Market Update

US tsys higher, yields 2-3bps lower across the curve led by the short end, the 2Y 1.72%, 10s below 2.0% for the first time since Nov 2016 as markets now fully priced for 25bp cut at the July FOMC with 50% odds of a 50bp cut, 2s10s tsy curve 10bps steeper since Tuesday’s close. Prices weakening post Phili Fed despite weak headline and drop in prices paid to 12.9 vs 23.1 in May.   The Fed’s ‘dot plot’ revealed there are now eight FOMC members in favour of at least one rate cut this year. Equities rallying in the US, S&P futures +1.0% on increased prospects of stimulus. GOC yields continuing to diverge from their US counterparts, 3% surge in crude on Iran weighing on Cda/US,  +2bps wider on top of the ~10bp yest post FOMC, longs particularly heavy.  

News headlines

TSX futures rise as oil prices soar (Reuters) Futures for Canada’s main stock index rose on Thursday, as oil prices surged after Iran shot down a U.S. military drone, raising fears of a military confrontation between the two countries.

Treasury 10-Year Yield Slides Below 2% to Lead Global Decline (Bloomberg) Treasuries led a global bond rally, with 10-year yields dropping below 2% for the first time since November 2016 as expectations grow that major central banks will ease policy.

U.S. Fed scraps patient approach, opens door to potential rate cut (BNN) The Federal Reserve signaled it was ready to lower interest rates for the first time since 2008, citing “uncertainties” that have increased the case for a cut as officials seek to prolong the near-record U.S. economic expansion.

China, U.S. to resume trade talks but China says demands must be met (Reuters) Top Chinese and U.S. officials will resume trade talks in accordance with the wishes of their leaders, but China hopes the United States will create the necessary conditions for dialogue, the Chinese commerce ministry said on Thursday.

Russia’s Putin says U.S. move against Huawei aims to weaken China (Reuters) Russian President Vladimir Putin said on Thursday that U.S moves against technology giant Huawei aimed to weaken China, while U.S. tariffs sought to hold the Chinese economy back.

Trump and Trudeau to confront disputes over uranium, lumber (BNN) Canadian Prime Minister Justin Trudeau plans to take up trade disputes with President Donald Trump in Washington on Thursday and meet with congressional leaders on the proposed U.S.-Canada-Mexico trade pact.

Oil surges after Iran downs U.S. drone, Fed signals rate cut (BNN) Oil rose after Iran said it shot down a U.S. spy drone in its airspace, stoking Middle East tensions further after the attack on two tankers last week, while a more dovish stance from the Federal Reserve lifted financial markets.

Market Overview: US 10yr note futures are up 0.208% at 128-04, S&P 500 futures are up 0.95% at 2961.25, Crude oil futures are up 3.5% at $55.64, Gold futures are up 2.68% at $1384.9, DXY is down -0.48% at 96.647, CAD/USD is down -0.86% at 0.7595.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.386% 2 Year 1.702%
5 Year 1.315% 5 Year 1.723%
10 Year 1.431% 10 Year 1.994%
30 Year 1.678% 30 Year 2.514%

US Economic Data

08:30 AM    Current Account Balance, 1Q  Survey: -$124.3b  Actual: — Prior: -$134.4b
         Initial Jobless Claims, Jun 15  Survey: 220k  Actual: — Prior: 222k
        Continuing Claims, Jun 8  Survey: 1680k  Actual: — Prior: 1695k
        Philadelphia Fed Business Outlook, Jun  Survey: 10.4  Actual: — Prior: 16.6
09:45 AM Bloomberg Consumer Comfort, Jun 16  Survey: —  Actual: — Prior: 61.6
        Bloomberg Economic Expectations, Jun  Survey: —  Actual: — Prior: 52.5
10:00 AM Leading Index, May  Survey: 0.10%  Actual: — Prior: 0.20%

Canadian Economic Data

08:30 AM ADP Canada Releases May. Payroll Estimates

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, Émile Bordeleau

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.

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