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Market update

US tsys trading higher yet well off earlier highs, US 10Y 2.144 (-2bps). Personal income , PCE came in as exp for August. Equities weaker on story ECB will no longer buy VW backed auto loans and Glencore shares continue to collapse. NY Fed Dudley saying Fed will likely raise rates this year, Oct is ‘live meeting’. GOCs are higher, led by 10s, 2s/10s ~2bps flatter @ 96. Provis opening wider, reversing Friday’s ~1bp tightening after Thurs 2-3bp hamering… We continue to see some picking away at the Ont 20/19 rl (19s look exp).

News headlines

• Alcoa to Split Into Two Companies (WSJ) Struggling Aluminum maker Alcoa Inc. said Monday that it would split into two publicly traded companies next year, joining the recent wave of companies looking to spur growth by breaking up.

• Big US banks lose patience with Fed (FT) Janet Yellen’s decision to delay an interest rate rise has worsened the outlook for big US banks, prompting them to try to eke out profits by shifting excess cash into longer-term assets.

• German Prosecutors Investigating Winterkorn, Volkswagen’s Ex-Chief (NYT) German prosecutors said on Monday that they had begun an investigation of Martin Winterkorn, who until last week was the chief executive of Volkswagen, based on complaints from unidentified people that he should be held responsible for a widening scandal linked to diesel-emissions.

• Investors Pull Back From Junk Bonds (WSJ) Investors are pulling back from the junk-bond market, in a shift that threatens to slow the global mergers-and-acquisitions boom. Tepid demand forced European cable company Altice NV and U.S. chemical producer Olin Corp. in recent days to reduce the size of bond sales and boost interest payments.

• The More Yellen Talks Up Inflation, the Less Traders Believe Her (Bloomberg) The bond market isn’t buying what Federal Reserve Chair Janet Yellen is selling on inflation.

Overnight markets 

• Overview: IG24 5Y 86.429/86.979 (+2.597), US 10yr note futures are up +0.18% at 128-02+, S&P 500 futures are down -0.55% at 1908.75, Crude oil futures are down -2.01% at 44.78, Gold futures are down -1.15% at $1132.4, DXY is up +0.09% at 96.360.

US Economic Data

• Personal income came in at 0.3% MoM in August compared to July 0.5%.
• Personal spending grew 0.4% MoM in August versus previous month 0.4%.
• PCE came in at 0.0% MoM (0.3% YoY) in August versus July 0.1% MoM (0.3% YoY).
• PCE core increased 0.1% MoM (1.3% YoY) in August compared to 0.1% MoM (1.2% YoY) in July.
• Pending home sales are forecast at 0.4% MoM (8.1% YoY) in August versus July 0.5% MoM (7.2% YoY).
• Dallas Fed is forecast at -10.0 in September higher than August -15.8.

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 are lower/steeper, Tsy futures underperform on above avg volume. Risk off, global stocks better (save China CSI 300 and Mexico), EGBs lower, Bunds lower/steeper, US Swap and US MBS spds tighter, USD higher vs ccy majors. Big news was Yellen’s double down on “later this yr” for liftoff. Said, first hike will have “only minor implications” for fin cond, econ, unempl rate is “likely to continue to fall” and headwinds “will continue to fade…boosting the economy’s underlying strength.” Also said FOMC has “not yet fully attained” objectives, some slack in labor mkts. Said “Most FOMC participants, including myself, currently anticipate that achieving these conditions will likely entail an initial increase in the federal funds rate later this year,” then gradual hikes later. Tsys lower in Tokyo but quickly found support though. London saw prices ebb further, in line with Gilts and Bunds while carry over sales were seen in 10Y. Ahead of NY open huge 34K lot was blocked in bunds, said to be fat finger other say EFP trade. (MNI)

News headlines

Janet Yellen Says Fed Is Likely to Raise Interest Rates This Year (NYTImes) The Federal Reserve still intends to raise its benchmark interest rate this year, barring unpleasant surprises, the Fed chairwoman, Janet L. Yellen, said on Thursday. Ms. Yellen, speaking a week after the Fed announced it was not ready to raise interest rates just yet, reiterated that the central bank was not planning to wait much longer. She said that labor market conditions were improving and that the Fed expected inflation to follow.

