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Market update

US Tsys slightly higher, curve flatter with little reaction to small miss in ADP (190k vs 200k), US 10Y 2.165 (+1bp). Tsy futures range bound overnight, underperforming core EU bonds as 10Y gilts, bunds ~1bp lower. Aussie govt bonds sharply lower despite slower Q2 GDP (0.2% vs 0.4%). In Canada, GOCs are lower , spds unch vs tsys, curve steeper before $400mln RRB auction this aft (reopen 47s).

News headlines

• Fed official flags concern over US growth (FT) Slowing foreign economies, stock market volatility and falling commodity prices could deal a setback to US growth, a Federal Reserve policymaker warned as he made the case for a modest path of monetary policy tightening.
• Investors Betting on More ECB Stimulus (WSJ) Six months after the European Central Bank launched its blockbuster bond-buying program to rouse the region’s economy, some investors are betting that authorities will crank stimulus efforts even higher.
• Canada officially in a recession as GDP shrinks 0.5% in second quarter (FP) A technical recession, but not an “outright recession. ”That is the verdict from economists Tuesdayafter Statistics Canada reported that the Canadian economy shrank at an annual rate of 0.5 per cent in the second quarter, following a 0.8 per cent decline (revised from an earlier figure of 0.6 per cent) in the first three months of the year.
• Market Bets Abound, but Where Are the Banks? (WSJ) The past two weeks of nearly unprecedented stock-market volatility once would have marked ideal trading conditions at the country’s biggest banks. That era is over.
• Small U.K. Banks Show Big Rivals How To Travel Light (WSJ) Picture a life without the baggage of the past. In the U.K., smaller banks are showing established rivals how that could be.

Overnight markets

• Overview: IG24 5Y 83/83.5 (-1.25), US 10yr note futures are down -0.04% at 127-08+, S&P 500 futures are up +0.76% at 1930.50, Crude oil futures are down -1.59% at 44.69, Gold futures are down -0.14% at $1138.2, DXY is up +0.28% at 95.720.
• US BANK CDS (5yr): BAC 80/84 (-1), GS 98/102 (+1), MS 90/94 (-1), C 91/95 (-1), JPM 81/85 (+0), WFC 59/63 (+0)

 US Economic Data

• MBA mortgage applications came in this morning at +11.3% for the week ending August 28, versus prior week 0.2% increase.
• ADP employment change came in at 190K in August compared to 177K in July (Expected 200K).
• Nonfarm productivity (F) came in at 3.3% in 2Q 2015 (1.3% P) versus -1.1% for previous quarter.
• Unit labor costs (F) increase -1.4% in 2Q 2015 (0.5% P) compared to the 2.6% in 1Q 2015.
• ISM New York (August) will be release at 9:45 (last report: 68.8).
• Factory orders are expected at +0.9% MoM in July fallowing +1.8% in June.
• Fed will release beige book at 14:00.

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 Tsys higher, curve flatter, US 10Y 2.17 (-5bps) on weak China data (See above), lower global equities. Crude oil ~3% lower @ 47.60, still only retracing a fraction of  yest $6 rally on talk Saudi weighing production cuts. Latest JPM Tsy Client Survey showed fewest shorts since net shorts among all clients since Feb 23 15. Core EU bonds higher led by 10Y gilts (~4bps). In Canada, GOCs are higher lagging the move in tsys after Q2 GDP surprised to the upside – falling 0.5% vs -1.0% exp, curve 3bps flatter, longs, lagging with 10/30 +1.5bps @ 75.5. Provis opening 0.5-1.0 bp wider on the bid, long Onts 100.5/99.5 – provis unbale to capitalize on yest pullback in yields, thou long Ont issue at the top of the mkt weighed.

News headlines

• China Factory Gauge Slips to Three-Year Low in August (WSJ) China got another poor picture of its economic health on Tuesday, as an official gauge of manufacturing activity in August slumped to a three-year low while the usually strong services sector showed new weakness.

• Charting the Market: New Month, Same China (Bloomberg) China continues to dictate the mood of markets. On Tuesday, Asian and European stocks resumed where they left off in August after China’s official factory gauge fell to a three-year low. The report suggests the world’s second largest economy has yet to find a bottom.

• Oil falls on weak China factory data (Reuters) Oil prices fell sharply on Tuesday after official data showed China’s giant manufacturing sector, one of the main engines powering the world’s biggest energy consumer, contracted at its fastest pace in three years.

• Euro zone factory growth eases in August despite modest price rises – PMI (Reuters) Euro zone manufacturing growth eased last month, despite factories barely raising prices, adding to the European Central Bank’s woes as it battles to spur expansion and inflation, a survey showed.

