Market Update

US tsys sharply lower, 10Y 2.274% (+4.5bps), off the lows after Q1 GDP revised higher 1.4% vs 1.2% & PCE 1.1% vs 0.6%, thou GDP price index 1.9% vs 2.2% prev. Heavy volume in TY1 futures (690k) overnite. Core EGBs lower as well, the German bund curve ~5bps steeper, Gilt yields 5-8bps higher. European peripheral spds vs Germany continue to compress led by Greece, 10Y vs bunds 493 bps or 15bps tighter. German CPI rose above forecasts in June, while BOE chief economist Haldane said the BOE had to seriously consider raising rates to stem cost of living increases. GOCs lower, underperforming tsys across the curve 2-3bps, longs tighter on the curve, 10s30s new lows 42bps. Can/US spreads 20-30 bps cheaper since Wilkins/Poloz warning on rates two weeks ago. Provincials tighter by 0.5bps to start after closing 1bp tighter yest on no issuance.

News headlines 

Euro, Pound Climb as Traders Adjust Rates Outlook: Markets Wrap (Bloomberg) The euro strengthened to the highest level in more than a year and the British pound gained a seventh day as expectations grew that financial conditions will be tightened on accelerating economic growth. Banking stocks outperformed and oil extended its winning streak.

Oil prices rise to two-week high on dip in U.S. output (Reuters) Oil prices rose to a two-week high on Thursday, extending a rally into a sixth straight session after a decline in weekly U.S. production eased concerns about deepening oversupply. Crude prices slipped to the lowest in 10 months last week but have since rebounded more than 7 percent, stretching their bull-run to the longest since April.

Global borrowing hits record $217T, as central banks prepare to tighten credit (Financial  Post) Global debt levels have climbed $500 billion in the past year to a record $217 trillion, a new study shows, just as major central banks prepare to end years of super-cheap credit policies.

Buffett’s Berkshire on verge of becoming BofA’s top shareholder (Reuters) Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) may be on the verge of becoming Bank of America Corp’s (BAC.N) largest shareholder, after the bank raised its dividend in the wake of a positive assessment of its ability to handle market stresses.

Banks Unleash Surprisingly Big Payouts After Fed’s Stress Tests (Bloomberg) The Federal Reserve told big banks they have more than enough capital, and they promptly announced a windfall for their shareholders. JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. led U.S. firms in unveiling plans to boost dividends and stock buybacks more than analysts had projected, after every lender passed annual stress tests for the first time since the Fed began the reviews in the wake of the 2008 financial crisis. Shares across the industry rallied in early trading Thursday.

Canada’s long ride with rock-bottom interest rates appears to be ending (Financial Post) Canada’s long ride with rock bottom interest rates appears to be coming to an end. Stephen Poloz, governor of the Bank of Canada, has dropped a big hint that for the first time in seven years, the bank will be pushing Canadian interest rates higher.

Overnight markets 

Overview: US 10yr note futures are down -0.384% at 125-23, S&P 500 futures are down 0% at 2438.5, Crude oil futures are up 1.14% at $45.25, Gold futures are down -0.53% at $1242.5, DXY is down -0.03% at 95.982, CAD/USD is down -0.04% at 0.7672.

US Economic Data 

8:30 AM GDP Annualized, q/q, 1Q T, 1.4%, est. 1.2% (prior 1.2%)
Personal Cosumption, 1Q T, 1.1%, est. 0.6% (prior 0.6%)
GDP Price  Index, 1Q T, 1.9%, est. 2.2% (prior 2.2%)
Core PCE, q/q, 1Q T, 2.0%, est. 2.1% (prior 2.1%)
Initial Jobless Claims, Jun 24, 244k, est. 240k (prior 241k, prior 242k)
Continuing Claims, Jun 17, 1948k, est. 1935k (prior 1944K, prior 1942k)

Canadian Economic Data 

CFIB Business Barometer, Jun, (prior 66.0)

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