Market Update

US tsys giving up slight gains on much firmer Apr core PPI – 0.7% vs 0.2% exp , while claims fell to 236k vs 245k and cont claims at a new low 1918k -US 10Y unch @ 2.403%. EGBs lower after US data after rising on dovish BOE Carney testimony. Carney said the global outlook has improved while UK wages remain subdued, gilt curve ~1bp steeper. The US auctions $15bln in 30Y bonds at 1:00ET – yesterday’s $23bln 10Y auction was weak tailing 1.8bps with a below avg b/c.  GOCs higher, outperforming tsys  ~2bps thru the curve. Moody’s downgrade of the big six banks has undercut the CAD which is lower by 72pps despite ~4.0% gain in crude since yest.  Provis opening 0.5 – 1bp wider after closing 0.5bps tighter yest – Ont 27s 77/76 (75), Ont 48s 87.5/87 (86). QC/Ont 10Y roll tighter – 0.3/0.1, QC 27s 77/76. Quebec reopened their Oct 2024 FRN yest @ CDOR +39, the province has now funded ~2/3 of its 2018 FY borrowing program. Ontario is in the USD mkt with a new 5Y as MS +29bps, book said to be $2.5bln.

News headlines 

Europe Stocks Slip as Oil Leads Commodity Rebound: Markets Wrap (Bloomberg) European stocks drifted lower for the first time in three days as gains for mining and energy shares struggled to offset a broader mood of caution. Gold was poised to snap its six-day losing streak amid a wider commodity bounce.

Bombardier’s Pierre Beaudoin stepping down from executive role (TheGlobeAndMail) Pierre Beaudoin is stepping down as Bombardier Inc.’s executive chairman amid a mounting controversy over executive pay at the Canadian plane and train maker. Mr. Beaudoin will become non-executive chairman, the company said Thursday in advance of its annual meeting, after a revolt by several Canadian institutional investors. The move will be effective as of the end of June; Mr. Beaudoin will still chair the board, but will no longer have any management role at Bombardier, a company spokesman said.

Greece says bailout review conclusion will help outperform EU’s 2017 growth forecast (Reuters) The conclusion of Greece’s second bailout review will help the country outperform the EU Commission’s revised forecast for 2.1 percent growth this year, the country’s government spokesman said on Thursday. After six months of talks and disagreements, Greece reached a deal with its international lenders last week on the reforms it needs to implement in the coming years, paving the way for the conclusion of a crucial bailout review and the disbursement of vital fresh loans.

Fed’s Dudley says to normalize balance sheet in ‘very careful way’ (Reuters) New York Federal Reserve President William Dudley said on Thursday the U.S. central bank will normalize its balance sheet in a « very careful way », while leaving « sufficient » excess reserves in the financial system. Dudley, in a speech in Mumbai, also told the audience not to expect any « dramatic change » in monetary policy in the United States.

Moody’s downgrades credit ratings of Canada’s Big Six banks (FinancialPost) Moody’s Investors Service downgraded the credit ratings of the Big Six banks late Wednesday reflecting “expectation of a more challenging operating environment for banks in Canada for the remainder of 2017 and beyond, that could lead to a deterioration in the banks’ asset quality, and increase their sensitivity to external shocks.”

Home Capital’s high-interest accounts balance expected to fall to C$128 million (Reuters) Canada’s biggest non-bank lender Home Capital Group Inc (HCG.TO) said on Thursday its high-interest savings deposits were expected to have fallen to about C$128 million ($93 million)following the completion of Wednesday’s settlements. Deposits were expected to have fallen to about C$134 million following completion of Tuesday’s settlements.

Overnight markets 

Overview: US 10yr note futures are down -0.025% at 124-25, S&P 500 futures are down -0.19% at 2390.75, Crude oil futures are up 1.08% at $47.84, Gold futures are up 0.11% at $1220.3, DXY is up 0.11% at 99.781, CAD/USD is up 0.49% at 0.7287.

US Economic Data

8:30 AM PPI Final Demand, m/m, Apr, 0.5%, est. 0.2% (prior -0.1%)
PPI Ex Food and Energy, m/m, 0.4%, est. 0.2% (prior 0.0%)
PPI Final Demand, y/y, Apr, 2.5%, est. 2.2% (prior 2.3%)
PPI Ex Food and Energy, y/y, Apr, 1.9%, est. 1.6% (prior 1.6%)
Initial Jobless Claims, May 6, 236k, est. 245k (prior 238k)
Continuing Claims, Apr 29, 1918k, est. 1980k (prior 1964k, revised 1979k)
9:45 AM Bloomberg Consumer Comfort Index, May 7, (prior 50.9)

Canadian Economic Data 

8:30 AM New Housing Price Index, m/m, Mar, 0.2%, est. 0.2% (prior 0.4%)
New Housing Price Index, y/y, Mar, 3.3%, (prior 3.3%)


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