilt curve is ~1bp flatter on dovish outlook for rates & inflation (inflation expected to remain below 1% until spring 2016). GOCs are slightly higher, curve flatter, spds unch vs tsys after strong Sep housing starts (three yr high). Provis opening 1bp wider after rally fizzled yest on supply ($1.4bln ) with Alberta rumoured for today.

News headlines

• BOE Signals Rate Can Stay Low as Inflation Weakness Persists (Bloomberg) Bank of England policy makers said the U.K. economy is withstanding international pressures, while also signaling they have room to keep the benchmark rate at a record low as inflation weakness persists.

• German exports in steepest fall in almost 7 years (Marketwatch) Germany’s trade surplus missed forecasts in August, as exports registered their steepest decline in almost seven years. Germany’s trade surplus, adjusted for seasonal swings and calendar effects, narrowed to 19.6 billion euros ($22.1 billion) from a revised EUR22.4 billion in July, undershooting forecasts of EUR22.5 billion, data from the Federal Statistical Office showed Thursday.

• Deutsche Bank Sees Big Loss on Write-Down in Corporate Banking (WSJ) Deutsche Bank AG warned it will take a €5.8 billion ($6.5 billion) charge on assets in its investment bank and retail- and private-banking operations for the third quarter and said it could cut its dividend this year.

• HSBC’s Major, Who Called 2014 Bond Rally, Cuts Yield Forecasts (Bloomberg) Steven Major is counting on the Federal Reserve to help him repeat history. The London-based head of fixed-income research at HSBC Holdings Plc, who stood out in 2014 by correctly predicting that 10-year Treasury yields would fall, cut his end-of-2016 yield forecast to just 1.5 percent, from 2.8 percent previously.

• CIBC unveils bold new targets in technology-driven shift (G&M) Canadian Imperial Bank of Commerce said it will cut $600-million in costs and drive profit growth to 10 per cent a year by 2018, as it shifts resources to technology-driven banking.

 Overnight markets

• Overview: IG24 5Y 79.587/80.220 (+0.653), US 10yr note futures are up +0.08% at 128-28+, S&P 500 futures are down -0.38% at 1979.75, Crude oil futures are up +1.06% at 48.31, Gold futures are down -0.91% at $1138.20, DXY is up +0.03% at 95.528.

US Economic Data

• Initial jobless claims came in at 277K  for the week ending October 3rd, higher than expected (271K) and higher than prior week (267K).
• Continuing claims decreased to 2191K from 2244K and lower than expected (2230K).
• Fed minutes from September 16-17 FOMC meeting will be release at 14:00.

Canadian Economic Data 

• Housing starts came in at 230.7K in September versus August revised 214.3K.
• New housing price index increased 0.3% MoM (+1.3% YoY) in August compared to July 0.1% MoM (1.3% YoY).

 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 lower. US 10Y 2.07 (+3.7bps), back to pre-payroll lvls as risk sentiment continues to climb, European equities ~0.80% higher, crude closing in on $50 (+1.7%). Core EU bonds lower for a 3rd day led by 10Y gilts,weighed by BOJ decision to forgo additional stimulus (see above) and another uncovered German 10Y auction. GOCs opening lower led by 10s, spds ~1bp wider vs tsys. Provi spds opening unch after yest 2bp rally led by longs, Ont 45/25 bx 9bps from 10.5 last wk, expecting supply in longs given positive tone – hearing QC, Alta or Ont.

News headlines

• German Industrial Output Unexpectedly Falls as Risks Emerge (Bloomberg) German industrial production unexpectedly declined in August, signaling that Europe’s largest economy is vulnerable to risks including weaker growth in emerging markets.

• BoJ damps hopes for stimulus boost (FT) The Bank of Japan has kept monetary policy on hold with an upbeat statement acknowledging risks from a slowdown in emerging markets but otherwise made little concession to recent bad data.

• Further fall in China forex reserves points to more renminbi support (FT) China’s foreign exchange reserves fell another $43bn last month, suggesting continued intervention in the forex markets to support the renminbi.

• Crude oil inches closer to $50 a barrel on lower U.S. production (Marketwatch) Crude oil prices climbed on Wednesday on signs of ebbing U.S. production and increasing willingness among the major oil producers to collectively jump-start the market amid the prolonged price slump.

