Market Update Tsys trading slightly higher, 10Y below 3.0% (2.992), prices rebounding as equity futures slide as ‘risk-on’ tone fades, heavy volume in TY1 on continued Jun/Sep roll.  USD index slightly lower, crude lower for a third day @ 70.93. Core EGBs higher, outperforming tsys, brief rally in Italian bonds after Italian govt formed, BTP/bund spd  @ 183.8 from earlier low 178.6 . GOCs lower, in line with tsys, rolls unch, 10s/30s narrowing after Dec 51 auction yest, 51/48 rl  -0.3/-0.4, post auction flows saw decent short cvoering of48s. Provincial spreads opening 0.5bps wider,  Ontario 48/27 curve  1bp flatter since end of April,  going into month end extension, all in yield pick up the narrowest it has ever been @ ~14.5bps. 

News headlines

Trump Threatens Allies With New Tariffs, Sowing Global Confusion (Bloomberg)  President Donald Trump’s push for tariffs on imported cars and trucks threatened a shake-up of the global auto industry while motivating nations including China and Germany to reiterate commitments of varying strength to free trade. The U.S. statement late Wednesday that it’s investigating auto imports on national security concerns drew pointed responses from Japan and South Korea — two nations that have been at pains to placate Trump — as well as Germany.

Carney And Dudley Urge Banks to Prepare for Move Away From Libor (Bloomberg)  Bank of England Governor Mark Carney and Bill Dudley, President of the Federal Reserve of New York, urged the finance industry to prepare for the transition to new benchmark rates from scandal-ridden Libor. “Libor’s potential cessation after 2021 poses a clear risk to financial stability, and prudent risk management means that all of us must prepare for a world without Libor,” Dudley said at a conference in London. “This is a monumental and complicated effort — one that the industry has never undertaken — and it will entail overcoming many obstacles.”

Trump Says He Won’t Sign ‘Dreamers’ Bill Without Money for Wall (Bloomberg) President Donald Trump said he won’t back any immigration bill out of Congress that doesn’t include both funding for a wall and increased border security, as some Republican lawmakers try to force a vote on a measure designed to shield young people from deportation. « Unless it includes a wall, and I mean a wall, a real wall, and unless it includes very strong border security, there’ll be no approvals from me, because I have to either approve it or not, » Trump said during an interview on the Fox News program “Fox & Friends.” « There is a mood right now to get better, stronger border security. »

Stocks Mixed as Trade Worries Linger; Euro Gains: Markets Wrap (Bloomberg) Concerns surrounding global trade hung over markets on Thursday, with U.S. equity futures following Asian shares lower even as European stocks edged up. The yield on 10-year Treasuries stabilized around 3 percent, while the euro and pound gained. The Stoxx Europe 600 Index managed to claw back a little ground following Wednesday’s selloff, even as carmakers took a hit after President Donald Trump ordered a probe into automobile imports to the world’s biggest economy. That news also dragged the MSCI Asia Pacific Index lower. Major American equity benchmarks were poised to slip at the open.

Canada blocks Chinese takeover of Aecon on security grounds (Reuters) Canada has blocked a proposed C$1.51 billion ($1.18 billion) takeover of construction company Aecon Group Inc (ARE.TO) by a unit of China Communications Construction Co Ltd (601800.SS) on national security grounds, the government said on Wednesday.

Unemployed Canadians’ struggle to find work getting worse: Survey (BNN) It’s becoming increasingly difficult for unemployed Canadians to find work. According to a survey by Express Employment Professionals, Canadians’ average duration of unemployment rose to 19 months – the highest level posted by the survey in five years. By comparison, in 2014 the average length of unemployment was 13 months.

Fed sees next hike soon, signals modest inflation overshoot OK (BNN) Federal Reserve officials said the economic outlook warranted another interest-rate hike “soon” and signaled they would welcome a modest overshoot of their 2 per cent inflation target, indicating they’re in no rush to tighten more aggressively. “Most participants judged that if incoming information broadly confirmed their current economic outlook, it would likely soon be appropriate for the committee to take another step in removing policy accommodation,” minutes released Wednesday of the Federal Open Market Committee’s May 1-2 meeting said.

Overnight markets 

Overview: US 10yr note futures are up 0.039% at 119-14, S&P 500 futures are down -0.1% at 2728, Crude oil futures are down -1.29% at $70.91, Gold futures are up 0.49% at $1301.2, DXY is down -0.21% at 93.808, CAD/USD is up 0.35% at 0.7763. 

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 2.018% 2 Year 2.512%
5 Year 2.265% 5 Year 2.819%
10 Year 2.441% 10 Year 2.99%
30 Year 2.446% 30 Year 3.149%

US Economic Data

8:30 AM Initial Jobless Claims, May 19th  234k est 220k (222k prior)
Continuing Claims, May 12th  1741k est 1746k (1707k prior)
9:00 AM House Price Purchase Index QoQ, 1Q est 0.7% (1.6% prior)
FHFA House Price Index MoM, Mar est 0.6% (0.6% prior)
9:45 AM Bloomberg Consumer Comfort, May 20th (54.6 prior)
10:00 AM Existing Home Sales, Apr est 5.55m (5.60m prior)
Existing Home Sales MoM, Apr est -0.9% (1.1 % prior)
11:00 AM Kansas City Fed Manf. Activity, May est 20 (26 prior)

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