Market Update US tsys higher on below avg volume in TY futures (330k ), 10Y 2.94%, early bid on back of weak Australian CPI data (2.1% vs 2.2%). Equities weaker, thou off the lows (S&P futures -4), crude/USD slightly weaker. Key talks on US/EU trade today with EU Commission President Juncker meeting in Washington, while the US auctions $18bln in 2Y FRNs & $36 5Y notes later today. Core EGBs higher, outperforming tsys, bunds little changed despite stronger IFO sentiment survey. GOCs little changed before 10Y auction at noon – $3.0bln in new June 2029 bonds, with the WI roll (new 29/28) ~2bps (1.9/ this morn) vs 1.2bps for the current 10Y roll. The outstanding 5.75/29s trade 2.8bps back of 10s, so at first glance the WI roll looks tight, particularly given the new 2029 bond will have a duration closer to 9.6s vs ~8.5 for the high coupon 5.75/29.  Keep in mind the new 29s will eventually become the 10Y benchmark. 

News headlines

Nafta Talks to Pick Up Again as Threat of Auto Tariffs Looms (Bloomberg) High-level talks for a new Nafta are picking up again this week following two months of limited negotiations that were instead marred by tit-for-tat tariff battles and diplomatic fallout. Canadian Foreign Affairs Minister Chrystia Freeland will discuss the North American Free Trade Agreement on Wednesday when she meets in Mexico City with officials from the incoming and outgoing Mexican administrations. On Thursday, Mexican Economy Minister Ildefonso Guajardo is traveling to Washington to discuss the status of Nafta talks with U.S. Trade Representative Robert Lighthizer. The bilateral gatherings mark the most activity on Nafta negotiations since May.

Trump Says U.S., EU Must Cut All Tariffs Ahead of Key Talks (Bloomberg) President Donald Trump said that the U.S. and the European Union should eliminate all tariffs, barriers and subsidies, with the bloc’s trade chiefs set to present him with proposals in that direction in a crunch meeting at the White House later Wednesday. “I have an idea for them. Both the U.S. and the E.U. drop all Tariffs, Barriers and Subsidies!” Trump said in a Tuesday night tweet. “That would finally be called Free Market and Fair Trade! Hope they do it, we are ready – but they won’t!”

Coke Profit Beats Estimates on Sales Boost From Healthier Drinks (Bloomberg) Coca-Cola Co. is getting a boost from its healthier beverages, with its resurgent zero-sugar soda brands buoying the company’s results. Profit beat analysts’ estimates in the second quarter, helped by double-digit growth for its Coca-Cola Zero Sugar brand and efforts to cut costs, it said in a statement. The results drove the shares up as much as 1.7 percent in early trading Wednesday.

Stocks Turn Lower Before Trade Talks; Dollar Slips: Markets Wrap (Bloomberg) U.S. equity futures turned lower with European stocks as investors digested the latest raft of earnings, and before key trade talks between America and the European Union. The dollar declined against most of its major peers. Futures for the S&P 500 and Dow edged lower, while those for the Nasdaq erased a gain amid a mixed bag of earnings. Coca Cola’s results beat forecasts, while Fiat Chrysler’s came in below expectations, triggering declines in pre-market trading. The picture was similar in Europe, and the Stoxx Europe 600 Index retreated. Asian equities advanced earlier, though Shanghai stocks edged lower as positive sentiment spurred by Beijing’s willingness to support the Chinese economy showed signs of fading.

Singapore buys trains from Canada’s Bombardier in up to $880 million contract (Reuters) Singapore has bought 66 new trains from Canada’s Bombardier Inc to replace an older fleet on its metro rail service in a contract worth up to S$1.2 billion ($880 million), the city-state’s Land Transport Authority said on Wednesday. The LTA’s contract with Bombardier includes an option under which the firm can provide long-term service support for the new fleet, set to arrive from 2021.

Canadian grocery chain Loblaw’s profit beat estimates (Reuters) Canadian grocery and pharmacy chain Loblaw Cos Ltd’s (L.TO) quarterly profit topped analysts’ estimates on Wednesday, driven by higher food and drug same-store sales. The company, which sells everything from grocery to wireless mobile connections, said food retail same-store sales grew 0.8 percent while drug retail same-store sales rose 1.7 percent. The Brampton, Canada-based company, like other retail stores, has been refurbishing and expanding its online presence to carve out more market share in the face of stiff competition from companies such as Amazon.com Inc (AMZN.O).

OECD urges Canada to review tax system, boost competitiveness (BNN) The Organisation for Economic Cooperation and Development is warning that Canada risks being left behind in the global race for investment dollars if it doesn’t respond to U.S. tax reform, joining a growing chorus of voices that are sounding the alarm on the country’s competitiveness. The OECD said in a report Monday that tax reform in the United States has made Canada a less attractive place to do business, and urged the Canadian government to reassess its own tax system.

Ontario accountability officer to probe Ford’s cancellation of cap and trade (BNN) Ontario’s fiscal watchdog said Tuesday it will examine the new Progressive Conservative government’s cancellation of the cap-and-trade program in order to determine how much that decision will end up costing the province. Financial Accountability Officer Peter Weltman said the work on the review, which was requested by Opposition Leader Andrea Horwath, was already underway. « There are some key considerations with cap-and-trade, » Weltman said. « We need to get more detail from the government as to how they intend to manage those considerations. »

Overnight markets

Overview: US 10yr note futures are up 0.052% at 119-20, S&P 500 futures are down -0.18% at 2816, Crude oil futures are up 0.01% at $68.53, Gold futures are up 0.6% at $1242, DXY is down -0.14% at 94.476, CAD/USD is down -0.25% at 0.7621.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 2.014% 2 Year 2.645%
5 Year 2.139% 5 Year 2.814%
10 Year 2.22% 10 Year 2.938%
30 Year 2.263% 30 Year 3.061%

US Economic Data

7:00 AM MBA Mortgage Applications, Jul 20th -0.2% (-2.5% prior)
10:00 AM New Home Sales, Jun est 668k (689k prior)
  New Home Sales MoM, Jun est -3.1% (6.7% prior)

Canadian Economic Data

There is 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

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.

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