Market Update

Tsys higher, US 10Y 2.38 (-2bps) on above avg volume in TY futures (346k). No real reaction to stronger April import prices (0.5% vs 0.1% exp. Overnite bid in tsys on news Trump fired FBI director Comey & N. Korea missile test.  EGBS higher, bunds and gilt yields 2-3bps lower on FTQ and solid Portugal & German 5Y auctions, thou bunds weakening on  ECB Draghi comments, saying ‘things are clearly improving’ ,the economic recovery has evolved –  yet ‘substantial policy support still needed’. European stocks have recovered most of their earlier losses, S&P futs slightly higher, crude +1.3% 46.50. The US auctions $23bln in 10Y notes at noon with the 10Y 8ps higher than the previous auction in April. GOCs higher in line with tsys – steading cheapening in GOCs this week vs tsys a marked contrast to to last week’s 9bp outperformance – long end esp heavy on corp & provi issuance (ABIBB, Sask). The BOC auctions $3.9bln in 2Y notes at noon – new 0.5% Aug 19s with the 2Y roll (May/Feb 19) offered at 2.5bps vs 2.1bps at last auction which was also the low for the roll. Interpolating along the GOC curve would give a fair value for the WI at 2.2bps vs May 19s or 0.74%. Yet given that this is a new issue we would expect a concession of roughly 0.5 – 0.7 bps or WI roll closer to 2.7bps.

News headlines 

Stocks Edge Lower as Dollar Stalls; Oil Advances: Markets Wrap (Bloomberg) U.S. stock index futures slipped and the dollar’s rally faltered after Donald Trump fired FBI Director James Comey. Oil climbed following an industry report that showed American stockpiles declining for a fifth week.

Oil rises after U.S. inventories drop, but extra supplies weigh (Reuters) Oil prices rose on Wednesday after a larger-than-expected fall in U.S. crude inventories but failed to recoup last week’s losses due to concerns about rising output from the United States, Libya and Nigeria.

China April producer prices rise 6.4 pct, consumer prices up 1.2 pct (Reuters) China’s April producer price inflation cooled for a second straight month as iron ore and coal prices tumbled further, pressured by fears that domestic demand will not be strong enough to absorb surging supplies of steel.

Home Capital finds buyer for $1.5 billion in mortgages, tightens lending criteria (FinancialPost) Embattled mortgage lender Home Capital says it has entered into an arrangement with an “independent third party” that wishes to either purchase funded mortgages or take on its mortgage commitments and renewals, up to a total of $1.5 billion.

U.S. withdrawal from NAFTA is back on table: Wilbur Ross (TheGlobeAndMail) The Trump administration may tear up the North American free-trade agreement and negotiate separate deals with Canada and Mexico, President Donald Trump’s point-man on the file is warning.

RBC eyes bigger cut of U.S. banking market (TheGlobeAndMail) Royal Bank of Canada seeks to capture as much as 4.5 per cent of the $40-billion (U.S.) pool of U.S. investment-banking fees within three years as it expands operations in the world’s largest market for deal-making.

Overnight markets 

Overview: US 10yr note futures are up 0.2% at 125-03, S&P 500 futures are down -0.06% at 2391.75, Crude oil futures are up 1.26% at $46.46, Gold futures are up 0.47% at $1221.8, DXY is down -0.11% at 99.545, CAD/USD is down -0.18% at 0.7302.

US Economic Data

7:00 AM MBA Mortgage Applications, May 5, 2.4%, (prior -0.1%)
8:30 AM Import Price Index, m/m, Apr, 0.4%, est. 0.1% (prior -0.2%, revised 0.1%)
14:00 AM Monthly Budget Statement, Apr,  est. $179.0b (prior -$176.2b)

Canadian Economic Data 

There is no major economic data release 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, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230