Market Update

US tsys lower, under pressure from lower EGBs in reaction to hawkish Draghi comments, US 10Y 2.163 (+2.6bps). Core EGBs sharply lower after Draghi said the global recovery was firming and inflation is being boosted by temporary factors, deflationary forced are being replaced by reflationary ones. 10Y bund yields at a one month high 0.31% (+7bps), 10Y gilt 1.06% (+5.2bps).  European stocks off 0.60%, thou Euro banks are pushing higher on Draghi. The US auctions $34bln in 5Y notes after a solid 2Y yest – highest b/c since Nov 2015, @ 0.5bps thru. GOCs lower, underperforming tsys in the backup by ~1bp, curve 1bp steeper led by 10s, 10Y 1.508%. Provis opening unch, the Ont 28/27 box steeper by 1bp since last week 10.5/10.2, the underlying 10s30s GOC curve continues to narrow, trading up @ 48.3 this morn. New HSBC 5Y dep note 94/92 (priced at 101.9 yest).

News headlines 

Stocks Drop, Commodities Rise; Draghi Spurs Euro: Markets Wrap (Bloomberg) A mood of caution was evident in equity markets Tuesday, with European stocks falling in a broad-based retreat. The euro jumped as bonds and dollar fell after Mario Draghi said headwinds to inflation in the region are temporary.

Euro surges on Draghi comments, dollar slips (Reuters) The euro surged to its highest in over a week against the dollar on Tuesday after European Central Bank President Mario Draghi said factors weighing on inflation in the euro zone were mainly temporary and the Bank could look through them.

Yuan Surges in Afternoon Trade Amid Talk PBOC Supported Currency (Bloomberg) China’s yuan surged both onshore and overseas amid speculation of central bank intervention and a decline in the dollar. The offshore currency jumped as much as 0.7 percent in a sudden afternoon spike, after spending much of the day little changed. The yuan traded in Shanghai’s onshore market climbed 0.5 percent to 6.8100.

U.S. slaps more duties on Canadian lumber shipments (Financial Post) The Canada-U.S. softwood lumber trade dispute intensified Monday after the U.S. Department of Commerce boosted the levy it imposes on Canadian lumber shipments to 26.75 per cent from 19.88 per cent.

Tim Hortons’ U.S. franchisees form alliance as tensions boil (Financial Post) Tim Hortons’ U.S. franchisees are banding together to lobby for corporate-level changes at the coffee chain, which is owned by Restaurant Brands International Inc., the fast-food giant that also runs Burger King.

Google Gets Record $2.7 Billion EU Fine for Skewing Searches (Bloomberg) Google lost its biggest regulatory battle yet, getting a record 2.4 billion-euro ($2.7 billion) fine from European Union enforcers who say the search-engine giant skewed results to thwart smaller shopping search services.

Overnight markets 

Overview: US 10yr note futures are down -0.296% at 126-13, S&P 500 futures are down -0.08% at 2434, Crude oil futures are up 1.31% at $43.95, Gold futures are up 0.27% at $1249.8, DXY is down -0.6% at 96.841, CAD/USD is down -0.24% at 0.7568.

US Economic Data 

9:00 AM S&P Case-Shiller Home Price Index, m/m, Apr, est. 0.5% (prior 0.87%)
S&P Case-Shiller Home Price Index, y/y, Apr, est. 5.90% (prior 5.89%)
10:00 AM Conference Board Consumer Confidence Index, Jun, est. 116.0 (prior 117.9)
Richmond Fed Manufacturing Index, Jun, est. 5 (prior 1)

Canadian Economic Data 

There is no major economic data release 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, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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