Market Update

Core Euro bonds unch, volume in German bund futures way below avg with the US on holiday. Italian debt under pressure, curve ~5bps steeper 10Y yield 10bps higher @ 2.18% after former PM Renzi said Italy could stage early elections, also tomorrow brings both 5 & 10Y supply. The GBP  reversed one third of Friday’s 1.0% plunge after polls showed tighter race, with May’s conservatives barely 5pts ahead of labor.  SF Pres Williams , in a BB interview, said three hikes this year while the balance sheet unwind could begin later this yr. The latest CFTC COT report showed specs adding to longs/reducing shorts across the curve. In 10s specs are the longest since Dec 2007 @ 362k after adding 123k exposure. GOCs unch , Q1 GDP on Wed, consensus is for a 4.2% rise after Q4 2.6% – OIS mkts have increased odds of a rate hike before year end after the BOC acknowledged stronger growth yet the Bank would like to see a shift away from housing towards consumption & bus investment.

News headlines 

Stocks Meander, Pound Rises in Holiday-Hit Trading: Markets Wrap (Bloomberg) Global stocks were mixed and the dollar edged lower as the latest comments from a Fed official offered little to excite traders amid thin trading. The British pound advanced after a selloff.

Oil slips as more U.S. drilling outweighs OPEC-led cuts (Reuters) Oil prices slipped on Monday as further increases in U.S. drilling activity undercut an OPEC-led push to tighten supply. Trading was subdued due to public holidays in China, the United States and Britain, but concerns lingered over whether OPEC action would be enough to stem the tide of oversupply.

Sterling steadies after opinion poll pummeling (Reuters) Britain’s pound was the only substantive mover among major currencies on Monday, recovering some ground after weekend polls showed Prime Minister Theresa May is set to win next week’s elections even if the scale of victory is in question.

Why the Bank of Canada needs to prepare Canadians for rate hikes (GlobeAndMail) We have been stuck in a low-interest period for almost a decade now, and with that apparent inertia comes the challenge of knowing when to start reversing course. Last Wednesday’s interest rate announcement and press release by the Bank of Canada were slightly more hawkish (or slightly less dovish) in tone than its previous announcement, but it gave no explicit hints that rate increases are on the immediate horizon. However, stronger economic data that support the bank’s own internal forecasts suggest they should be. At a minimum, communication with the public should start to prepare the market for such increases.

Back-to-work bill in Quebec construction strike expected today (GlobeAndMail) The Quebec government is expected to bring in back-to-work legislation today to put an end to a strike by tens of thousands of construction workers. Premier Philippe Couillard said last week that he would set the wheels in motion to legislate an end to the strike if the picket lines didn’t come down by today.

Face it, Canada—you’re a real estate addict, and no one wants a cure (GlobeAndMail) Why, Canada! It’s great to see you, old friend. Here, take the comfortable seat by the window. You’re probably wondering why I’m here in your living room, so let me blurt it out. This is an intervention. And, yes, it’s about this housing habit of yours.

Overnight markets 

Overview: US 10yr note futures are down -0.012% at 126-06, S&P 500 futures are up 0.11% at 2416.5, Crude oil futures are down -0.12% at $49.74, Gold futures are down -0.13% at $1269.8, DXY is down -0.1% at 97.345, CAD/USD is up 0.05% at 0.7433.

US Economic Data

There is no major economic news for today.

Canadian Economic Data

10:00 AM Bloomberg Nanos Confidence Index, May 26, (prior 57.9)


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