• Beware of the liquidity delusion (FT) Is the fragility of market liquidity a reason for concern? The “flash rally” in US Treasury bonds in October 2014 and the “German Bund tantrum” in April 2015 show that dislocations can occur even in markets for highly liquid assets.

• Once the Biggest Buyer, China Starts Dumping U.S. Government Debt (WSJ) Central banks around the world are selling U.S. government bonds at the fastest pace on record, the most dramatic shift in the $12.8 trillion Treasury market since the financial crisis.

Overnight markets 

• Overview: IG24 5Y 79.896/80.559 (-3.372), US 10yr note futures are down -0.23% at 128-23+, S&P 500 futures are up +0.61% at 1980.5, Crude oil futures are up +1.46% at 49.24, Gold futures are up +0.44% at $1151.50, DXY is down -0.01% at 95.452.

US Economic Data

• MBA mortgage applications came in this morning at 25.5% for the week ending October 2nd, versus prior week -6.7% decrease.
• Consumer credit is forecast at $19.5B  in August versus July $19.097B.

Canadian Economic Data

• Building permits came in at -3.7% MoM in August versus +0.7% in July (revised from -0.6%).

 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 slightly higher in NY open, 10Y 2.045 (-1.1bps) with short end unch. Euro stocks higher a second day, USD The US auctions $24bln in 3Y notes at 1:00Pm with the WI 0.895%. Last month’s 3Y cleared @ 1.056% so yields are ~16bps lower close to the 6 mnth lows. Core Euro bonds underperforming, 10Y bunds 3bps higher @ 0.60% despite weaker factory orders, strong UK 2034 gilt auction (b/c 2.02 vs 1.50 prev). GOCs opening unch, with small buying of CMBs, provis overnite thou spds are opening unch on no trade, bids 0.5bps wider.

News headlines

• German Factory Orders Unexpectedly Fall Amid Economic Risks (Bloomberg) German factory orders unexpectedly fell in August in a sign that Europe’s largest economy is vulnerable to weaker growth in China and other emerging markets.

• Treasuries Rise as Goldman Says Fed May Hold Rate Well Into 2016 (Bloomberg) Goldman Sachs Group Inc. says there’s a chance the Federal Reserve will delay its planned interest-rate increase well into 2016, or even later.

• Bank of England Won’t Raise Rates Until 2017, Markets Show (Bloomberg) It’s getting increasingly difficult to convince investors that the Bank of England will tighten monetary policy any time next year. With volatility-plagued stock markets and a slowdown in China threatening to derail the global economy, traders have been relentlessly setting back their predictions for when the Federal Reserve and BOE will raise interest rates from record lows.

• Treasury auction sees US join 0% club (FT) For the first time ever, investors on Monday parked cash for three months at the US Treasury in return for a yield of zero per cent.

• Renminbi overtakes Japanese yen as global payments currency (FT) China’s renminbi has surpassed the Japanese yen to become the world’s fourth-most-used payments currency, despite an unexpected devaluation and concerns about slowing Chinese growth.

• Aussie Gains Fifth Day as Rate-Cut Wagers Fall After RBA Meeting (Bloomberg) The Australian dollar strengthened for a fifth day versus its U.S. peer as traders pared bets that interest rates would be lowered this year by the central bank after it kept them unchanged at a record low of 2 percent on Tuesday.

Overnight markets 

• Overview: IG24 5Y 82.771/83.362 (+0.316), US 10yr note futures are down -0.07% at 128-23+, S&P 500 futures are flat at 1974.75, Crude oil futures are up +0.80% at 46.63, Gold futures are up +0.54% at $1143.70, DXY is down -0.24% at 95.876.

US Economic Data

• Trade balance tightened to -$41.86B in August compared to previous month (-$41.86B).
• IBD/TIPP economic optimism is forecast at 44.5 in October 2.5 points higher than September (42.0).

Canadian Economic Data

•  Int’l merchandise trade worsened to -$2.53B in August from a revised deficit of -$0.82B in July and worse than expected (-$1.20B).
• IVEY purchasing managers index is forecast at 54.0 in September versus August 58.0.

 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