Market Update

Tsys rising off the lows after disappointing Apr Housing Starts (-2.6% vs 3.7% exp) rallying o/n on risk-off bid related to latest Trump news on Russia, US 10Y fell to 2.32% before the pullback in Europe, now 2.36% (+1bp). The USD index lower for a third day, crude extending gains up another 0.68% @49.18. EGBs lower, bund curve 1.5bps steeper, supply a factor with France OAT 30Y syndication & UK 40Y gilt. In Canada, GOCs slightly lower, curve unch – GOC 10s30s @65.6bps  continuing steepening trend before tomorrow’s 30Y reopening – $1.2bln Dec 48s, long rolls close to recent wides, the 48/45 -3.2bps, 45/41 2bps.  Provis trading up in longs, Ont 48/27 curve unch @ 10.2. In corps  after the successful Pepsico 7Y two weeks back and AB Inbev maple last week, UPS (A1/A+) priced a $750mm  7Y @ 87 (C24 +86.7) which broke 3bps tighter . Transcanada trust issued CAD $1.5bln (upsized from $1.25bln) in 60YNC10 @ 4.65%.  Recall that back in Feb TRP issued a similar structure in USD @ T10 + 293bps or 5.3%. This bond is currently trading 240/230 which comes back to CAD @ GOCs + 272 or 4.31% – so 4.65% looked to be fairly generous concession.

 News headlines 

Euro Soars Amid Trump Concerns; Oil Extends Gain: Markets Wrap (Bloomberg) The dollar weakened for a fifth day and the euro surged to the highest since November after a report U.S. President Donald Trump revealed classified information to Russia’s top diplomat. Crude extended gains as confidence grew that output cuts will be extended. The dollar fell against most of its major peers after the Washington Post reported the president last week shared closely-held intelligence with Russia’s foreign minister and ambassador.

Oil Jumps as Saudis, Russia Favor Extending Output Deal to 2018 (Bloomberg) Futures closed at their highest in more than two weeks. While output curbs that started Jan. 1 are working, global inventories aren’t yet at the level targeted by OPEC and its allies, Saudi Energy Minister Khalid Al-Falih said Monday in Beijing alongside his Russian counterpart, Alexander Novak. The ministers agreed the deal should be extended through the first quarter of 2018 at the same volume of reductions, they said.

Europe car sales drop 6.8 percent in April on VW, British slump: ACEA (Reuters) European car sales fell 6.8 percent in April due to a fall in demand for Volkswagen-branded (VOWG_p.DE) cars, fewer trading days during Easter, and thanks to a double-digit sales drop in Britain, industry figures published on Tuesday showed.

Japan’s Abe reaffirms conviction that TPP benefits Asia-Pacific (Reuters) Japanese Prime Minister Shinzo Abe’s conviction that a Trans-Pacific Partnership (TPP) pact will help bring prosperity to the Asia-Pacific region is unaltered, he said on Tuesday. After U.S. President Donald Trump pulled out of the 12-nation pact, Japan has been exploring options to revive the pact without the United States, hoping it can eventually convince Trump to reconsider.

Canadian small business lending little changed in March: PayNet (Reuters) Lending to small Canadian businesses was little changed in March compared to the month before, though borrowing by medium-sized companies jumped as they benefited from a recovery in the energy sector, data showed on Tuesday. The PayNet Small Business Lending index inched up to 118.0 in March from 117.9 in February, while the index for medium businesses rose to 243.1 from 232.6.

Ford to cut North America, Asia salaried workers by 10%, source says (FinancialPost) Ford Motor Co plans to shrink its salaried workforce in North America and Asia by about 10 per cent as it works to boost profits and its sliding stock price, a source familiar with the plan told Reuters on Monday. A person briefed on the plan said Ford plans to offer generous early retirement incentives to reduce its salaried headcount by Oct. 1, but does not plan cuts to its hourly workforce or its production.

Overnight markets 

Overview: US 10yr note futures are down -0.012% at 125-14, S&P 500 futures are up 0.18% at 2402.75, Crude oil futures are up 0.84% at $49.26, Gold futures are up 0.44% at $1235.4, DXY is down -0.57% at 98.347, CAD/USD is down -0.19% at 0.7349.

US Economic Data

8:30 AM Housing Starts, Apr, 1172k, est. 1260k (prior 1215k, revised 1203k)
Housing Starts, m/m, Apr, -2.6%, est. 3.7% (prior -6.8%, revised -6.6%)
Building Permits, Apr, 1229k, est. 1270k (prior 1260k, revised 1260k)
Building Permits, m/m, Apr, -2.5%, est. 0.2% (prior 3.6%, revised 3.4%)
9:15 AM Industrial Production, m/m, Apr, est. 0.4% (prior 0.5%)
Capacity Utilization, Apr, est. 76.3%  (prior 76.1%)
Manufacturing Production, Apr, est. 0.4% (prior -0.4%)
10:00 AM MBA Mortgage Foreclosures, 1Q, (prior 1.53%)
Mortgage Delinquencies, 1Q, (prior 4.80%)

Canadian Economic Data 

There is no economic news release today.


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