Market UpdateUS tsys trading lower, US 10Y 2.757 (+2.7bps), reversing most of yest rally which saw the 10Y move below 2.72% as US equities rebound, S&P futures +18, Nasdaq + 60. European equities also reversing losses after reopening from the long weekend, Euro stoxx -0.50%. Quiet day on the data front with only Vehicle sales, Redbook and ISM NY, Fed Kashkari speaks at 9:30. The CAD continuing to rise on yest Nafta news, up 0.75% 1.2838. GOCs lower, outperforming tsys by 1-2bps. Tomorrow the BOC will auction $3bln of new Sep 2023s with the WI/5Y roll 3.6/3.4. Provi spds steady after widening another ~0.5bps yest, Ontario 27s 10bps wider over the past two weeks.
News headlines
Stocks’ Second-Quarter Start Is the Worst Since the Great Depression (Bloomberg) If you feel like the second quarter began badly, you’d be right. U.S. stocks had their worst April start since 1929, according to data compiled by Bloomberg. The S&P 500 index slumped 2.2 percent, a rout exceeded only by its 2.5 percent decline 89 years ago, a prelude to the devastating crash later that year that brought on the Great Depression. (Back then, the index only comprised 90 stocks.)
Trump Pushing for Preliminary Nafta Deal by Mid-April, Sources Say (Bloomberg) The Trump administration is pushing for a preliminary Nafta deal to announce at a summit in Peru next week, and will host cabinet ministers in Washington to try to achieve a breakthrough, according to three people familiar with the talks. The White House wants leaders from Canada and Mexico to join in unveiling the broad outlines of an updated pact at the Summit of the Americas that begins April 13, while technical talks to hammer out the finer details and legal text could continue, according to the people. They asked not to be identified because the talks are private.
America’s Libor Replacement Is Ready for Its Debut (Bloomberg) Regulators around the globe began work on replacements for Libor, the London interbank offered rate, well before the U.K.’s Financial Conduct Authority set to put the beleaguered interest-rate benchmark out of its misery. In the U.S., enter the Secured Overnight Financing Rate, or SOFR, a new reference rate being introduced next week by the Federal Reserve Bank of New York in cooperation with the U.S. Treasury Department’s Office of Financial Research. The debut of SOFR is a critical step in a quest to wean more than $350 trillion of securities off Libor.
Euro-Area Manufacturers Rein in Output Amid Capacity Constraints (Bloomberg) Euro-area manufacturing expanded at the weakest pace in eight months in March as factories delayed production due to increasing capacity constraints. A Purchasing Managers’ Index dropped to 56.6 from 58.6 — in line with a previous flash estimate — IHS Markit said on Tuesday. Activity slowed across countries and industries in the region but remained indicative of solid growth nonetheless, it said.
Provincial stimulus can kick Canada into a higher gear: economists (Reuters) Fiscal stimulus from major provinces is set to give Canada’s economy a shot in the arm, which could boost the case for further Bank of Canada interest rate hikes over the coming months despite slow growth at the start of the year, economists said on Monday.
Disappointing Canada growth data for January heralds under par Q1 (Reuters) The Canadian economy unexpectedly shrank by 0.1 percent in January, Statistics Canada data indicated on Thursday, in a clear sign that first-quarter growth is likely to be weaker than the Bank of Canada had predicted. Analysts in a Reuters poll had expected gross domestic product to increase by 0.1 percent after a revised 0.2 percent gain in December. January’s drop was the first since a 0.1 percent decline in August 2017.
RBC chief McKay warns investment capital fleeing Canada in ‘real time’ (BNN) The head of one of Canada’s largest banks is urging the federal government to stem the flow of investment capital from this country to the United States — because, he warns, it’s already leaving in “real time.” RBC president and CEO Dave McKay discussed some of his biggest concerns about Canadian competitiveness, particularly those related to recent U.S. tax reforms, during a recent interview. Ottawa has come under pressure from corporate Canada to respond to a U.S. tax overhaul that’s expected to lure business investments south of the border.
Overnight markets
Overview: US 10yr note futures are down -0.18% at 121-02, S&P 500 futures are up 0.54% at 2589, Crude oil futures are up 0.24% at $63.16, Gold futures are down -0.34% at $1342.3, DXY is down -0.01% at 90.04, CAD/USD is down -0.33% at 0.777.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.785% | 2 Year | 2.262% |
| 5 Year | 1.991% | 5 Year | 2.572% |
| 10 Year | 2.121% | 10 Year | 2.755% |
| 30 Year | 2.259% | 30 Year | 2.99% |
US Economic Data
| 04/03 | Wards Domestic Vehicle Sales, Mar est 13.10m (12.94m prior) |
| Wards Total Vehicle Sales, Mar est 16.90m (16.96m prior) |
Canadian Economic Data
There is no Canadian economic data for 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, Hugues Savard
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230