Market Update Tsys trading higher, rising after ECB decision to end QE in Dec yet leave rates unch until summer 2019, US 10Y 2.937% (-3.1bps). Bunds reversed earlier losses, the Sep bund spiking to intra-day high 160.32, thou the contract has since backed off. EUR/USD initially rallied on the ECB taper (15bln from Sep-Dec from 30bln) but reversed sharply lower on dovish pledge to hold rates unch. Bund yields 3-4bps lower, 10Y 0.45% at a one week low. ECB press conference at 8:30 along with US Retail Sales and Import Prices. Stocks higher, S&P futures +6.5, crude higher (66.88 +0.24). GOCs higher, in line with tsys after ECB, Can/US 2Y which rallied 3bps post FOMC back to only marginally tighter , -62.5bp, indicating Can outperformance may be stretched at this point. Provis closed yest 0.5bps tighter on no supply, City of Montreal 10Y @ 85 (QCs +25) well received.
News headlines
Powell Solves Some Fed Policy Mysteries, Plot Thickens on Others (Bloomberg) Jerome Powell gave Federal Reserve-watchers some meaningful answers on Wednesday. He also left them scratching their heads over ever-bigger questions. Federal Reserve Chairman Jerome Powell signaled growing optimism on the U.S. economy while trying to reassure investors that the central bank would not derail the country’s second-longest expansion by aggressively tightening monetary policy. Fed officials on Wednesday raised interest rates by a quarter point for the second time this year and upgraded their median forecast to four total increases in 2018, as unemployment falls and inflation overshoots their 2 percent target earlier than previously projected
ECB says its massive bond-buying program will likely end in December (CNBC) The bank said Thursday that if incoming data followed its forecasts, then its monthly bond purchase program would be extended through to the final quarter of the year.Until now, this quantitative easing (QE) program was scheduled to last until September, carrying monthly purchases of 30 billion euros ($35 billion) of government and private debt.This will now be reduced to 15 billion euros during the last three months of 2018.
China urges U.S. to make ‘wise choice’ ahead of tariffs decision (Reuters) China urged the United States on Thursday to make a “wise decision” on trade, saying it was ready to respond in case Washington chose confrontation, as U.S. President Donald prepares to decide whether to activate tariffs on Chinese goods. Trump is due to unveil revisions to his initial tariff list targeting $50 billion of Chinese goods on Friday. People familiar with the revisions said the list would be slightly smaller than the original, with some goods deleted and others added, particularly in the technology sector.
China’s Economy Is Slowing Just as Trump Readies a Trade Beating (BLoomberg) China’s economy fell short of expectations and its central bank chose not to follow the Federal Reserve in raising borrowing costs, adding fresh caution on the outlook for global growth as trade tensions with the U.S. escalate. etail sales grew by 8.5% year-over-year in April, making for the weakest reading since June 2003, according to National Bureau of Statistics data released Thursday. Fixed asset investment, industrial output, and mining output also fell short of expectations.
U.S. energy firms chasing oil price rally stumble on old baggage (Reuters) With oil price recovery taking hold, several U.S. oil and gas companies entered 2018 with a compelling plan – sell undeveloped or less essential fields and invest the money to boost returns from their sweetest, most productive spots.
Euro goes up as ECB prepares to wind down (Reuters) The euro rose to its highest in a month but world stocks wilted on Thursday, as the European Central Bank prepared to pull the plug on its 2.55 trillion-euro, three-year stimulus program.
Overnight markets
Overview: US 10yr note futures are up 0.197% at 119-14, S&P 500 futures are up 0.35% at 2788.75, Crude oil futures are up 0.68% at $67.09, Gold futures are up 0.78% at $1311.4, DXY is up 0.33% at 93.856, CAD/USD is up 0.04% at 0.7699.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.93% | 2 Year | 2.561% |
| 5 Year | 2.154% | 5 Year | 2.814% |
| 10 Year | 2.291% | 10 Year | 2.944% |
| 30 Year | 2.307% | 30 Year | 3.057% |
US Economic Data
| 8:30 AM | Retail Sales Advance MoM, May 0.8% est 0.4% (0.3% prior) |
| Retail Sales Ex Auto MoM, May 0.9% est 0.5% (0.3% prior) | |
| Retail Sales Ex Auto and Gas, May 0.8% est 0.4% (0.3% prior) | |
| Import Price Index MoM, May 0.6% est 0.5% (0.3% prior) | |
| Import Price Index ex Petroleum MoM, May 0.1% (0.1% prior) | |
| Import Price Index YoY, May 4.3% est 3.9% (3.3% prior) | |
| Export Price Index MoM, Apr 0.6% est 0.3% (0.6% prior) | |
| Export Price Index YoY, Apr 4.9% (3.8% prior) | |
| Initial Jobless Claims, June 9th 218k est 223k (222k prior) | |
| Continuing Claims, June 2nd 1697k est 1732k (1741k prior) |
Canadian Economic Data
| 8:30 AM | New Housing Price Index MoM, Apr 0.0% est 0.0% (0.0% prior) |
| New Housing Price Index YoY, Apr 1.6% est 1.7% (2.4% 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