Market Update US tsys slightly higher on avg volume (295k TY fut), 10Y 2.96 (-0.5bps), tsy curve unch after yesterday saw 2s/10s flatten to 40bps the narrowest since 2007. Relatively quiet day data wise with import prices & U. Michigan Sent, Fed Bullard speaks on economy this morn. Equities higher, S&P fut +5, crude unch 71.37. Core EGBs giving up early gains, 10Y gilt slightly lower, 1.435% (+0.5bps), bund curve 1bp flatter. GOCs slightly lower before April Employment data – 20k increase exp after 32.3k in March, Can/US spreads wider going into the data 3-6 bps wk/wk, notably flattening in 10s30s ~5bps over the week, 10s 5bps cheaper on the 2s30s butterfly, the equivalent tsy butt unchanged on the week. In corps 3 deals yest including a Morguard 3Y @200 (4x oversubscribed) which broke 10bps tighter and BP Capital 7Y maple @113. Consider the Morguard credit curve still fairly steep after the repricing yest, the 18s ~90bps, so 30bps/yr. Ontario & BC 2028 deals yesterday both trading 0.5bps inside of issue , Ont 28s 64.5/64.
News headlines
U.S. Congress Needs Notice of Nafta Deal by Next Week, Ryan Says (Bloomberg) Paul Ryan says he needs notice of a Nafta deal by May 17 if the current Congress is going to be able to vote on it, suggesting talks are pushing up against the constraints of American trade law. The House Speaker, in remarks delivered Wednesday in Washington, said U.S. Trade Promotion Authority regulations mean next week is a deadline for the Trump administration if it wants to pass a new North American Free Trade Agreement before a new Congress is sworn in.
Trump Heads Into Kim Summit Adept at Breaking Not Making Deals (Bloomberg) Donald Trump has spent his presidency breaking deals he inherited, confident he could do better. So far, it hasn’t worked. Now, as he games out a historic summit with North Korea’s Kim Jong Un in Singapore next month, Trump is gambling he can do just the opposite: construct a complicated pact to dismantle Pyongyang’s nuclear program.
Italy Finally Falls to the Forces of Populism (Bloomberg) First came Brexit, then Donald Trump, and now the rebellion by angry voters has landed its biggest blow on continental Europe. Italy, the most indebted member of the euro region to avoid a bailout during the European debt crisis, has succumbed to the forces of nationalism and protectionism that emerged over the past two years as the biggest threat to the political order.
Global Stocks Mixed as Rates in Focus; Oil Steady: Markets Wrap (Bloomberg) European stocks struggled for traction even as U.S. equity futures rose and Asian peers jumped after easing inflation in the world’s biggest economy removed some pressure from the Fed to step up the pace of monetary tightening. The dollar slipped after dropping the most since March on Thursday. The Stoxx Europe 600 Index fluctuated, but still headed for its seventh week of increases, the longest streak in more than three years. Declines in the healthcare sector — weighed on by a string of negative drug-trial results and some stocks trading ex-dividend — offset gains for real estate and basic resources. U.S. 10-year Treasury yields held below 3 percent. Oil was steady around a three-year high, heading for a second week of gains after the U.S. pulled out of the Iran nuclear deal.
Canada new home prices unchanged in March; Toronto slips (Reuters) Canadian new home prices were unchanged in March, as expected, as higher prices in Ottawa were offset by a weaker Toronto market, data from Statistics Canada showed on Thursday. Prices in Toronto fell 0.3 percent, the third monthly decrease in a row, after provincial government measures taken last year to rein in the city’s hot market. Tighter mortgage rules that came into effect at the start of 2018 and three interest rate increases from the Bank of Canada have also helped cool the country’s housing market. Markets expect the central bank to hike rates again this summer, which could put additional pressure on highly indebted consumers.
TSX futures rise on strong commodity prices (Reuters) Canada’s main stock index futures edged higher on Friday, helped by strong commodity prices on the back of a weaker U.S. dollar. June futures on the S&P TSX index SXFc1 were up 0.19 percent at 7:45 a.m. ET. Employment change data for April is due at 8:30 a.m. ET The Toronto Stock Exchange’s S&P/TSX .GSPTSE rose 48.69 points, or 0.31 percent, to 15,959.50.
Air Canada pounces on WestJet ‘uncertainty’ amid strike threat (BNN) Air Canada is aiming to cash in as its main rival braces for the possibility of a walkout by its pilots. “Travellers who may be concerned about the uncertainty resulting from WestJet’s strike vote mandate can book Air Canada with confidence,” Air Canada said in a release Thursday afternoon, less than a half hour after the Air Line Pilots Association said in a tweet 91 per cent of its WestJet members voted to authorize a strike.
Feds, Quebec team up with Apple, Alcoa, Rio Tinto on carbon-free aluminum smelting (BNN) Aluminum giants Alcoa Inc. (AA.N) and Rio Tinto Group (RIO.N) are teaming up with Apple Inc. () and the federal and Quebec governments to commercialize the world’s first carbon-free aluminum smelting process. Described by the companies as the most significant innovation in the aluminum industry in 100 years, the new process eliminates greenhouse gas emissions from traditional smelting by instead producing oxygen.
Overnight markets
Overview: US 10yr note futures are up 0.039% at 119-14, S&P 500 futures are up 0.15% at 2722.75, Crude oil futures are down -0.01% at $71.35, Gold futures are up 0.21% at $1325.1, DXY is down -0.15% at 92.512, CAD/USD is down -0.27% at 0.7854.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.984% | 2 Year | 2.533% |
| 5 Year | 2.238% | 5 Year | 2.831% |
| 10 Year | 2.408% | 10 Year | 2.962% |
| 30 Year | 2.437% | 30 Year | 3.107% |
US Economic Data
| 8:30 AM | Import Price Index MoM, Apr est 0.5% (0.0% prior) |
| Import Price Index ex Petroleum MoM, Apr 0.2% (0.1% prior) | |
| Import Price Index YoY, Apr est 3.9% (3.6% prior) | |
| Export Price Index MoM, Apr est 0.4% (0.3% prior) | |
| Export Price Index YoY, Apr (3.4% prior) | |
| 10:00 AM | U. of Mich. Sentiment, May est 98.3 (98.8% prior) |
| U. of Mich. Current Conditions, May (114.9 prior) | |
| U. of Mich. Expectations, May (88.4 prior) | |
| U. of Mich. 1 Yr Inflation, May (2.7% prior) | |
| U. of Mich. 5-10 Yr Inflation, May (2.5% prior) |
Canadian Economic Data
| 8:30 AM | Net Change in Employment, Apr est 20.0k (32.3k prior) |
| Unemployment Rate, Apr est 5.8% (5.8% prior) | |
| Hourly Earnings Permanent Empl YoY, Apr est 3.2% (3.1% prior) | |
| Full Time Employment Change, Apr est 16.8 (68.3 prior) | |
| Part Time Employment Change, Apr est 12.0 (-35.9 prior) | |
| Participation Rate, Apr est 65.5 (65.5 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