Market Update

US tsys higher across the curve, 10Y 2.23% lowest since Sep 2017, tsy 3M10Y curve inverted to new lows  -12.5bps.  Carry over risk-off on US/China trade, S&P futures -19pts. China considering cutting off exports of rare earths to the US.   Core EGBs higher, 10Y bund -.17% multi-year lows with the bund 2Y10Y 2.5bps flatter- German unemployment rose 60k (sa) vs -8k exp, Aussie 10Y fell below the o/n rate for first time since 2015. GOCs higher, 3bps wider vs tsys, before BOC decision at 10:00ET.  GOC 2s5s curve inverted  @-7bps – a level not seen since the depths of the 2007 crisis.   BOC expected to hold rates unch at 1.75%, no press conference but Deputy Wilkins speaks tomorrow before Q1 GDP Friday.  Poloz has been fairly upbeat lately despite trade developments and weaker crude, implying the next move in rates is likely higher once the trade picture clears.

News headlines

Stocks Slump as Bond-Market Warning Rings Louder: Markets Wrap (Bloomberg) Stocks extended their global retreat on Wednesday as investors fled to bonds, driving yields down to multi-year lows in a fresh wave of risk aversion. Gold advanced.

Oil Slumps Below $58 as U.S.-China Trade Hostilities Escalate (Bloomberg) Oil slumped as escalating trade hostilities between the U.S. and China stoked fears of slowing global growth, overshadowing forecasts for a drop in American crude inventories.

Bank of Canada likely on hiatus before federal election (BNN) Bank of Canada Governor Stephen Poloz will probably keep interest rates unchanged Wednesday in what looks to be a prolonged hiatus, at least until after elections in October.

China ready to hit back at U.S. with rare earths: newspapers (Reuters) China is ready to use rare earths to strike back in a trade war with the United States, Chinese newspapers warned on Wednesday in strongly worded commentaries on a move that would escalate tensions between the world’s two largest economies.

Huawei challenges legality of U.S. defense bill as sanctions fight ramps up (Reuters) China’s Huawei Technologies Co Ltd has filed a motion for summary judgment in its lawsuit against the U.S. government, in the telecoms equipment maker’s latest bid to fight sanctions from Washington that threaten to push it out of global markets.

Bond bulls get a boost as trade tensions fan recession fears (Reuters) The global bond rally accelerated on Wednesday, sending 10-year U.S Treasury yields to 20-month lows, as investors fearful of the fallout from the Sino-U.S. trade war sold shares and scurried for the safety of German and U.S. government debt.

U.S. Treasury says nine trade partners deserve scrutiny over currency practices (Reuters) The Trump administration said on Tuesday that no major trading partner met its currency manipulation criteria but nine countries, including China, required close attention as Washington presses tariffs and negotiations to address trade deficits.

Overnight markets

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.527% 2 Year 2.079%
5 Year 1.46% 5 Year 2.026%
10 Year 1.562% 10 Year 2.231%
30 Year 1.819% 30 Year 2.67%

US Economic Data

07:00 AM MBA Mortgage Applications, May 24 Survey – Actual -3.3% Prior 2.4%
10:00 AM     Richmond Fed Manufact. Index, May Survey 7 Prior 3

Canadian Economic Data

10:00 AM Bank of Canada Rate Decision, May 29 Survey 1.75% Prior 1.75%

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, Émile Bordeleau

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