Market Update

US tsys trading higher, yields 0.5bps – 2bps lower led by the long end in a bull flattening move with the 10Y 2.177 (-1.1bps), US 10/30 curve new lows 59bps, 6bps since last week’s FOMC. S&P futures -2.75, crude off 2.6% below $44 before DOE inventory data at 10:00am. Tsys buoyed by rally in core EGBs, UK gilt yields 3-4bps lower after BOE Carney warned of risks from Brexit, the GBP off1.0% since yest back to levels post the April 18th election call. GOCs higher, outperforming tsys out to 10yrs, 2bps wider in longs, CAD at the lows 1.3266 consolidation lows. Provis ended yest 0.5bps tighter led by longs, the Ontario 48/27 curve flattening 0.2bps ,now 9.3/8.8 new narrows. Alberta underperforming with crude, Alta/Ont 46 12/11 +1bp since last week.

News headlines 

Pound Slides on Brexit Worry; No Respite for Crude: Markets Wrap (Bloomberg) The pound sank and gilt yields fell as Britain’s central bank governor underlined his dovish stance in the face of Brexit. Oil dropped again on supply concerns and the dollar was steady as this week’s stream of Fed speakers continued.

Oil prices hit seven-month lows on global oversupply (Reuters) Oil prices fell to seven-month lows on Tuesday after news of increases in supply by several key producers, a trend which has undermined attempts by OPEC and other producers to support the market through reduced output.

Carney Ends Silence With Brexit Warning to Rebuff Rate-Hike Call (Bloomberg) Mark Carney ended more than a month of silence with a major speech that pushed back against rate hawks in the Bank of England and re-emphasized his concerns about the impact of Brexit on the economy.

Consumption, euro zone recovery lift German growth: Ifo (Reuters) Vibrant domestic demand and strong export growth fueled by a recovery in the euro zone will boost growth in Germany this year and next, the Ifo economic institute said on Tuesday, raising its 2017 growth forecast for Europe’s largest economy.

Poloz Weighs the Sudden Urgency of a July Rate Hike in Canada (Bloomberg) There is nothing in the Bank of Canada’s market-moving statements last week to indicate an interest rate hike is imminent, but investors aren’t taking chances. The central bank’s next decision on July 12 is now a toss up, with traders assigning a 50 percent chance of an increase.

Japan government-led group tells Toshiba to fix chip spat with Western Digital: sources (Reuters) A Japanese government-led consortium has told Toshiba Corp it needs to resolve its legal dispute with Western Digital Corp before it will invest in the firm’s chip unit, sources briefed on the matter said.

Bombardier agrees to sell up to 50 Q400s to India’s SpiceJet (Reuters) Canadian airplane maker Bombardier Inc (BBDb.TO) said on Tuesday it agreed to sell up to 50 Q400 turboprop aircraft to Indian budget carrier SpiceJet Ltd (SPJT.BO). SpiceJet will buy 25 Q400 turboprop aircraft from Bombardier, as per a letter of intent between the two companies. The Indian airline has the option to buy 25 more planes.

Overnight markets 

Overview: US 10yr note futures are up 0.025% at 126-16, S&P 500 futures are down -0.09% at 2445.25, Crude oil futures are down -2.58% at $43.06, Gold futures are up 0.05% at $1247.3, DXY is up 0.04% at 97.586, CAD/USD is up 0.36% at 0.7538.

US Economic Data 

8:30 AM Wholesale Trade Sales, m/m, Apr,  1.0%  est. 0.5% (prior 0.9%, revised 1.2%)
Revisions : Current Account
Current Account Balance, 1Q,  -$116.8b, est. -$123.8b (prior -$112.4b, revised -$114.0b)

Canadian Economic Data 

There is no major economic news release 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, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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