Market Update Tsys lower on heavy volume in TY futures (>500k) , 10Y above 3.0% @ 3.026% (+2.6bps), yield curve slightly steeper. USD index at high since Jan 12th  (DXY + 0.46%), above key 91 resist, equities adding to yesterday’s selloff, S&P futures -8.0. Core Euro bonds weaker, bund/gilt yields 1-3bps higher, bund curve 2bps steeper, 10Y bund 0.64%.  The bund/tsy spd broke to new wides @ 238bps as bunds continue to lag the decline in tsys.  With USD hedging  costs significantly higher than the last time the US 10Y was at 3.0% in Jan2014,( both in terms of the libor-euribor spd and the cross-currnecy basis), US tsys offer very little pickup for european as well as Japanese buyers. And there is more supply to deal with as  the US auctions $17bln in 2Y FRNS & $35bln in 5Y notes this aft . In Canada, GOCs are lower , outperforming tsys out the curve, the 10Y GOC/tsy spd at one month narrows. Provis closed 1-2 bps wider yest on weaker stocks, Ont 27s 65.5, Ont 38 78.5.  The BOC auctions $2.3bln in June 2028s at noon, with the 28/27 roll 1.7/1.4 vs ~3.0bps when the June 28s were last auctioned on Feb 21st , thou this time amount being auctioned is $700mln less. The 10Y yield @ 2.35% should offer some support as it is close to 2.38% high reached in Feb, and 27bps higher since the end of March. 

News headlines

Macron’s Pitch to Trump on a ‘New’ Iran Deal Surprises EU Allies (Bloomberg) French President Emmanuel Macron is pushing the limits of international diplomacy, as his last-ditch appeal to salvage the Iran nuclear deal wrong-footed European allies and was met with intransigence by U.S. President Donald Trump. Macron, who has sought to cultivate a personal bond with Trump, made his Iran pitch the centerpiece of his visit to the White House. If the U.S. preserved the existing nuclear accord, that could serve as the cornerstone of a new, expanded deal that would address the Islamic Republic’s ballistic missile program and destabilizing behavior across the Middle East.

Google’s Results Spark an $85 Billion Rout for FANG Stocks (Bloomberg) A bad earnings season for the tech industry just got worse with Google’s parent joining the ranks of stocks tumbling after results. Shares of Alphabet Inc. slumped almost 5 percent as of 1:10 p.m. in New York after first-quarter results sparked concern that the internet company is embarking on a new spending binge to keep up with its biggest rivals. Other tech giants fell in tandem, with the FANG complex that also includes Facebook, Amazon and Netflix seeing almost $85 billion in market value wiped out.

Dollar Gains as Treasury Yield Hits 3%; Stocks Dip: Markets Wrap (Bloomberg) The dollar resumed its rally on Wednesday, climbing to the highest in three months as the yield on benchmark U.S. Treasuries extended an advance to pierce 3 percent a second day. Pressure grew on stocks as investors digested a slew of earnings. The greenback strengthened against almost every major peer, with the euro among the losers a day before the European Central Bank’s next rate decision. The region’s currency weakness was no tonic for equities, and the Stoxx Europe 600 Index fell along with U.S. futures and the MSCI Asia Pacific Index after less-than-optimistic earnings forecasts Tuesday from bellwethers including Caterpillar Inc.

Takeda Closes in on $64 Billion Shire Deal to Join Pharma Elite (Bloomberg) Takeda Pharmaceutical Co. reached a preliminary agreement to buy Shire Plc with a sweetened takeover offer of about 46 billion pounds ($64 billion), closing in on a bold transaction to gain a foothold in one of the pharma industry’s most coveted niches. The U.K.-listed company’s board said it was willing to recommend the latest offer to shareholders on Wednesday, capping a month-long tug of war in which its Japanese suitor made five successively higher proposals, two of them in the last few days.

Futures lower on rising U.S. yields, cost worries (Reuters)  Canada’s main stock index was set to open lower on Wednesday, tracking losses in global shares, due to rising U.S. bond yields and warnings from top global companies about increasing costs. June futures on the S&P TSX index SXFc1 were down 0.11 percent at 7:15 a.m. ET. Canada’s main stock index fell on Tuesday as lower oil prices weighed on energy shares, while investors worried about the prospect of higher global borrowing costs after the benchmark U.S. 10-year Treasury note US10YT=RR yield hit 3 percent for the first time in four years.

China’s Dagong downgrades Canada’s sovereign credit outlook to negative (BNN) China’s Dagong Global Credit Rating Co, one of the country’s major ratings firms, on Wednesday cut the credit outlook of Canada to negative, citing a slowdown in the Canadian economy and relatively high risks in its real estate market. A persistently high fiscal deficit was also one of the reasons for the downgrade, Dagong said in a statement. The agency kept its ratings for Canada’s local and foreign currency ratings at AA+.

Trump says NAFTA talks going ‘nicely,’ Canada sees progress on auto rules (BNN) U.S. President Donald Trump said on Tuesday a new North American Free Trade Agreement could be agreed on quickly, as Canada hailed progress on forging new rules for the auto industry, the pivotal issue in talks to revamp the 24-year-old accord. Ministers from the United States, Canada and Mexico responsible for NAFTA met in Washington to try to narrow differences on regional content rules for autos in the hope of tying up a deal in the coming days. 

Overnight markets

Overview: US 10yr note futures are down -0.236% at 119-02, S&P 500 futures are down -0.28% at 2628, Crude oil futures are down -0.07% at $67.65, Gold futures are down -0.9% at $1321, DXY is up 0.42% at 91.151, CAD/USD is up 0.45% at 0.7757.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.927% 2 Year 2.5%
5 Year 2.181% 5 Year 2.845%
10 Year 2.365% 10 Year 3.024%
30 Year 2.463% 30 Year 3.203%

US Economic Data

7:00 AM MBA Mortgage Applications, Apr 20th -0.2% (4.9% 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