Comments

Market update

US tsys are higher after rising for most of the o/n session, with a muted reaction to weaker July Pers spending data. US 10Y 2.16 (-3bps), European equities lower despite the surge in China (4.8%). Focus on various Fed speakers at the Jackson Hole symposium. Fed Bullard , Mester leaning towards Sep rate hike while Kocherlakota believes it is premature. Hilsenrath article in the WSJ (see above) notes foreign bankers are urging the Fed not to waiver and raise rates already.  In Canada, GOCs are higher led by the 10Y (~5bps), reversing half of this week’s cheapening, spds ~1bp tighter vs tsys after mixed wholesale inflation data. Provis opening 0.5bps tighter, long Onts lifted @ 99.5, the 45/25 bx tighter as well 11.3/11.1. QC/Ont 45 rl unch 6/5.5.

News headlines

• Overseas Bankers, Officials Urge Fed Not to Waver on Interest-Rate Rise (WSJ) After months of forewarning by Federal Reserve officials that they are preparing to raise short-term interest rates, some international officials attending the Fed’s annual retreat here this week have a message: Get on with it already.
• Greece’s Economy Surged as Tsipras Fought With EU Over Aid Deal (Bloomberg) Greece’s economy grew more than initially estimated in the second quarter as consumption surged during Prime Minister Alexis Tsipras’s battle with the euro area over financial aid.
• GDP data reveal surprising lift in UK trade figures (FT) Net trade made an unexpectedly big contribution to UK economic growth in the second quarter of the year, as the overall quarterly rate was confirmed at 0.7 per cent.
• This doesn’t look like a slowing economy to me’ (BI) The US economy is rolling along. In a note to clients following the market close on Thursday, Deutsche Bank economist Torsten Sløk, who has been notably bullish on the US economy over the last year, circulated a chart showing that when you look at R&D spending trends, the economy appears solid.
• Concern over waning use of covenants in debt markets (FT) Just two or three beers will give most drinkers enough Dutch courage to take risks they would avoid sober. But after seven years at the Federal Reserve’s open bar, a lingering thirst for yield among lenders has stoked concern they are not taking out enough protection on the loans they make.
• TD profit tops forecasts as Canada’s banks defy low oil prices, economic worries (G&M) Toronto-Dominion Bank continued a trend among Canada’s big banks this week, reporting strong profit growth in the third quarter despite widespread concerns about the impact of low oil prices and a contracting Canadian economy.

Overnight markets

• Overview: IG24 5Y 78.5/79.5 (+0.75), US 10yr note futures are up +0.15% at 128-04+, S&P 500 futures are down -0.62% at 1977.0, Crude oil futures are down -1.13% at 42.08, Gold futures are up +0.36% at $1126.6, DXY is flat at 95.608.
• US BANK CDS (5yr): BAC 76/81 (+0), GS 95/100 (+0), MS 86/91 (+0), C 88/93 (+1), JPM 77/82 (+0), WFC 55/60 (-1)

 US Economic Data

• Personal income came in at 0.4% MoM in July compared to June 0.4%.
• Personal spending grew 0.3% MoM in July versus previous month 0.3%.
• PCE came in at 0.1% MoM (0.3% YoY) in July versus June 0.2% MoM (0.3% YoY).
• PCE core increased 0.1% MoM (1.2% YoY) in July compared to 0.1% MoM (1.3% YoY) in June.
•  University of Michigan confidence (Final) is expected at 93.0 in August 0.1 point higher than preliminary report.

Canadian Economic Data

• Industrial product price increase 0.7% MoM in July after climbing in June 0.5%.
• Raw materials price index came in at -5.9% MoM in July versus +0.2% 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

Market update

US tsys are mixed after 2Q GDP was revised higher (3.7% vs 2.3%), curve ~2bps flatter, US 10Y 2.19 (+1bp).  Reports of China liquidating tsys to support yuan  as well as comments from BOJ Kuroda on inflation pressured tsys overnite. The pipeline of IG corporate issuance is building after issuance ground to a halt due to equity volatility this week. Could be as much as $100bln in Sept according to MNI, should conditions stabilize further. The US auctions $29bln in 7Y notes after lacklustre 2 & 5Y auctions, with the belly of the tsy curve ~3 bps cheaper than at this pt yest which should support the auction. In Canada, GOCs are lower led by the 5Y for a change with 5/10 ~2bps flatter. Provis opening ~1bp tighter, long Onts trading up at 99 earlier, Ont 25s @ 87.5 so the 45/25 bs is ~1bp wider at 11.9/11.6.

News headlines

• U.S. second-quarter GDP revised to show larger 3.7% gain (Marketwatch) The U.S. economy grew at a faster 3.7% annual pace in the second quarter, up from the initial estimate of growth at a 2.3% clip, the Commerce Department said Thursday.
• China Intervened Today to Shore Up Stocks Ahead of Military Parade (Bloomberg) China’s government resumed its intervention in the stock market on Thursday and has been cutting holdings of U.S. Treasuries this month to support the yuan, according to people familiar with the matter.
• Margin Calls Bite Investors, Banks (WSJ) Loans backed by investment portfolios have become a booming business for Wall Street brokerages. Now the bill is coming due—for both the banks and their clients.
• Fed’s Dudley: Case for September Rate Increase Now ‘Less Compelling’ (WSJ) Federal Reserve Bank of New York President William Dudley said Wednesday that prospects of a U.S. central-bank rate rise next month have dimmed amid rising concerns about events happening outside of U.S. borders.
• Bank of England publishes concerns over bond liquidity (FT) Regulation to make banks safer may have had a destabilising effect on the bond market, according to a Bank of England analysis published on its new staff blog.

