Market Update

Tsys slightly lower on avg vol in TY1 futs, 10Y 2.333 (+0.7bps), curve steeper with longs underperforming – little reaction to weaker May Empire Man (-1 vs 7.5). Early risk off bid on North Korea missile launch faded, crude sharply higher as OPEC looks to extend prod cuts. EGBs lower, gilt/bund yields 2-3bps higher, bund/tsy 10Y spread at new lows. Expectations for a new 30Y OAT issue to be launched sometime in the near future (MNI) weighing on long end of EGB curves. GOCs lower, underperforming tsys by 1bp in 5s, 10s. CAD rallying along with crude @ 1.3612 . Provis under pressure after spds widened 2-3bps last week, 10s30s Ont ~0.5bps wider. Moodys downgrade of the banks last week put pressure on spds, moreso on lower rated sub debt NVCC.

News headlines 

Oil Jumps With Commodity Currencies on Output Deal: Markets Wrap (Bloomberg) Crude rallied on the prospect a deal to cut global supply will be extended, leading a broader advance across commodities and spurring the currencies of major exporters. Miners and energy shares gained in Europe as most other stocks fell.

China’s economy loses momentum as policymakers clamp down on debt risks (Reuters) China’s growth took a step back in April after a surprisingly strong start to the year, as factory output to investment to retail sales all tapered off as authorities clamped down on debt risks in an effort to stave off a potentially damaging hit to the economy.

UK employers plan smallest pay rises since 2013: survey (Reuters) British employers plan to increase pay at the weakest rate since 2013, a survey showed on Monday, offering poor prospects for British households already strained by higher inflation since last year’s Brexit vote.

Home Capital’s Unique Troubles Are Contained, BOC’s Poloz Says (Bloomberg) Bank of Canada Governor Stephen Poloz said Home Capital Group Inc.’s troubles are unique to the mortgage lender and that he sees no evidence they’re spreading to other parts of the country’s financial system.

China central bank’s net FX sales fall to nearly two-year low in April (Reuters) Net foreign exchange sales by China’s central bank fell to the lowest in nearly two years in April as capital outflows eased in the face of strict regulatory curbs and a pause in the dollar’s rally.

Toronto’s Rent Control Risks Stoking the Red-Hot Housing Market (Bloomberg) Toronto’s trying to make it more affordable to rent in one of the world’s hottest housing markets. New measures may have the opposite effect. Ontario’s government is set to impose the most sweeping rent controls in a quarter century, linking annual increases to inflation, with a cap of 2.5 percent, on all buildings as it tries to keep costs under control. The measure, meant to protect tenants from price gouging, could end up making it more — not less — expensive to rent in North America’s fourth biggest city.

Bell targets cord-cutters with new ‘Alt TV’ service (TheGlobeAndMail) This may be the new golden age of television, but the number of Canadians actually subscribing to TV services has been steadily declining. BCE Inc. is trying to push back on that trend with a cheaper, app-based service that offers live television without the frills of a traditional set-top box experience.

Overnight markets 

Overview: US 10yr note futures are up 0.012% at 125-16, S&P 500 futures are up 0.16% at 2392.5, Crude oil futures are up 3.49% at $49.51, Gold futures are up 0.6% at $1235.1, DXY is down -0.42% at 98.831, CAD/USD is down -0.79% at 0.7352.

US Economic Data

8:30 AM Empire Manufacturing, -1.0, est. 7.5 (prior 5.2)
10:00 AM NAHB Housing Market Index, May, est. 68 (prior 68)
16:00 AM Total Net TIC Flows, Mar, (prior $19.3b)
  Net Long-Term TIC Flows, Mar, (prior $53.4b)

Canadian Economic Data

9:00 AM Existing Home Sales, m/m, Apr (prior 1.1%)
10:00 AM Bloomberg Nanos Confidence, May 12, (prior 59.0)


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