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Market update

US tsys opening lower after in line Retail Sales & overnite ‘risk on’ session, US 10Y 2.18 (+3.0bps). PBOC tried to calm nerves over Yuan devaluation, saying China has ample reserves, strong economy .  US auctions $16bln in 30Y bonds at 1:00EST after a poorly received 10Y yest. Core Euro bond yields sharply higher led by ~6bps in UK gilts. In Canada, GOCs are lower led by the belly of the curve. Provis opening tighter after closing ~2-2.5bps wider yest.

News headlines 

• China central bank tries to soothe global markets, says no reason for yuan to fall further (Reuters) China’s central bank said on Thursday there was no reason for the yuan to fall further given the country’s strong economic fundamentals, in a bid to reassure jittery global markets after it devalued the currency earlier in the week.

• China puts September Fed rate lift-off in doubt (FT) It was nearly a century ago during the battle of the Marne that the French marshal Ferdinand Foch messaged his superiors: “My centre is giving way, my right is in retreat. Situation excellent. I shall attack.”

• Who’s Crazy Now? Yuan Bears Vindicated by Tumble See More Pain (Bloomberg) Sue Trinh had to defend her sanity. Albert Edwards almost got kicked out of meetings. Kevin Lai was ignored by clients for an entire year.Once ridiculed for their bearish forecasts on China’s currency, the analysts who predicted this week’s devaluation don’t look so crazy now.

• Greek Economy Grows Unexpectedly in Second Quarter (WSJ) Greece’s economy grew unexpectedly in the second quarter of the year on the back of a strong start to the tourism season and resilient consumption, data from the Greek statistics agency showed Thursday.

• Gold demand plunges to 6-year low as Asian buyers retreat (CNBC) Global gold demand slumped to a six-year low in the second quarter as consumers in China and India continued to pull back on purchases of gold jewelry, coins and bars despite bullion’s multi-year low prices.

• Canada Prime Minister Stephen Harper vows limit on foreign home buyers if needed (FP) Prime Minister Stephen Harper promised new measures to track foreign home ownership in Canada and even hinted at restrictions on buying, during a press conference in Canada’s most expensive housing market.

Overnight markets

• Overview: IG24 5Y 75.5/76 (-0.2), US 10yr note futures are down -0.31% at 127-18+, S&P 500 futures are down -0.10% at 2082.25, Crude oil futures are down -1.09% at 42.83, Gold futures are down -0.81% at $1114.5, DXY is up +0.50% at 96.740.

 US Economic Data

•  Retail sales increased 0.6% MoM in July, equal to expectations, after decreasing -0.3% the previous month.
• Retail sales excluding automobiles increased 0.4% in July, compared to consensus of a 0.4% gain, and a revised 0.4% increase in June.
• Initial jobless claims came in at 274K  for the week ending August 8, higher than expected (270K) and prior week (269K).
• Continuing claims increased to 2273K from 2258K and higher than expected (2245K).
• Import price index came in at -0.9% MoM (-10.4% YoY) in July versus June -0.1% MoM (-9.9% YoY).
• Business inventories are forecast to increase 0.3% MoM in June, equal to previous month.

Canadian Economic Data

• New housing price index increased 0.3% MoM (+1.3% YoY) in June compared to May 0.2% MoM (1.2% 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 higher, US 10Y 1.84 (-5.3bps) after second Yuan devaluation in as many days. Volume in tsy futures o/n said to be very high according to MNI. Tsys off the o/n highs on reports China bought its currency in an effort to stem the decline. Crude trading higher, despite IEA report of oil glut (see above). Core EU bond yields lower led by UK gilts, yet underperforming tsys. The US auctions $24bln in 10Y notes this aft after a solid 3Y auction yest, after short end yields had rallied ~5bps on the China deval. The total refunding package actually pays down $3.25bln which further supports today’s and Thurs 30Y auctions.GOCs trading higher, spds ~2bps wider vs tsys in the rally , with the 10Y butt the narrowest in four months. Provis ~1-1.5bps wider, Ont 45s trading down at 91, Ont 45/25 roll 12.5/12.1.

