Market Update Tsys trading slightly higher on very light volume ( 216k TY fut), 10Y 2.85% (-1bp),  rallying in Europe with gilts after UK June inflation came in below exp (2.4% vs 2.6%).  Fed Powell delivers second part of Mon policy testimony before the US House this morning, Fed Beige Book at 2:00ET.  US equity futures lower, crude  at a three week low (67.55), the USD extending gains to close to highs of June 28th on the back of Powell’s bullish assessment of the US economy.  In Canada, GOCs are higher, continuing outperformance vs tsys with the GOC curve at new narrows across major segments , 2s10s 18.6bps the narrowest since Sep 2007. Yesterday Moody’s upgraded  Canadian bank deposit notes and NVCC, and raised the outlook to Stable from negative, reversing its downgrade of the banks last summer as the new ‘bail-in’ regime affords greater loss protection for senior debt.

News headlines

U.K. Inflation Miss Adds a Little Doubt to BOE August Rate Hike (Bloomberg) An anticipated pickup in U.K. inflation failed to materialize last month, a development that sent the pound lower as investors pared bets for a Bank of England interest-rate increase next month. Summer sales meant clothes prices dropped sharply in June, and there was also drag from computer games. Annual inflation stayed at 2.4 percent, surprising economists who had expected the rate to accelerate to 2.6 percent. Core inflation also surprised to the downside, slowing to a 15-month low of 1.9 percent.

Trump Yields to Pressure in Delayed Retreat From Putin Remarks (Bloomberg) Donald Trump was still dug in, unwilling to back down a day after siding with Vladimir Putin over U.S. intelligence agencies in accepting the Russian leader’s denial of interfering in the 2016 U.S. presidential election. That changed after a meeting between the president and Vice President Mike Pence and Secretary of State Michael Pompeo, according to a person familiar with the deliberations.

Airbus’s Bombardier Gambit Gets Boost With $5.4 Billion Jet Deal (Bloomberg) Airbus SE’s bet on a slow-selling Canadian jetliner is paying off. The European planemaker reached its second 60-plane deal in a week for the A220 aircraft, this time through a pact with a planned U.S. carrier backed by airline entrepreneur David Neeleman. The agreement is valued at $5.4 billion before customary discounts, the same as last week’s order by JetBlue Airways Corp.

Dollar Extends Advance After Powell; Stocks Climb: Markets Wrap (Bloomberg) The dollar advanced for a second day after Federal Reserve Chairman Jerome Powell gave an upbeat assessment of the U.S. economy, helping spur declines in raw materials prices and emerging-market currencies. Stocks in Europe rose and S&P 500 futures edged higher. The greenback outperformed its major peers, helping push down an index of developing-nation currencies by the most in two weeks. China’s yuan approached its weakest close in almost a year. The pound tumbled after U.K. inflation came in below expectations, while CPI for the eurozone matched forecasts. A Bloomberg commodities gauge was further weighed down by oil futures, which tumbled through a technical support level on rising inventories. Treasuries drifted higher while European sovereign bonds were mixed.

TSX futures point to slightly higher open (Reuters) Stock futures pointed to a higher opening for Canada’s main stock index on Wednesday, gaining strength from U.S. Federal Reserve Chairman Jerome Powell’s upbeat view on the strength of the world’s largest economy. Powell, in his congressional testimony on Tuesday, said he believed the United States was on course for years of steady growth and played down the risks to the economy from an escalating trade dispute.

Canadian finance minister set to keep job during shuffle (Reuters) Canadian Finance Minister Bill Morneau is set to stay in his post when Prime Minister Justin Trudeau shuffles his cabinet, which could be as early as this week, political sources said on Tuesday. Foreign Minister Chrystia Freeland will also not be moving, said the sources, who declined to be identified given the sensitivity of the situation. The next election is scheduled for October 2019 and Trudeau wants to freshen up his cabinet amid an increasingly strong challenge from the official opposition Conservatives, said the sources. Trudeau’s office declined to comment.

U.S. plans uranium import probe that may lead to tariffs (BNN) The Trump administration plans to open an investigation into whether uranium imports are harming national security, a move that could lead to tariffs on foreign shipments of the metal, said three people familiar with the matter. U.S. uranium producers Energy Fuels Inc. and Ur-Energy Inc. filed a petition in January asking the Commerce Department to investigate the matter under Section 232 of the 1962 Trade Expansion Act, the same provision the president used to slap tariffs on steel and aluminum imports. U.S. industry wants the government to shield it from competition from state-owned companies in countries including Russia, Canada and Kazakhstan.

Avison Young to buy European real estate company after Caisse investment (BNN) Avison Young Canada Inc. will use a new, $250 million investment by a big Canadian pension fund to recruit talent and make global acquisitions, including the purchase of a European real estate services company, Chief Executive Officer Mark Rose said. The Toronto-based firm announced Monday that Caisse de Depot et Placement du Quebec, Canada’s second-largest pension fund manager, had made a preferred-equity investment in Avison Young. Caisse will be entitled to designate three members of the company’s nine-member board of directors.

Overnight markets

Overview: US 10yr note futures are up 0.052% at 120-06, S&P 500 futures are down -0.06% at 2809.5, Crude oil futures are down -0.71% at $67.6, Gold futures are down -0.42% at $1222.1, DXY is up 0.41% at 95.372, CAD/USD is up 0.48% at 0.7545.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.911% 2 Year 2.611%
5 Year 2.023% 5 Year 2.754%
10 Year 2.103% 10 Year 2.853%
30 Year 2.158% 30 Year 2.962%

US Economic Data

7:00 AM MBA Mortgage Applications, Jul 13th -2.5% (2.5% prior)
8:30 AM Housing Starts, Jun est 1320k (1350k prior)
  Housing Starts MoM, Jun est -2.2% (5.0% prior)
  Building Permits, Jun est 1330k (1301k prior)
  Building Permits MoM, Jun est 2.2% (-4.6% prior)
14:00 PM U.S. Federal Reserve Releases Beige Book

Canadian Economic Data

There is no Canadian economic data for 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, Hugues Savard

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230