Yellen ‘felt dehydrated’ after long speech (CNBC) Federal Reserve Chair Janet Yellen is said to be OK after receiving medical attention following a speech at the University of Massachusetts at Amherst on Thursday. “Chair Yellen felt dehydrated at the end of a long speech under bright lights. As a precaution, she was seen by EMT staff on-site at U-Mass Amherst. She felt fine afterward and has continued with her schedule Thursday evening,” the Fed said in a statement.

Japan Prices Fall in August, the First Time in Over Two Years (WSJ) Prices fell in Japan for the first time in over two years in August, a possible setback to Prime Minister Shinzo Abe’s quest to liberate the economy from the grip of deflation.

Economy in U.S. Picked Up on Consumer Spending, Construction (Bloomberg) The world’s largest economy expanded more than previously forecast in the second quarter, boosted by gains in consumer spending and construction that may help the U.S. withstand a global slowdown. Gross domestic product rose at a 3.9 percent annualized rate, compared with a prior estimate of 3.7 percent, Commerce Department figures showed Friday in Washington. The median forecast of 76 economists surveyed by Bloomberg called for a 3.7 percent gain.

European Stocks Rebound as Yellen Clarifies Fed Rate Policy (Bloomberg) European stocks jumped from an eight-month low after Federal Reserve Chair Janet Yellen said she’s ready to raise rates this year, indicating recent market turmoil won’t derail the U.S. recovery.

Overnight markets

Overview: IG24 5Y 81.014/81.558 (-0.312), US 10yr note futures are down -0.38% at 127-20+, S&P 500 futures are up +1.15% at 1940.75, Crude oil futures are up +0.91% at 45.32, Gold futures are down -0.87% at $1143.8, DXY is up +0.51% at 96.481.

US Economic Data

• GDP annualized QoQ grew 3.9% in 2Q 2015 higher than previously reported 3.7% increase.
• Personal consumption came in at 3.6% for 2Q 2015 vs 3.1% for previous release.
• GDP price index and Core PCE QoQ for 2Q 2015 were 2.1% and 1.9% that is 0.1% higher for Core PCE vs previous release.
• Markit US Services PMI (Preliminary) is forecast at 55.6 for September, 0.5 point lower than previous month.
• University of Michigan confidence (Final) is expected at 86.5 in September 0.8 point higher than preliminary report.

Canadian Economic Data

• There is no major economic data 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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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

Market update

US sharply higher/flatter, futures outperforming on good volume. Global stocks in the red after Norway unexpectedly cut rates 25 bps to .75bps, Taiwanese cut rates to 1.75%, its first cut since 2009 and as BMW now becomes the second auto company to have emissions problems. USD mixed, commodities mixed with risk off boosting gold while WTI and Brent are up a smidge. EGBs mostly up with bund curve bull flattening, EU peripheral spds vs Germany behaved. Key data point in Europe was German IFO, a bit stronger than expected at 108.5 vs exp 107.9. Overnight in Tokyo, Tsy prices opened better and traded slightly better in a sideways pattern. Firming was due to some weakening in stocks and weaker Japanese Mfg PMI, a Taiwan rate cut and talk of big sales in 20Y Aussie bonds. Prices ebbed from the get-go in London but Norway’s rate cut and the big turn in European stocks allowed bonds to bottom around 4am ET. Another leg higher seen as NY traders take their seats. Data today will be released via websites due to Pope visit in DC. That includes wkly claims on Labor Dept site, Durables and New Home Sales on Commerce site. That means might be a slight delayed by news wires as this is not normal lockup procedure. (MNI)

News headlines

Janet Yellen’s Inflation Lecture More Than Just an Academic Exercise for Fed (Dow Jones Business News) Federal Reserve Chairwoman Janet Yellen speaks Thursday  5pm at the University of Massachusetts Amherst on an economic topic–inflation dynamics and monetary policy–that has major implications for the debate over when the central bank should begin raising short-term interest rates.

