Market Update Tsys trading lower, yields 0.5-1bp higher with longs outperforming, avg volume in TY futures (30k), 10Y 2.835 (+0.7bps). Equities firmer (S&P fut +11) – Morgan Stanley +2.0% pre-mkt after Q1 eps beat est ($1.45 vs $1.25), gold higher, crude 1.4% higher @ 67.47 close to the highs of last week after API showed surprise drop in US inventories. Core EGBs mixed – gilts higher , steeper on drop in UK Mar CPI. GOCs lower in line with tsys – BOC not expected to raise rates today, yet updated forecasts for growth & inflation expected to inject a level of hawkishness into the mix, with Poloz likely to signal at least a couple more hikes in are in the cards for this year, particularly as the trade picture seems to be improving. Provis reacting as expected to positive tone in risk mkts – another 0.5bps tighter yest, opening 0.5bps tighter this morn. Ontario spds narrower despite Moody’s downgrade yest which was expected. In corps – BAC priced 2 tranche maple yest – $500mln 4Y FRN @ CDOR+52 & $1bln 6Y fixed-floater @ 118.6. Both tracnhes looked cheap, 3-4bp concesssion on the fixed, and we would highlight the relative cheapness of the existing May 22 sub FRNs @ ~90. Kruger Products (BBL) priced $125mln 6% 7NC3 @ 379 which broke $1.00 higher on the break.
News headlines
Trump Confirms CIA Chief Pompeo Met North Korea’s Kim Last Week (Bloomberg) CIA Director Mike Pompeo traveled to North Korea last week to meet with Kim Jong Un in advance of a possible summit on denuclearization, President Donald Trump said. « Meeting went very smoothly and a good relationship was formed,” Trump said in a Twitter posting Wednesday morning. “Details of Summit are being worked out now. Denuclearization will be a great thing for World, but also for North Korea! »
U.K. Inflation Drops More Than Expected to Slowest in a Year (Bloomberg) U.K. inflation slowed to the weakest in a year in March, raising questions about how quickly the Bank of England will increase interest rates. Consumer prices rose 2.5 percent from a year earlier, down from 2.7 percent in February, the Office for National Statistics said on Wednesday. That’s less than economists estimated and below the BOE’s most recent forecast of 2.8 percent for the same period. Core inflation cooled to 2.3 percent, also the lowest rate in a year.
Oil Rallies as Drop in U.S. Inventories Adds to Political Risks (Bloomberg) Crude rose as the drop in U.S. inventories reported by an industry group helped to sustain a rally spurred by geopolitical risks. Futures in New York rose as much as 1 percent while Brent gained to within a dollar of last week’s three-year high. U.S. crude and gasoline inventories fell last week, the American Petroleum Institute was said to report on Tuesday, in contrast to forecasts for a build in U.S. government data later. OPEC and Russia will probably look at ways to prolong their cooperation on cuts when they meet in Saudi Arabia this week.
U.S. Stock Futures Climb on Earnings, Geopolitics: Markets Wrap (Bloomberg) U.S. stock futures rose, extending gains a third day as investors took heart from a solid start to the earnings season and signs of improving relations between America and North Korea. The pound slumped and euro briefly dropped on disappointing inflation data. The U.S. gains followed sweeping increases across Asian equities, though shares in Europe fluctuated in the wake of a jump on Tuesday. The dollar strengthened as many of its major peers had a bad day, with the Swiss franc deepening declines and Europe’s common currency wobbling after euro-area inflation data was revised downward. Sterling dropped as U.K. price growth slowed to the weakest level in a year. Treasuries edged lower and European bonds were mixed.
Teamsters Canada notifies Canadian Pacific of possible strike (Reuters) Teamsters Canada said early on Wednesday it has notified Canadian Pacific Railway that workers will go on strike starting April 21 following a stalemate in negotiations between the two parties. Teamsters Canada, which is affiliated to the International Brotherhood of Teamsters union, said it has issued railway operator Canadian Pacific with a formal 72 hours notice of intent to strike. Canadian Pacific was not immediately available for comment outside business hours.
Futures rise ahead of Bank of Canada’s rate decision (Reuters) The central bank is widely expected to hold the rate steady at 1.25 percent when it announces its decision at 10:00 a.m. ET. June futures on the S&P TSX index were up 0.38 percent at 7:15 a.m. ET. Canada’s main stock index rose to a 12-day high on Tuesday as technology and energy shares climbed and domestic data showed a stronger-than-expected gain for manufacturing sales. Dow Jones Industrial Average e-mini futures rose 0.35 percent at 7:15 a.m. ET, while S&P 500 e-mini futures were up 0.39 percent and Nasdaq 100 e-mini futures were 0.37 percent higher.
Poloz to set tone for future rate increases (BNN) Almost nobody expects Bank of Canada Governor Stephen Poloz to increase interest rates at a policy decision Wednesday, but attention will turn to clues for the timing of the next hike as the central bank tries to steer an economy that’s beginning to run up against capacity. All but two of the 23 economists surveyed by Bloomberg, including those from the country’s largest banks, predict the benchmark interest rate will remain unchanged at 1.25 per cent. The central bank will also release new quarterly forecasts along with its decision at 10 a.m. in Ottawa, followed by an 11:15 a.m. press conference by Poloz and Senior Deputy Governor Carolyn Wilkins.
Overnight markets
Overview: US 10yr note futures are down -0.143% at 120-13, S&P 500 futures are up 0.43% at 2718.25, Crude oil futures are up 1.47% at $67.5, Gold futures are up 0.27% at $1353.2, DXY is up 0.03% at 89.54, CAD/USD is up 0.18% at 0.7953.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.9% | 2 Year | 2.402% |
| 5 Year | 2.124% | 5 Year | 2.697% |
| 10 Year | 2.264% | 10 Year | 2.836% |
| 30 Year | 2.354% | 30 Year | 3.021% |
US Economic Data
| 7:00 AM | MBA Mortgage Applications, Apr 13th 4.9% (-1.9% prior) |
| 14:00 PM | U.S. Federal Reserve Releases Beige Book |
Canadian Economic Data
| 10:00 AM | Bank of Canada Rate Decision, Apr 18th est 1.25% (1.25% 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