Comments

Market update

US tsys lower & curve steeper on risk on rally as Nikkei surged 7.7% o/n (see above), US 10Y 2.22 (+4bps). Core EU bonds outperforming led by 10Y bunds- bund/tsy spd at three week wides. US auctions $21bln in new 10Y notes at 1:00EST with yields ~5bps higher since the 3Y yest. Also pressuring tsys is a building corp calendar after yest saw $14bln in issuance(JDC, CP…). Today Amex, Marsh & Mclennan and Gilead with the latter looking to sell bonds across the curve. GOCs are lower before BOC decision, CAD steady after housing starts/permits came in stronger than exp. provis opening 0.5 – 1bp tighter, Ont 46s traded at 99 (from 100 yest cls), Ont 45/25 bx unch 11.5/11.2.QC/Ont 45 5.9/5.6 unch.

News headlines

• Japan’s Nikkei 225 Rises 7.7% for Biggest Gain Since October 2008 (Bloomberg) Japanese stocks soared, with the Nikkei 225 Stock Average staging the steepest advance since the aftermath of the 2008 Lehman Brothers Holdings Inc. bankruptcy, amid speculation a selloff that drove valuations to an 11-month low was overdone.
• Blame short-sellers for Japan’s sharp equity rally (FT) The funny thing about short-sellers is that they are blamed when markets fall — most recently in China, but by US and European leaders in 2008 — but never celebrated when their actions help markets soar.
• Abe Pledges Corporate Tax Cut as Investments Slump (Bloomberg) Japanese Prime Minister Shinzo Abe pledged to follow through with a corporate-tax cut, a day after government data underscored businesses’ reluctance to ramp up domestic investment.
• Poloz Expected to Hold Rates in Lone Decision During Canada Vote (Bloomberg) The Bank of Canada will probably leave its main interest rate unchanged in a decision that will be closely parsed by the nation’s political leaders amid a tight election campaign focused on the economy.
• Interest rate rise: Redemption at last for banks? (FT) Whisper it quietly (especially if you are in the company of politicians or regulators) but banks are finally starting to find life a little easier. The pace of regulatory change is easing, the worst of the misconduct fines seem to be out of the way and US and UK interest rate rises are likely to be coming sooner rather than later.
• Canadian oil producers among first in the world to yield to low prices and turn off taps (FP) Amid the corn and canola fields of eastern Saskatchewan, oil foreman Dwayne Roy is doing what Saudi Arabia and fellow OPEC producers are loath to do: shutting the taps on active wells.

Overnight markets

• Overview: IG24 5Y 77.8/78.3 (-1.2), US 10yr note futures are down -0.23% at 126-31+, S&P 500 futures are up +0.97% at 1984.50, Crude oil futures are down -0.94% at 45.51, Gold futures are down -0.22% at $1118.5, DXY is up +0.38% at 96.349.
• US BANK CDS (5yr): BAC 72/76 (-1), GS 92/96 (-1), MS 81/85 (-1), C 81/85 (-1), JPM 73/77 (-1), WFC 54/58 (-1)

US Economic Data

• MBA mortgage applications came in this morning at -6.2% for the week ending September 4th, versus prior week 11.3% increase.
• JOLTs job openings are forecast at 5300 in July compared to June 5249.

Canadian Economic Data

• Housing starts came in at 216.9K in August versus July revised 193.3K.
• Building permits came in at -0.6% MoM in July versus 15.5% in June.
• Bank of Canada overnight lending rate decision will be release at 10:00 and is expected to remain at 0.50%.

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, curve steeper with the US 10Y 2.164 (+3.7bps)on ‘risk on’ after China stocks rallied 3.0% despite poor export figures.  European equities are higher, USD lower , gold higher and crude lower. Also weighing on tsys – a wave of govt/corp supply: the US auctions $58bln in 3,10& 30Y bonds this week while corp issuance expected to pick up after a slow August. CP (Baa1/BBB+) set to issue ~$1bln in 20 & 30Y bonds to fund capital investments as well as a $850mln repurchase pgrm. S&P had noted that this would raise its debt/ebitda to ~2.5x – above which would necessitate a downgrade. In Canada, GOCs are lower & steeper with provis unch – expectations of supply weighing despite the positive tone in credit/equities, thou GOCs $1.00 lower in longs not supportive.