• High-frequency traders: bond market scourge or saviour? (FT) Depending on who you speak to, high-frequency traders are either the scourge of the US Treasury market, contributing to volatile price movements, or its saviour as banks make a broad retreat.

Overnight markets

•  Overview: IG24 5Y 83.75/84.25 (+2.25), US 10yr note futures are up +0.31% at 127-14+, S&P 500 futures are down -2.26% at 1924.75, Crude oil futures are down -3.50% at 47.48, Gold futures are up +0.62% at $1139.5, DXY is down -0.15% at 95.678.
• US BANK CDS (5yr): BAC 81/85 (+1), GS 97/101 (+1), MS 90/94 (+2), C 91/95 (+0), JPM 81/85 (+1), WFC 58/62 (+1)

 US Economic Data

• Markit US Manufacturing PMI (Preliminary) is forecast at 52.9 in August, equal to preliminary report.
• ISM Manufacturing is forecast at 52.5 in August versus July 52.7.
• Construction spending is forecast at 0.6% MoM in July versus 0.1% in June.
• IBD/TIPP economic optimism is forecast at 47.1 in September 0.2 point higher than August (46.9).
• Total vehicle sales are expected at 17.30M in August lower than July 17.46M.

Canadian Economic Data

• GDP MoM in June increased 0.5% MoM (+0.6% YoY) compared to -0.2% MoM (+0.5% YoY) in May.
• RBC Canadian Manufacturing PMI will be released at 9h30am.

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 higher, curve ~4bps flatter o/n with the US 10Y 2.15 (-3bps) on weaker global equities & Fed rate hike fears. China stocks fell 0.8% while at the same time Fed VC Fischer’s comments on inflation raised expectations of a rate hike at the Sept meeting.  Core Euro bonds lagging the move higher in tsys on better than exp German retail sales (3.3% y/y vs 1.7% exp) and firmer Eurozone core CPI. GOCs are higher led by a 3bp rally in 10s on the curve, little reaction from a larger than exp Q2 current acct. provis opening unch from Fri, long Onts 100/99, Ont 45/25 bx below 11 11/10.8 – supply exp this week, perhaps as early as today – long QC , Ont 10& 30, Sask 10Y all possible.

News headlines

• Fed’s Fischer: ‘Good Reason’ to Think U.S. Inflation Will Move Higher (WSJ) The Federal Reserve’s No. 2 official said there is “good reason” to think sluggish U.S. inflation will firm and move back toward the U.S. central bank’s 2% annual target, touching on a significant assessment facing the Fed ahead of its September policy meeting.
• Weak eurozone inflation revives quantitative easing debate (FT) Inflation in the eurozone held steady in August, ahead of a European Central Bank meeting later this week that is expected to test policymakers’ appetite for more aggressive monetary easing.
• The Day After $15: New minimum wage would bring nightmare scenario to Canada, critics say (FP) In principle, Hervé Mallet supports the idea of a $15 minimum wage. “My employees deserve to have $15, they probably deserve to have $20,” said the Bathurst, N.B.-based owner of a St-Hubert Express chicken franchise. “But can I raise my prices by 40 per cent? No friggin’ way.
• Beijing abandons large-scale share purchases (FT) China’s government has decided to abandon attempts to boost the stock market through large-scale share purchases, and will instead intensify efforts to find and punish those suspected of “destabilising the market”, according to senior officials.
• Economists cut Canada’s growth projection, casting cloud on election pledges (G&M) Economists are shaving their growth forecasts for 2015 ahead of a Statistics Canada report this week that is widely expected to confirm that Canada slipped into recession earlier this year.

Overnight markets

• Overview: IG24 5Y 80.375/80.875 (+0.5), US 10yr note futures are up +0.17% at 127-13+, S&P 500 futures are down -0.99% at 1970.0, Crude oil futures are down -2.57% at 44.06, Gold futures are down -0.54% at $1127.9, DXY is down -0.17% at 95.947.
• US BANK CDS (5yr): BAC 78/83 (+0), GS 95/100 (+0), MS 86/91 (+0), C 88/93 (+0), JPM 77/82 (+0), WFC 55/60 (+0)

 US Economic Data

• ISM Milwaukee is expected at 50.0 in August versus 47.12 in July.
• Chicago purchasing manager index is forecast at 54.5 in August lower than July 54.7.
• Dallas Fed is forecast at -3.8 in August higher than July -4.6.

Canadian Economic Data

• Canada 2Q current account balance came in at -$17.4B vs -$16.9B expected and -$18.15B for 1Q.

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