Market Update US tsys slightly higher on avg volume in TY futures (317k), 10Y 2.875%, off session highs as equity futures erase eralier losses. Data includes Richmond Fed , Case Shiller HP & Consumer Confidence. The US auctions $34bln in 2Y notes at 1:00ET. Focus on trade after Navarro said late yest there were no plans to impose investment restrictions on China, this morning Trump tweeted his frustration with Harley Davidson’s plans to shift production overseas to deal with EU retaliatory tariffs. GOCs opening well bid, outperforming tsys by 1 – 1.5bps across the curve, 10Y continues to outpeform, 10Y butt at a two month low, 7bps tighter on the week. Provis another 0.5bps weaker on the back of yesterday’s 1bp weakening.
News headlines
Bear Market in Stocks, Weak Yuan Show China Problems Piling Up (Bloomberg) A deepening sense of unease is rippling through China’s financial markets. The benchmark Shanghai stock index has tumbled 20 percent in just five months to enter a bear market. The yuan is heading for its longest losing streak in four years in Hong Kong. Corporate defaults are mounting.
Mueller Poised to Zero In on Trump-Russia Collusion Allegations (Bloomberg) Special Counsel Robert Mueller is preparing to accelerate his probe into possible collusion between Donald Trump’s presidential campaign and Russians who sought to interfere in the 2016 election, according to a person familiar with the probe. Mueller and his team of prosecutors and investigators have an eye toward producing conclusions — and possible indictments — related to collusion by fall, said the person, who asked not to be identified. He’ll be able to turn his full attention to the issue as he resolves other questions, including deciding soon whether to find that Trump sought to obstruct justice.
Trump’s Tussle With Trudeau Wallops Canadian Consumer Confidence (Bloomberg) Escalating trade friction with the U.S. is spooking Canadian households and sending consumer confidence into a slide. Polling by Nanos Research for Bloomberg News shows a sharp deterioration in household sentiment gauges since Donald Trump and Prime Minister Justin Trudeau squared off over trade issues after a Group of Seven summit two weeks ago, which included a threat by Trump that the dispute is “going to cost a lot of money for the people of Canada.” The decline has been most acute in Canadians’ expectations for growth, which have fallen to the weakest levels in more than two years.
Dollar Advances as Stocks Grapple With Trade Fears: Markets Wrap (Bloomberg) The dollar climbed and U.S. stock futures turned lower as investors continued to fret over the outlook for global trade. European equities gave up half of their earlier gains while Treasuries edged higher as markets grappled for direction in the wake of Monday’s sell-off. Contracts for the S&P 500 Index fluctuated before falling while the Stoxx Europe 600 Index struggled to hold onto an advance even as the euro retreated. In Asia, Chinese equities entered a bear market on concern about the country’s ability to fight a trade war, though Japanese shares reversed losses to finish slightly higher. Brent crude rose above $75 a barrel after U.S. Energy Secretary Rick Perry suggested a planned production hike isn’t enough to stop a price spike. The pound weakened as a new Bank of England member spoke about the risks of raising interest rates too fast.
Bombardier, Toronto union reach new agreement, averting strike (Reuters) Bombardier Inc and its Canadian workers who assemble turboprops and the company’s new top-of-the-line business jet have reached a new labor agreement, averting a potential strike, the company said on Sunday. Bombardier and Unifor, the union representing more than 2,100 production and office workers, had reached a tentative deal just hours the strike deadline on Saturday. The union members ratified the agreement on Sunday, Bombardier said in a statement.
Canada rate hike in question as data disappoints (Reuters) An unexpected plunge in Canada’s retail sales in April and flat inflation figures for May drove the Canadian dollar to a year-low on Friday and cut expectations for a July rate hike to 50-50 at best. Retail sales fell 1.2 percent in April, the largest drop in more than two years, adding slowing consumer spending to a list of concerns facing the Bank of Canada as it tries to raise interest rates in the face of a trade war and housing downturn.
U.S. oil premium rises on shortage as OPEC uncertainty persists (BNN) U.S. oil for near-term delivery rose to the highest level since 2014 versus cargoes for later on speculation that America faces a supply crunch while uncertainty lingered over OPEC’s planned output boost. August futures in New York were over a US$1 higher than the September contract, in a market structure known as backwardation that signals a shortage. Inventories at the key U.S. storage hub in Cushing, Oklahoma, are seen sliding for a sixth week and the nationwide hoard is forecast to have fallen for a third week. A Canadian oil-sands outage could lead to a North American crunch for all of July and drain stockpiles, according to Goldman Sachs Group Inc.
Overnight markets
Overview: US 10yr note futures are up 0.026% at 120-02, S&P 500 futures are down -0.09% at 2719.75, Crude oil futures are up 0.26% at $68.26, Gold futures are down -0.92% at $1257.2, DXY is up 0.21% at 94.484, CAD/USD is up 0.23% at 0.7504.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.755% | 2 Year | 2.523% |
| 5 Year | 1.921% | 5 Year | 2.736% |
| 10 Year | 2.061% | 10 Year | 2.869% |
| 30 Year | 2.153% | 30 Year | 3.02% |
US Economic Data
| 9:00 AM | S&P CoreLogic CS 20-City MoM SA, Apr est 0.4% (0.53% prior) |
| S&P CoreLogic CS 20-City YoY NSA, Apr est 6.80% (6.79% prior) | |
| S&P CoreLogic CS 20-City NSA Index, Apr (208.62 prior) | |
| S&P CoreLogic CS US HPI NSA Index, Apr (198.94 prior) | |
| S&P CoreLogic CS US HPI YoY NSA, Apr (6.53% prior) | |
| 10:00 AM | Richmond Fed Manufact. Index, Jun est 15 (16 prior) |
| Conf. Board Consumer Confidence, Jun est 128.0 (128.0 prior) | |
| Conf. Board Present Situation, Jun (161.7 prior) | |
| Conf. Board Expectations, Jun (105.6 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