News headlines

• China central bank under pressure to weaken yuan further: sources (Reuters) China’s move to devalue its currency reflects a growing clamor within government circles for a weaker yuan to help struggling exporters, ensuring the central bank remains under pressure to drag it down further in the months ahead, sources said.

• Asian currencies hit new multiyear lows (FT) Losses for emerging market currencies accelerated on Wednesday, touching new multiyear lows after China’s authorities once again allowed the renminbi to weaken further.

• Global oil supply grows at ‘breakneck speed’, says IEA (FT) The global oil glut will persist well into 2016, the world’s leading energy body said on Wednesday, even as the collapse in prices is pushing up demand at the fastest pace in five years.

• Tougher bank rules hit bond market trading, report says (FT) A report on deteriorating bond market trading conditions commissioned by two of the financial industry’s biggest lobbying groups has urged regulators to ameliorate the “liquidity” crunch by revisiting parts of the post-financial crisis supervisory framework.

Overnight markets

• Overview: IG24 5Y 76.05/76.3 (+0.92), US 10yr note futures are up +0.20% at 128-03+, S&P 500 futures are down -0.71% at 2065.0, Crude oil futures are up +1.44% at 43.70, Gold futures are up +0.95% at $1118.2, DXY is down -1.04% at 96.280.

 US Economic Data

• MBA mortgage applications came in this morning at +0.1% for the week ending August 7, versus prior week 4.7% increase.
• JOLTs job openings are forecast at 5350 in June compared to May 5363.
• Monthly budget statement is forecast at -$138.0B in July versus $94.6B in June.

Canadian Economic Data

 Teranet/National bank housing price index for the month of May came in at 1.2% MoM and 5.1% 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 Tsy lower/ curve steeper after brief jump on weaker ADP (185 vs 215) as stock futures rise on no go Fed. Fed Powell had said there was no decision on Sep rate hike and that this Friday’s jobs report is key. Fed fund futures pricing in ~50% odds of rate hike in Sep vs 40% last week after Fed Lockhart comments yest. Euro stocks up 1.5% led by gains in materials, crude up 1.5%. Core Euro bond yields sharply higher despite weaker EU retail sales. In Canada, GOCs are lower, spds unch vs tsys, 1bp tighter in longs. Yest Cda closed 5-7 bps tighter vs tsys in the aft selloff, curve maintain a flattening bias… Provis opening unch, Ont45s 88.5, Ont 45/25 bx 11.8/11.4 – expectations of a long Alberta deal.

News headlines

• China Services Sector Shows Strength (WSJ) China’s services sector showed continued strength in July, a private survey showed Wednesday, cushioning persistent problems in manufacturing in the world’s second-largest economy.
• Dollar and short-term Treasury yields eye fresh highs (FT) The dollar and short-term Treasury yields are eyeing multi-year highs as traders increase bets of a US interest rate rise next month.
• All eyes on sterling’s ‘Super Thursday’ (FT) The Old Lady of Threadneedle Street’s “unreliable boyfriend” is turning over a new leaf, catching the attention of the currencies market. Mark Carney, the Bank of England’s governor, was given the moniker last summer amid criticism about the central bank’s inconsistent message, via forward guidance, for the UK interest rate outlook.
• Alberta forecasts deficit in the range of $5.4-billion (G&M) Alberta’s deficit will be “in the range” of $5.4-billion next year, Finance Minister Joe Ceci said Tuesday, sticking to a spring forecast even as skidding oil prices prompt deeper cuts in the energy sector.

Overnight markets

• Overview: IG24 5Y 71.5/71.8 (-0.6), US 10yr note futures are down -0.20% at 127-00+, S&P 500 futures are up +0.85% at 2100.75, Crude oil futures are up +1.31% at 46.34, Gold futures are down -0.16% at $1089.0, DXY is down -0.10% at 97.833.

US Economic Data

• MBA mortgage applications came in this morning at 4.7% for the week ending July 31st, versus prior week 0.8% increase.
• ADP employment change came in at 185K in July compared to 229K in June (Expected 215K).
• Trade balance widened to -$43.80B in June compared to previous month (-$40.9B).
• Markit US Services PMI for July (Final) is forecast at 55.2, equal to the preliminary report.
• ISM non-manufacturing is forecast at 56.2 in July a tad higher than June 56.0.

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