Market Update Tsys trading slightly higher, 10Y 3.10% (-1.7bps), avg volume in TY futures. USD index reaching a new high 93.64, crude/equities slightly higher as well. Core EGBs higher led by UK gilts, safe haven bid as Italian 10Y yields hit a ten-month high 2.22% (+33bps this week) spread 10 bunds ~10bps wider, on news of a deal to form a populist coalition govt. US data calendar thin (only GDP now forecast), multiple Fed speakers. In Canada, GOCs weaker, 1.5-2bps wider vs tsys before March Retail Sales/April CPI, 10Y near yest high 2.52%. CPI expected to remain unch at 2.3% y/y, with the core also unch at 2.1%. Provincials well bid, part in longs, Mani 48 deal yest @ Ont +11 now 10.5 bid, Ont 48/27 14.1/13.8, 0.5bps narrower wk/wk despite $2.3bln of long provi supply this week
News headlines
China’s Greatest Ally in Trump Trade Talks May Be North Korea (Bloomberg) North Korea may turn out to be Chinese President Xi Jinping’s greatest ally in negotiating a trade deal with President Donald Trump. As Trump heads toward a high-stakes summit with North Korean leader Kim Jong Un next month, the president will look for all the help he can get, especially from Beijing — Pyongyang’s closest ally. That’s giving China added leverage in simultaneous talks with the Trump administration aimed at averting a trade war.
EU Acts to Counter U.S. Sanctions on Iran, Preserve Nuclear Deal (Bloomberg) The European Union started to activate measures to preserve the Iran nuclear agreement and to protect EU companies operating in the country, as the bloc reiterated support for the landmark deal after President Donald Trump’s decision to withdraw from it. The European Commission, the EU’s executive arm in Brussels, on Friday began putting a so-called blocking statute in place to shield European companies doing business with Iran from U.S. sanctions. It’s the first time in more than two decades that the measure is being invoked.
Long End of Canada Yield Curve Inverts for First Time Since 2007 (Bloomberg) How much is 20 years of extra risk worth? Nothing, at least in Canada. The yield on Canada’s 10-year government bond briefly rose above the nation’s 30-year securities for the first time in more than a decade Thursday. The shorter-maturity notes have sold off in the last few days, pushing yields above 2.5 percent for the first time since 2014. Canada is the only developed economy with that part of its yield curve inverted, according to data compiled by Bloomberg.
Europe Stock Rally Stumbles; Treasury Yield Steady: Markets Wrap (Bloomberg) Stocks in Europe slipped, failing to follow Asian peers higher amid conflicting reports over progress on trade talks between the world’s largest economies. U.S. futures and the dollar both gained while Treasury yields edged lower after reaching the highest level since 2011. The euro retreated and Italian 10-year bond yields jumped to the highest since October amid uncertainty over the Five Star Movement-League coalition’s policy platform as they attempt to form a government. Risk sentiment was dampened earlier after Chinese state media described reports that it would attempt to slash its trade surplus as “nonexistent.”
Canada adds 30,200 jobs in April: ADP (Reuters) Canada added 30,200 jobs in April, led by hiring in professional and business services, trade, and manufacturing, according to a report from ADP released on Thursday. The report, which is jointly developed with Moody’s Analytics, is derived from ADP’s payrolls data of about 40,000 companies.
Futures flat ahead of inflation, retail sales data (Reuters) Futures for Canada’s main stock index were little changed on Friday as investors awaited inflation and retail sales data. Canada’s annual inflation rate is expected to have remained at 2.3 percent in April while retail sales are likely to have increased by 0.3 percent in March. Both the reports are scheduled to release at 8:30 a.m. ET.
U.S.’s Lighthizer says NAFTA deal ‘nowhere near close’ (BNN) The United States declared the NAFTA countries were nowhere close to a deal in a statement Thursday designed to douse expectations that an agreement might be just a few minor adjustments away. It rebuffed an effort from Prime Minister Justin Trudeau, Foreign Affairs Minister Chrystia Freeland, and several high-ranking staffers who were in the U.S. on Thursday urging a quick deal.
Quebec rejects restaurateurs’ request to add tip-pooling to labour code (BNN) The Quebec government is nixing a proposal by restaurant owners to have a tip-pooling clause added to the province’s labour code to address a considerable wage gap among their employees. The association representing the restaurant owners made the request earlier this week, citing an income discrepancy between servers and kitchen workers.
Overnight markets
Overview: US 10yr note futures are up 0.079% at 118-20, S&P 500 futures are up 0.09% at 2721.25, Crude oil futures are up 0.18% at $71.62, Gold futures are down -0.12% at $1287.8, DXY is up 0.13% at 93.593, CAD/USD is down -0.03% at 0.781.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.069% | 2 Year | 2.559% |
| 5 Year | 2.342% | 5 Year | 2.919% |
| 10 Year | 2.523% | 10 Year | 3.095% |
| 30 Year | 2.526% | 30 Year | 3.234% |
US Economic Data
There is no US economic data for today.
Canadian Economic Data
| 8:30 AM | Retail Sales MoM, Mar est 0.3% (0.4% prior) |
| Retail Sales Ex Auto MoM, Mar est 0.5% (0.0% prior) | |
| CPI NSA MoM, Apr est 0.3% (0.3% prior) | |
| CPI YoY, Apr est 2.3% (2.3% prior) | |
| Consumer Price Index, Apr est 133.3 (132.9 prior) | |
| CPI Core- Common YoY%, Apr est 1.9% (1.9% prior) | |
| CPI Core- Median YoY%, Apr est 2.1% (2.1% prior) | |
| CPI Core- Trim YoY%, Apr est 2.1% (2.0% 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