Overnight markets

•  Overview: IG24 5Y 79.4/79.9 (-2.6), US 10yr note futures are down -0.21% at 127-21+, S&P 500 futures are up +1.24% at 1962.0, Crude oil futures are up +3.83% at 40.08, Gold futures are down -0.32% at $1121.0, DXY is up +0.69% at 95.759.
• US BANK CDS (5yr): BAC 78/83 (-3), GS 98/103 (-1), MS 90/95 (-2), C 90/95 (-3), JPM 79/84 (-2), WFC 58/63 (-1)

 US Economic Data

• GDP annualized QoQ grew 3.7% in 2Q 2015 higher than previously reported 2.3% increase.
• Personal consumption came in at 3.1% for 2Q 2015 vs 2.9% for previous release.
• GDP price index and Core PCE QoQ for 2Q 2015 were 2.1% and 1.8% 0.1% for GDP price index and unchanged from previous release.
• Initial jobless claims came in at 271K  for the week ending August 22, lower than expected (274K) and prior week (277K).
• Continuing claims increased to 2269K from 2256K and higher than expected (2248K).
• Pending home sales are forecast at 1.0% MoM (8.3% YoY) in July versus June -1.8% MoM (11.1% YoY).
• Kansas City Fed manufacturing index is forecast at -4 in August higher than July level (-7).

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 lower, curve ~3bps steeper, US 10Y 2.15 (+8bps) after surge in Durable Goods. Global stocks mixed, China was lower again, yet Euro stocks have reversed declines while DOW futures are ~300 pts higher. US auctions $35bln in 5Y notes with the belly of the curve looking fairly expensive on the curve even after taking into acct latest steepening due to Fed repricing. Core Euro bonds mixed lagging the move in tsys, German bunds slightly lower while UK gilts ~3bps 10Y higher – ECB Praet leaving the door open for further QE as downside risks to inflation goal have increased. In Canada, GOCs are sharply lower led by 10s which are 4bps wider on the curve. Provis opening 0.5bps tighter, long Onts trading up at 100, Qc 45s @ 106. BOC auctions $3.3bln in reopened Nov 17s with the roll 3.0/2.5 – ~1bp cheaper since last auction so relatively cheap in context of a flatter 2s/5s curve.

News headlines

• Rise in durable-goods orders points to business investment perking up (Marketwatch) Orders for long-lasting U.S. goods rose in July, and a key measure of investment posted the biggest gain in 13 months, a sign that companies continue to spend despite a tougher business climate.
• October Fed Rate Increase Suddenly on Some Investors’ Radar (Bloomberg) October is a long shot, but Wall Street isn’t ruling it out. Traders and investors have been betting for months that the Federal Reserve will raise interest rates in September or December. October — the only other meeting on the 2015 calendar — wasn’t part of the conversation, mainly because there’s no press conference scheduled along with the central bank’s interest-rate decision that day.
• For Oil Producers Cash Is King, and That’s Why They Just Can’t Stop Drilling (Bloomberg) Investors sent a surprising message to U.S. shale producers as crude fell almost 20 percent in August: keep calm and drill on. While most oil stocks have fallen sharply this month, the least affected by the slump share one thing in common: they don’t plan to slow down, even though a glut of supply is forcing prices down.
• Credit Market Opportunities Seen After Ugly Selloff (Bloomberg) While investor sentiment remains fragile after Monday’s incredibly ugly selloff, underlying fundamentals are generally stable and further fallout may be limited by seasonal considerations. With many traders and portfolio managers away on vacation, corporate bond trading volumes, new issue activity and generic liquidity remain muted for now.
• RBC profit climbs 4%; raises dividend (G&M) Royal Bank of Canada said Wednesday that its profits in the third quarter rose 4 per cent from a year earlier to nearly $2.5-billion or $1.66 a share. The bank also boosted its quarterly dividend by 2 cents a share, to 79 cents.

Overnight markets

•  Overview: IG24 5Y 85.75/86.5 (-1.12), US 10yr note futures are down -0.06% at 127-31+, S&P 500 futures are up +2.43% at 1918.25, Crude oil futures are up +1.02% at 39.71, Gold futures are down -0.68% at $1130.60, DXY is up +0.25% at 94.769.
• US BANK CDS (5yr): BAC 81/86 (-1), GS 101/106 (+0), MS 92/97 (+0), C 91/96 (-1), JPM 81/86 (-1), WFC 60/65 (+0)

 US Economic Data

• MBA mortgage applications came in this morning at +3.6% for the week ending August 14, versus prior week 0.1% increase.
• Durable goods orders increased in July by 2.0%, above expectations of -0.4% MoM (0.6% vs 0.3% Ex Trans.) versus revised June 4.1% MoM (1.0% Ex Trans.).
• Nondefense capital goods ( New Orders)  raised by 2.2% in July,  they were expected to increase 0.3% MoM (0.6% MoM vs 0.4% for Shipped) this is compared to -1.4% (NO) and 0.9% (S) for the previous month revised data.

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