Market Update Tsys trading sharply higher, catch up mode with EGBs after yesterday’s US mkt close, risk off tone as Italy elections loom, US 10Y thru 2.90% , 2.87% (-6.4bps). Italy 2Y yields jumped 152bps the largest one day chg on record, now 2.23% vs -0.30% on May 1st. Core EGBs seeing FTQ bid, German 10Y yield 0.29% (-5bps), a six month low. S&P futures -18pts, gold firmer, crude another 1.3% lower @ 66.96. GOCs higher, 2bps wider vs tsys, 10Y 2.275%, ~3bps narrower on the curve as 10s have led the rally , 15bps tighter since last week vs 2s30s, while 10s30s @5bps from flat last week. Provis ~5bps wider vs Friday’s cls, Ont 28s 70/69 from 66 on Friday. Ont 48/27 crv narrowing from ~15bps last week, trading up @12.7 this morn – more supply (10Y Ont, QC) expected going into month end cpn payment/extension. Data calendar picks up with BOC decision tomorrow (15% prob of hike, 55% for July from 72% last week), March GDP Thursday.  

News headlines

Italy Could Lose Irreplaceable Asset of Trust, Visco Says (Bloomberg) Italy is always just a few steps away from the “very serious risk of losing the irreplaceable asset of trust,” Bank of Italy Governor Ignazio Visco said as a political crisis in the euro area’s third-largest economy sent debt yields soaring and bank shares tumbling. While European rules can be debated, criticized and improved, Italy cannot disregard constitutional constraints that protect savings, balance accounts and ensure the respect of international treaties, Visco said at the central bank’s annual meeting in Rome on Tuesday. “Italy’s destiny is that of Europe.”

Saudis, Kuwait, U.A.E. Plan Saturday Meeting on OPEC (Bloomberg) Energy ministers from Saudi Arabia, the United Arab Emirates and Kuwait plan to meet on Saturday to discuss OPEC matters, about a week after the Saudis and Russia announced a new policy to revive oil production. Saudi Energy Minister Khalid Al-Falih will meet with Kuwait’s Bakheet Al-Rashidi and the U.A.E.’s Suhail Al Mazrouei — also the holder of OPEC’s rotating presidency — in Kuwait City, according to people with direct knowledge of the matter who asked not to be identified because the information isn’t public. Oman’s Oil Minister Mohammed Al Rumhi may join, they said.

Italy Woes Rock Global Assets as Traders Dump Risk: Markets Wrap (Bloomberg) The escalating political crisis in Italy engulfed markets on Tuesday, triggering risk-off moves and a flight to safety worldwide. Treasuries rallied with core European debt as gold and the yen gained, while Italian bonds plunged and the euro retreated. The benchmark U.S. bond yield briefly dipped below 2.8 percent, while the yield on 10-year gilts and bunds also tumbled. American equity futures retreated alongside the Stoxx Europe 600 Index. The MSCI Asia Pacific Index fell as shares of iPhone screen makers slumped on a report that Apple Inc. is shifting to next-generation technology. The Topix index posted its longest losing streak since September 2016 as Japan’s currency jumped.

Trump says top North Korean official headed to New York to discuss summit (Reuters) A senior North Korean official is headed to New York to discuss an upcoming summit, U.S. President Donald Trump said on Tuesday, the latest indication that an on-again-off-again meeting between Trump and North Korea’s leader may go ahead next month. “We have put a great team together for our talks with North Korea. Meetings are currently taking place concerning Summit, and more. Kim Young Chol, the Vice Chairman of North Korea, heading now to New York. Solid response to my letter, thank you!” Trump said in a Twitter post.

Ontario polls shift to left in two-way race to replace Liberals (Reuters) The left-leaning New Democrats have gained ground in Canada’s most populous province, Ontario, ahead of a June 7 provincial election, according to opinion polls, setting up a two-way race with the right-leaning Progressive Conservatives to take power. While plain-spoken populist Doug Ford looked set to lead the PCs to victory in Ontario when the campaign began nearly three weeks ago, momentum in the fight to unseat Liberal Premier Kathleen Wynne has shifted to the left.

TSX futures mirror global stocks fall (Reuters) Futures prices pointed to a lower opening for Canada’s main stock index on Tuesday following a sell-off in global equities triggered by a worsening Italian political crisis. Investors fear that repeat elections – which now seem inevitable in Italy – may become a de facto referendum on Italian membership of the currency bloc and the country’s role in the European Union

Feds said ‘increasingly likely’ to buy Trans Mountain pipeline (BNN) Canada is likely to buy Kinder Morgan Canada Ltd.’s Trans Mountain oil pipeline and its controversial expansion project in a bid to ensure it gets built amid fierce opposition, according to a person familiar with the talks. Buying the pipeline outright has become increasingly likely and is now the most probable option for the Canadian government, the person said, speaking on condition of anonymity because the discussions are private. The deal, a value for which hasn’t been publicly reported, will be announced as soon as Tuesday when Prime Minister Justin Trudeau’s cabinet is due to meet in Ottawa.

Scotiabank tops Q2 expectations on strong international earnings (BNN) Scotiabank reported a nearly four cent jump in profit in the latest quarter, beating market expectations with a boost from its international operations in Latin America. The bank said Tuesday it earned $2.04 billion in net income attributable to common shareholders for its second quarter, up 3.9 per cent from $1.97 billion a year ago.

Overnight markets

Overview: US 10yr note futures are up 0.417% at 120-12, S&P 500 futures are down -0.67% at 2700, Crude oil futures are down -1.31% at $66.99, Gold futures are down -0.2% at $1306.4, DXY is up 0.4% at 94.797, CAD/USD is up 0.26% at 0.7675. 

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.916% 2 Year 2.43%
5 Year 2.115% 5 Year 2.7%
10 Year 2.266% 10 Year 2.873%
30 Year 2.314% 30 Year 3.05%

US Economic Data

9:00 AM S&P CoreLogic CS 20-City MoM SA, Mar est 0.70% (0.83% prior)
  S&P CoreLogic CS 20-City YoY NSA, Mar est 6.40% (6.80% prior)
  S&P CoreLogic CS 20-City NSA, Mar (206.67 prior)
  S&P CoreLogic CS US HPI NSA Index, Mar (197.01 prior)
  S&P CoreLogic CS US HPI YoY NSA, Mar (6.34% prior)
10:00 AM Conf. Board Consumer Confidence, May est 128.0  (128.7 prior)
  Conf. Board Present Situation, May (159.6 prior)
  Conf. Board Expectations, May (108.1 prior)
10:30 AM Dallas Fed Manf. Activity, May est 23.0 (21.8 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