Market Update Tsys slightly lower, curve steeper, 10Y 2.977%, on average volume in TY futures. USD index lower for a third day, equities higher (S&P fut +3), crude firmer. Fed pres Mester had a positive outlook for the US economy, inflation likely to move higher, gradual rate hikes means 3 or 4 this year. Stock futures giving up early gains from Trump’s announcement on possible deal with Chinese telecom firm ZTE. Core Euro bonds lower, 10Y bund yield at a three week high 0.59%, hawkish comments from ECB Villeroy saying end of QE approaching, timing of first rate hike nearer, inflation slowdown is temporary. GOCs are lower, slightly wider vs tsys, with the 10Y back @ 2.40% pre Cda employment level. Provis unch , spds narrowing 3-4bps last week on ‘risk on’ & higher GOC yields. Notably the Ontario 48/27 curve narrowed 0.5bps last week despite significant flattening in the underlying 10s30s Cda curve, demand for long provis picking up going into month end extensions. This was a trade we highlighted in our provi comment sent last week. CMB 10Y deal this week as well as 5YR FRN.
News headlines
Trump, Xi Ease Trade Tensions With ZTE, Qualcomm Reversals (Bloomberg) The U.S. and China signaled a desire to avoid a costly trade war after President Donald Trump offered a lifeline to beleaguered telecom equipment maker ZTE Corp. and China’s Xi Jinping dispatched his top economic adviser to Washington. Vice Premier Liu He — who is Xi’s top aide for economic matters — will travel Tuesday to the U.S. for trade talks with Treasury Secretary Steven Mnuchin, the Chinese Ministry of Foreign Affairs said Monday in Beijing.
Pompeo Says U.S. Can Send ‘Capital’ to North Korea Once Nukes Go (Bloomberg) The U.S. is ready to allow investments in North Korea once it has verifiable proof of the Asian nation’s denuclearization, two of President Donald Trump’s top national security officials said. “We’re prepared to open the trade and investment with North Korea as soon as we can,” National Security Adviser John Bolton said on ABC’s “This Week,” one of two appearances on Sunday political shows.
Here’s Why Trump Is Looking to Seal a New Nafta Deal Soon (Bloomberg) Trade negotiators meet their target dates about as often as meteorologists accurately predict the weather. But the Trump administration will soon bump against a deadline that will determine the fate of its Nafta plans. When he started negotiations on a new North American Free Trade Agreement last year, President Donald Trump invoked a legislative process called trade-promotion authority, a measure to ease the passage of trade deals by Congress. It allows him to seek a simple yes-or-no vote by lawmakers on an updated pact with Mexico and Canada. In exchange, the administration must clear a series of steps designed to build support among politicians.
Europe Stocks Retreat With Bonds; Futures Climb: Markets Wrap (Bloomberg) European stocks retreated with bonds, and the euro climbed toward its highest in two weeks. Futures pointed to an advance in U.S. equities as trade tensions between the world’s two biggest economies showed signs of abating. Banking and technology shares pulled the Stoxx Europe 600 Index lower as investors weighed ongoing Brexit turmoil and Italy’s struggles to form a government. Sovereign bonds on both sides of the Atlantic retreated with the dollar. The euro climbed after a senior European Central Bank official said the first rate hike could come quarters, not years after the end of asset purchases. Most Asian markets advanced and emerging-market stocks built on their first weekly advance in four weeks.
Canada’s Trudeau remains optimistic on trade deal with U.S. (Reuters) Canadian Prime Minister Justin Trudeau is optimistic that a new NAFTA trade deal with the United States can be reached and that a solution on U.S. tariffs for steel and aluminum imports can be found, he told German newspaper Handelsblatt. “We are working hard to reach an agreement on the NAFTA free-trade agreement and possibly also on the question of tariffs and quotas on aluminum and steel,” Trudeau said in a pre-release excerpt from an interview to be published by the German daily on Monday.
Trump outlines ‘sweeping’ drug price reduction plan (BNN) President Donald Trump’s plan to lower U.S. drug prices avoids some of the harshest steps that the pharmaceutical industry and the network of companies that distribute its products feared. Calling his proposal the most sweeping attempt in U.S. history to lower drug prices, Trump wants to increase competition for medicines, cut list prices and reduce patients’ out-of-pocket costs. Yet it also preserves –and in some cases expands — the role of the pharmacy middlemen the administration has blamed for many problems with drug costs.
Overnight markets
Overview: US 10yr note futures are down -0.079% at 119-10, S&P 500 futures are up 0.14% at 2733.25, Crude oil futures are up 0.17% at $70.82, Gold futures are down -0.11% at $1319.3, DXY is down -0.24% at 92.313, CAD/USD is down -0.29% at 0.7838.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.972% | 2 Year | 2.535% |
| 5 Year | 2.224% | 5 Year | 2.845% |
| 10 Year | 2.4% | 10 Year | 2.981% |
| 30 Year | 2.425% | 30 Year | 3.115% |
US Economic Data
| 05/14-05/18 | Mortgage Delinquencies, 1Q (5.17% prior) |
| MBA Mortgage Foreclosures, 1Q (1.19% prior) |
Canadian Economic Data
| 8:30 AM | Teranet/National Bank HP Index, Apr (218.96 prior) |
| Teranet/National Bank HPI MoM, Apr (0.0% prior) | |
| Teranet/National Bank HPI YoY, Apr (6.6% prior) | |
| 10:00 AM | Bloomberg Nanos Confidence, May 11th (58.0 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