Abe Unveils Target to Boost Japan’s Economy to 600 Trillion Yen (Bloomberg) Prime Minister Shinzo Abe unveiled a new economic growth target and vowed to halt Japan’s population slide, as he seeks to claw back support after the passage of unpopular defense bills. Abe made the remarks following his official reappointment Thursday to a second three-year term as leader of the ruling Liberal Democratic Party. Shifting his focus, he avoided mentioning his trademark policies of monetary easing, fiscal spending, as well as tricky regulatory reforms that many economists say are already too slow.

Norway Cuts Rates to Record Low to Save Economy From Oil Slump (Bloomberg) Norway’s central bank unexpectedly lowered interest rates to an all-time low and said it may ease policy further as it seeks to rescue an expansion in western Europe’s biggest petroleum producer from a plunge in oil prices.

GE Capital Said to Agree to Sell Private-Equity Unit to Ardian (Bloomberg) General Electric Co. agreed to sell its private-equity investment group to French alternative asset manager Ardian for about $500 million, people with knowledge of the matter said.

Ardian won the assets earlier this month in an auction process run by Evercore Partners Inc., said two of the people, who asked not to be identified because the information is private.

Taiwan Cuts Rate for First Time Since 2009 as Exports Falter (Bloomberg) Taiwan lowered its policy rate for the first time since the global financial crisis, sending forwards on the island’s currency to a six-year low.

The central bank cut the benchmark discount rate by 12.5 basis points to 1.75 percent, it said in a statement in Taipei on Thursday. Eleven of 24 economists surveyed by Bloomberg predicted a cut, while the remaining 13 had expected the rate to be held for the 17th straight quarter.

We Still Aren’t Sure What Will Cause Janet Yellen to Pull the Trigger (Bloomberg) The effectiveness of the Federal Reserve’s communication strategy is clearly questionable when the outcome of a Federal Open Market Committee meeting is considered a coin toss among economists who closely follow monetary policy.

Ifo Business Climate Index Edges Upwards (CESifo Group) The Ifo Business Climate Index for German industry and trade rose in September to 108.5 from 108.4 points (seasonally revised) last month. Companies assessed their current business situation slightly less favourably than in August. However, they expressed greater optimism about future business developments. The German economy is proving robust.

Overnight markets

 Overview: IG25 5Y 87.019/83.373 (+2.889), US 10yr note futures are up +0.21% at 128-07, S&P 500 futures are down -0.88% at 1911.5, Crude oil futures are down -0.43% at 44.29, Gold futures are up +0.47% at $1136.8, DXY is down -0.23% at 95.849.

US Economic Data

• Initial jobless claims came in at 267K  for the week ending September 19th, lower than expected (272K) but slightly higher than prior week (264K).
• Continuing claims decreased to 2242K from 2243K and higher than expected (2240K).
• Durable goods orders decreased in August by -2.0%, better than expectations of -2.3% MoM (0.0% vs 0.1% Ex Trans.) versus revised July 1.9% MoM (0.4% Ex Trans.).
• Nondefense capital goods ( New Orders)  diminished by -0.2% in August,  they were expected to decrease -0.2% MoM (-0.2% MoM vs 0.5% for Shipped) this is compared to +2.1% (NO) and 0.5% (S) for the previous month revised data.
• New home sales are forecast at 515K (1.6% MoM) in August versus July 507K (5.4% MoM).
• Kansas City Fed manufacturing index is forecast at -6 in September higher than August level (-9).

Canadian Economic Data

•  There is no major economic data 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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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