Market Update
Tsys continuing higher , US 10Y 2.965 (-1.5.bps) , on above avg volume in TY futures, ahead of Q1 GDP (2.0% vs 2.9% Q4) and ECI. USD index higher for a third day, the euro declining to the lowest since Jan 12th. Core EGBs higher led by sharp rally in UK gilts in the wake of a much weaker than exp prelim Q1 GDP report – 0.1% the lowest q/q increase since 2012. Odds of a May BOE hike collapsed to 20% from 56% yest and 100% last week. Bunds higher, lagging the rally in gilts, the 10Y bund erasing this week’s losses. In Canada, GOCs are higher, in line with tsys, new 10Y roll (28/27) 0.2 wider 1.7/1.5, 10s30s unch @ 9.5.
News headlines
Kim Urges Frequent Talks After Declaring Korean ‘Era of Peace’ (Bloomberg) Kim Jong Un called for more meetings with his South Korean counterpart after becoming the first North Korean leader to cross the border to hold talks over his nuclear weapons program. Kim made the offer to South Korean President Moon Jae-in as the pair met Friday on their militarized boundary for the first summit between the rival governments in 11 years. Both men basked in symbolism of the moment. Kim declared “a new history” and an “era of peace,” while Moon said the “weight on our shoulders is heavy.”
European Economy Loses Thrust in Risk for Global Expansion (Bloomberg) Europe’s economy lost momentum in the first quarter as expansions slowed from France to the U.K., threatening to undermine the global growth the continent previously helped power. Figures from across the region pointed to a softer trend in the early part of the year, and U.S. first-quarter data due shortly is also set to show activity weakening. The world’s largest economy is forecast to have grown an annualized 2 percent, a step down from the pace seen through 2017.
Oil Steadies as Traders Weigh Impact of Korea Summit, Iran Deal (Bloomberg) Oil traded near $68 as investors weighed the impact of a potential U.S. pull-out from the Iran nuclear deal and the historic meeting between the leaders of North and South Korea. Futures in New York slipped 0.4 percent, on course for a 0.7 percent drop this week. French President Emmanuel Macron earlier this week predicted President Donald Trump will exit the Iran agreement, while U.S. Defense Secretary Jim Mattis said Thursday a decision on a withdrawal hasn’t been made. North Korean leader Kim Jong Un and South Korean President Moon Jae-in agreed to finally end seven decades of hostile relations this year.
BOJ’s Kuroda Starts New Term With Fresh Commitment to Easing (Bloomberg) Governor Haruhiko Kuroda began his new term at the Bank of Japan much as he did the first one — emphasizing his commitment to hitting 2 percent inflation. The BOJ left its policy settings intact, vowing to push ahead with stimulus even as other major central banks move further toward policy normalization, though at a moderating pace amid signs of slowing economic growth. Still there was a twist — not uncommon in Kuroda’s tenure — as the BOJ’s policy statement omitted mention of the projected time frame for hitting his longstanding 2 percent target.
Amazon Jumps After Posting First-Quarter Earnings Beat (Bloomberg) Shares of Amazon.com Inc. rose in extended trading after the company reported net sales in the first quarter that beat analyst estimates.
No risk of NAFTA termination despite Trump’s bravado: economists (Reuters) U.S. President Donald Trump’s threats to scrap the North American Free Trade Agreement (NAFTA) will soon be a distant memory, likely to be supplanted by only slight changes to the 24-year-old pact, a Reuters poll of economists suggested. None of the 80 forecasters – most based in Canada, the United States and Mexico – polled by Reuters April 16-24 expect NAFTA to be terminated. A large majority said the most likely outcome is a marginally different agreement, with only six expecting radical changes.
Airbus says aims to cut CSeries costs, sell ‘big volumes’ (Reuters) Airbus said on Friday it aims to reduce recurring costs of Bombardier’s CSeries so that it can sell the jetliner in “big volumes” as soon as a deal to buy the loss-making program from Canada’s Bombardier is completed. “We are ready to hit the market” using the global Airbus sales force as soon as the deal closes, Airbus executive Harald Wilhelm told analysts. People familiar with the matter told Reuters in Canada earlier this week that the deal is expected to clear the final regulatory hurdles by the end of May.
CETA’s extended drug patents could cost Ottawa $270M a year (BNN) An extension of drug patent protections in the Canada-EU free trade deal could end up costing Canadians an estimated $392 million a year, and federal coffers up to $270 million more annually, says a new report from the parliamentary budget officer. The report released Thursday sets out to put a price tag on a central — and controversial — element of the Comprehensive Economic and Trade Agreement, or CETA, that went into effect last September.
Overnight markets
Overview: US 10yr note futures are up 0.131% at 119-15, S&P 500 futures are down -0.13% at 2671, Crude oil futures are down -0.28% at $68, Gold futures are up 0.15% at $1319.9, DXY is up 0.37% at 91.904, CAD/USD is up 0.09% at 0.7761.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.904% | 2 Year | 2.472% |
| 5 Year | 2.14% | 5 Year | 2.797% |
| 10 Year | 2.331% | 10 Year | 2.964% |
| 30 Year | 2.428% | 30 Year | 3.144% |
US Economic Data
| 8:30 AM | Employment Cost Index, 1Q est 0.7% (0.6% prior) |
| GDP Annualized QoQ, 1Q est 2.0% (2.9% prior) | |
| Personal Consumption, 1Q est 1.1% (4.0% prior) | |
| GDP Price Index, 1Q est 2.2% (2.3% prior) | |
| Core PCE QoQ, 1Q est 2.5% (1.9% prior) | |
| U. of Mich. Sentiment, Apr est 98.0 (97.8 prior) | |
| U. of Mich. Current Condition est 106.2 (115.0 prior) | |
| U. of Mich. Expectations, Apr (86.8 prior) | |
| U. of Mich. 1 Yr Inflation, Apr (2.7% prior) | |
| U. of Mich. 5-10 Yr Inflation, Apr (2.4% 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