Market Update Tsys trading higher, US 10Y 2.91 (-3.5bps), on heavy volume in TY futures (440k), following core EGBs higher on renewed weakness in Euro peripherals, Italy 2Y 22bps higher. Gilts trading mixed, curve flatter, UK service PMI surprising to the upside for May, 54 vs 53 exp. GOCs higher, slightly lagging the rally in tsys, , long end trading heavy so far.. 10s30s close to 5bps. A new P3 issue just announced – Montreal Ring Road Project -$1.2bln in 4 tranches.
News headlines
Trump Said to Plan Meeting With GOP Concerned on China Stance (Bloomberg) President Donald Trump plans to meet Tuesday with Senate Republicans concerned about restrictions he’s weighing on Chinese investments in the U.S., two people familiar with the matter said. The meeting, called by the administration, includes Senate Majority Whip John Cornyn of Texas and Mike Crapo of Idaho, the chairman of the Banking, Housing and Urban Affairs Committee, according to the people. The lawmakers want to discuss Trump’s 301 investigation into Chinese violations of intellectual-property rights that has prompted U.S. threats of tariffs on imports of a range of products from the world’s second-largest economy, they said.
European Central Bank Boosts Purchases of German Bonds (Bloomberg) The European Central Bank’s buying of German bonds surged in May to a record relative to the so-called capital key, a guideline that dictates purchases corresponding to the size of a country’s economy. The share of Italian and French securities bought dropped below the capital key, but the shift in purchase patterns was due to technical factors rather than the recent sell-off in Italian debt, the ECB said.
BOE Gets Big Signal U.K. Economy Is Starting to Bounce Back (Bloomberg) The biggest part of the U.K. economy grew more than forecast in May, backing up the Bank of England’s view that a recent slump was temporary and keeping it on track for a rate hike in the summer. A measure of services jumped to a three-month high of 54 from 52.8, beating the reading of 53 predicted in a Bloomberg survey. Taken with manufacturing and construction, it suggests the economy is on course for growth of 0.3 to 0.4 percent this quarter, said IHS Markit, which publishes the indexes. Expansion slowed to just 0.1 percent in the first three months of the year.
Futures Point to Higher U.S. Open; Crude Declines: Markets Wrap (Bloomberg) U.S. futures pointed to a higher open on Tuesday, tracking gains in Europe as investors tried to keep the recent risk-on mood going. Amid trade headlines and political risks some caution was on show, however, and Treasuries rose while Italian bonds fell. Contracts for the S&P 500 signaled the underlying gauge will extend gains following its highest finish since mid-March, though momentum looks set to ease. After a shaky start the Stoxx Europe 600 Index advanced for a third day with technology companies and automakers leading the way. Italian bonds were poised for the first retreat since they blew up a week ago as Prime Minister Giuseppe Conte pledged in his maiden speech to pursue a program of fiscal expansion.
Canada vows to protect metals sector but resists call for quick action (Reuters) Canada’s government vowed on Monday to do all it could to protect its steel and aluminum sectors from U.S. tariffs but sidestepped an industry call to strike back quickly, saying it needed time to study the issue. President Donald Trump’s administration last week imposed U.S. tariffs of 25 percent on steel and 10 percent on aluminum from Canada – the No. 1 steel exporter to the United States – as well as on Mexico and the European Union.
Tech stocks on a tear as FAANGs and BATTS bite (Reuters) World tech stocks hit a record high on Tuesday, spurred on by a new all-time peak for Apple, a 17-year top for European tech firms and news that Twitter and Netflix were set to join Wall Street’s flagship S&P 500 index. MSCI’s global tech index .dMIWO0IT00PUS scored the milestone after the FAANGs — Facebook, Apple, Amazon, Netflix and Google — drove the technology-heavy Nasdaq to a new closing high in New York on Monday.
Canadian oil has record day after Enbridge scraps new rules (BNN) Canadian crude surged by the most ever after Enbridge Inc. said it won’t implement a new procedure to stop shippers from claiming more space than they can use on a key pipeline linking Alberta’s oil sands with U.S. refineries. Western Canadian Select jumped as much as US$12.20 a barrel to US$13.80 below the U.S. benchmark Monday, the narrowest spread since May 16. Canadian crudes have weakened to historically low levels in recent weeks as growing production overwhelms available pipeline capacity to transport Alberta’s supplies south of the border.
‘Mother Nature’ driving Vancouver, Toronto housing: Stephen Poloz (BNN)After years of hand-wringing over foreign investment in Canada’s most-scrutinized housing markets, Bank of Canada Governor Stephen Poloz argues fundamentals are at work as prices climb back in Vancouver and Toronto.“A year-and-a-half ago we had the changes in the Vancouver market and there was an initial effect and then a bounce back, and that just shows you that Mother Nature is still there – that the fundamentals for housing remain quite strong,” Poloz said in an interview with BNN Bloomberg late Friday in Whistler, B.C.
Overnight markets
Overview: US 10yr note futures are up 0.17% at 119-23, S&P 500 futures are up 0.11% at 2748.5, Crude oil futures are down -0.77% at $64.25, Gold futures are down -0.15% at $1295.3, DXY is up 0.08% at 94.111, CAD/USD is up 0.44% at 0.77.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.917% | 2 Year | 2.492% |
| 5 Year | 2.117% | 5 Year | 2.762% |
| 10 Year | 2.249% | 10 Year | 2.913% |
| 30 Year | 2.293% | 30 Year | 3.062% |
US Economic Data
| 9:45 AM | Markit US Services PMI, May est 55.7 (55.7 prior) |
| Markit US Composite PMI, May (55.7 prior) | |
| 10:00 AM | JOLTS Job Openings, Apr est 6350 (6550 prior) |
| ISM Non-manf. Composite, May est 57.6 (56.8 prior) |
Canadian Economic Data
| 8:30 AM | Labor Productivity QoQ, 1Q (0.2% 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