Market Update Tsys higher on light volume (206k TY fut), 10Y 2.93 (-1.7bps), tsy curve 1bp flatter. April non farm payrolls due at 8:30 – 185k increase exp rebounding from March’s weak 103k, with the unem rate forecast to decline 0.1% to 4.0% with AHE steady at 2.7%. EGBs mixed ahead of the US data, 10Y bund lower in rangebound trade despite more weak Eurozone data (PMI, retail sales), 10Y yield 0.532% (+0.4bps). GOCs higher in line with tsys, curve unch , 2s30s 2.5bps flatter wk/wk. New 10Y roll (28/27) 0.5bps flatter (1/0.9) since 10Y auction last week (1.5), while the old 10Y roll (27/26) 0.4bps cheaper so 27s starting to look cheap, June 26s anchored by CTD status.
News headlines
U.S.-China Trade Talks End With Key Differences Still Unresolved (Bloomberg) Two days of U.S.-China trade discussions ended in Beijing with an agreement to keep on talking, and little else. China’s official Xinhua News Agency reported Friday afternoon that both sides reached a consensus on some trade issues while acknowledging major disagreements on some matters. It said they would continue discussions, without providing specifics for when they would start again. Neither side briefed the media, and the U.S. delegation led by Treasury Secretary Steven Mnuchin departed Beijing in the evening.
Buffett’s Berkshire Braces for ‘Wild’ Swings From New Accounting (Bloomberg) Warren Buffett’s company is scheduled to report earnings Saturday morning before its annual meeting, and a new accounting rule could sink results. Berkshire is now required to report unrealized gains and losses from equity investments in net income. Buffett has warned that the change could be significant because Berkshire’s more than $170 billion stock portfolio can easily fluctuate by $10 billion or more in a quarter.
Stocks Mixed Amid China Talks; Payrolls in Focus: Markets Wrap (Bloomberg) Stocks in Europe edged higher despite a decline in Asia as investors assessed trade talks between the U.S. and China. U.S. equity-index futures declined while the dollar advanced ahead of the monthly U.S. jobs report. Basic materials and technology companies led gains in the Stoxx Europe 600 index as the euro slipped amid mounting concern about the region’s economic outlook. Financials fell after disappointing earnings reports from BNP Paribas SA, Societe Generale SA and HSBC Holdings Plc. Stocks from Sydney to Hong Kong retreated earlier. U.S. Treasury yields were steady along with core European bonds.
U.S. Looks Beyond Iran Nuclear Deal Deadline to What Comes Next (Bloomberg) Donald Trump seems set on pulling out of the Iran nuclear deal next week, with U.S. officials suggesting that any initial diplomatic turbulence will be followed by negotiations for a new accord. There’s one big hang-up: Iran is ruling out new talks, calling the current agreement “non-negotiable.” And America’s European allies continue to back it, saying the deal has been essential to reining in Iran’s nuclear program.
TSX futures slightly lower ahead of U.S. jobs report (Reuters) Futures for Canada’s main stock index edged lower on Friday, tracking gold prices and ahead of the closely watched U.S. jobs data. U.S. job growth likely accelerated in April after a weather-related slowdown in the previous month, with the unemployment rate expected to drop to near a 17-1/2-year low of 4.0 percent. June futures on the S&P TSX index SXFc1 were down 0.05 percent at 7:15 a.m. ET.
Canada posts unexpected $4.1B trade deficit, its biggest ever (BNN) Canada’s trade deficit unexpectedly widened to a record in March as a surge in automobile imports outpaced a rebound for the nation’s exporters. The merchandise trade deficit widened to $4.14 billion from $2.93 billion a month earlier, Statistics Canada reported Thursday in Ottawa. Economists predicted the March figure would narrow to $2.25 billion.
Canada Post Group reports 2017 profit up as parcel business swells (Toronto Star) The Canada Post Group of Companies reported a profit of $144 million for 2017, up from $81 million in 2016, as its parcel business grew with the popularity of online shopping. The improved profit at the company which includes Canada Post, Purolator and SCI Group came as revenue from operations totalled nearly $8.23 billion in last year, up from $7.88 billion in 2016. Canada Post has seen its parcels business grow significantly as shoppers opt for online retailers, offsetting a decline in the company’s traditional transaction mail business.
Overnight markets
Overview: US 10yr note futures are up 0.117% at 119-27, S&P 500 futures are down -0.3% at 2623.75, Crude oil futures are up 0.22% at $68.58, Gold futures are down -0.05% at $1312, DXY is up 0.09% at 92.496, CAD/USD is up 0.18% at 0.777.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.909% | 2 Year | 2.472% |
| 5 Year | 2.139% | 5 Year | 2.765% |
| 10 Year | 2.317% | 10 Year | 2.929% |
| 30 Year | 2.398% | 30 Year | 3.107% |
US Economic Data
| 8:30 AM | Change in Nonfarm Payrolls, Apr est 192k (103k prior) |
| Change in Private Payrolls, Apr est 190k (102k prior) | |
| Change in Manufact. Payrolls, Apr est 20k (22k prior) | |
| Unemployment Rate, Apr est 4.0% (4.1% prior) | |
| Underemployment Rate, Apr (8.0% prior) | |
| Average Hourly Earnings MoM, Apr est 0.2% (0.3% prior) | |
| Average Hourly Earnings YoY, Apr est 2.7% (2.7% prior) | |
| Average Weekly Hours All Employees, Apr est 34.5 (34.5 prior) | |
| Labor Force Participation Rate, Apr est 62.9% (62.9% prior) |
Canadian Economic Data
| 10:00 AM | Ivey Purchasing Managers Index SA, Apr (59.8 prior) |
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