News headlines

• China Exports Mark Latest Soft Reading for Economy (WSJ) Weaker demand for Chinese goods in most global markets led to a drop in exports for the second consecutive month, as the economy continued its struggle to regain momentum.
• San Francisco Fed’s Williams Sees Rate Increase ‘This Year,’ (WSJ) If Risks DissipateFor much of 2015, John Williams, president of the Federal Reserve Bank of San Francisco, has projected a rosy U.S. economic outlook, seeing solid output growth, steady unemployment declines and an approaching need to increase short-term interest rates.
• Euro zone second-quarter GDP revised higher as Italy grows faster (G&M) The euro zone economy grew faster than expected in the second quarter, data showed on Tuesday, mainly because of faster growth in Italy and Greece.
• Canadian banks helping clients bend rules to move money out of China (G&M) Some Canadian banks allow wealthy Asian investors to skirt Chinese law by helping them bring in large amounts of money that is often used to buy real estate in Vancouver.
• ECB quantitative easing: Failure to spark (FT) When Siemens revealed a €200m investment in a new wind turbine plant at Cuxhaven, on Germany’s North Sea coast, last month, it was hard to know who had more reason to cheer: the 1,000 people who will be employed at the facility — or the European Central Bank.
• Bond Market Sends Fed All-Clear to Raise Interest Rates (Bloomberg) Janet Yellen has the fixed-income market just where she wants it: ripe for the first increase in U.S. interest rates since 2006.Just about every indicator is telling the Federal Reserve Chair a move at next week’s policy meeting would cause government bonds little disruption.

Overnight markets

•  Overview: IG24 5Y 80.4/80.9 (-2.35), US 10yr note futures are down -0.23% at 127-14+, S&P 500 futures are up +1.70% at 1954.50, Crude oil futures are down -0.85% at 45.66, Gold futures are up +0.13% at $1122.9, DXY is down -0.12% at 96.111.
• US BANK CDS (5yr): BAC 76/80 (-1), GS 94/98 (-1), MS 85/89 (-1), C 85/89 (-1), JPM 77/81 (-1), WFC 56/60 (-1)

 US Economic Data

• NFIB Small Business Optimism Index for August came in at 95.9 compared to the consensus of 96.0 and prior month (95.4).
• Labor market conditions for August will be release at 10:00 and is forecasted at 1.5 after a 1.1 level in July.
• Consumer credit is forecast at $18.0B  in July versus June $20.74B.

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 rising with EGBs after Draghi increases QE buying cap, revises down GDP/inflation Eurozone forecast data, US 10Y 2.157 (-2.7bps). Tsys basically unch o/n  with little reaction to uptick in claims, lower trade deficit .In Canada, GOCs are higher with tsys, curve unch. Provis open unch, BC 48 issue at 94 yest (6 thru Onts) was so-so, expectations of further supply keeping a lid on spd tightening despite better tone in equities/credit.

News headlines

• ECB seen cutting inflation outlook, hinting at more policy action (Reuters) The European Central Bank is set to cut its inflation forecasts on Thursday but hold back from concrete policy action, promising only to beef up its bond-buying program if growth and inflation prospects weaken further.

• Eurozone’s manufacturing enjoys strong August (FT) The eurozone’s manufacturing sector continued to grow in August, as ongoing expansion in Germany, Italy, Spain, the Netherlands, Austria and Ireland offset the continuing contractions in France and Greece.

• Swedish Krona Jumps as Riksbank Holds Off on Additional Stimulus (Bloomberg) Sweden’s krona climbed to a six-week high versus the euro after the nation’s central bank refrained from easing monetary policy and signaled the unprecedented stimulus it’s already doing is helping steer the economy out of a deflationary trap.

• S. Treasury’s Lew says China will be held accountable on currency (Reuters) The Obama administration on Wednesday urged China to be clear about its intentions when it changes currency policies.”They need to understand that they signal their intentions by the actions they take and the way they announce them,” U.S. Treasury Secretary Jack Lew told network CNBC in an interview ahead of a Group of 20 meeting that Chinese officials will attend.

Overnight markets

• Overview: IG24 5Y 81.35/81.85 (-0.9), US 10yr note futures are up +0.25% at 127-15, S&P 500 futures are up +0.58% at 1958.25, Crude oil futures are down -0.06% at 46.22, Gold futures are down -0.94% at $1123.0, DXY is up +0.43% at 96.244.
• US BANK CDS (5yr): BAC 79/83 (+0), GS 96/100 (+0), MS 87/91 (-1), C 89/93 (+0), JPM 79/83 (+0), WFC 58/62 (+0)

 US Economic Data

• Challenger job cuts came in at 2.9% YoY in August, compared to prior month 125.4% increase.
• Initial jobless claims came in at 282K  for the week ending August 29, higher than expected (275K) and prior week (270K).
• Continuing claims decreased to 2257K from 2266K but slightly higher than expected (2253K).
• Trade balance tightened to -$41.86B in July compared to previous month (-$45.21B).
• Markit US Services PMI for August (Final) is forecast at 55.0, 0.2 point lower than preliminary report.
• ISM non-manufacturing is forecast at 58.2 in August lower than July 60.3.

Canadian Economic Data

•  Int’l merchandise trade improved to -$0.59B in July from a revised deficit of -$0.81B in June and better than expected (-$1.20B).

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