Market Update Tsys trading weaker, curve flatter, US 10Y 2.87% (+1.5bps) amid continued relief rally in Italian bonds, Italy 2Y ~50bps lower @ 1.0% from 2.64% on Tuesday. Bunds lower, slightly outperforming tsys despite better than expected Eurozone CPI (1.9% vs 1.6%) after strong regional German CPI data released yesterday. News that Trump may impose tariffs on Canadian steel and aluminum today, no real impact on CAD, thou GOCs 0.5bps wider vs tsys, 10Y 2.274%. March GDP expected to have risen 0.2% vs 0.4% in Feb, Q1 forecast at 1.8% vs 1.7%. Yesterday the BOC left rates unch yet raised the odds of a July hike with the removal of the ‘cautious’ language in favor of ‘gradual approach’, adding that incoming data suggests Q1 growth is stronger than expected while inflation is running higher than the Bank forecast in April. Provincial spreads improving since yest, Quebec reopened Dec 48s @ 75.5 , now 74.5/74, Qc/ont 48 -4.6/-5.2 from -4.5 at issue yest.
News headlines
Bank of Canada Lays Ground for More Rate Hikes (Bloomberg) Canada’s central bank is paving the way for a new round of rate increases in the second half of the year as the nation’s economy runs up against capacity constraints and inflation hovers at the highest in seven years. Bank of Canada Governor Stephen Poloz left rates on hold for a third straight decision Wednesday, but gave an upbeat assessment of the economy and removed some cautious language. The currency and bond yields popped higher after the statement from Ottawa.
Euro-Area Inflation Picks Up to Fastest in More Than a Year (Bloomberg) Euro-area inflation hit the fastest pace in more than year, some good news for European Central Bank officials debating the future policy path just as turmoil in Italy revives memories of the debt crisis. The 1.9 percent rate, effectively in line with the ECB’s goal, was up from just 1.2 percent in April and above the 1.6 percent reading forecast by economists. The core measure rose to 1.1 percent, also better than anticipated.
Imperial Professor Haskel Appointed to BOE Rates Committee (Bloomberg) Jonathan Haskel will join the Bank of England’s Monetary Policy Committee in September, giving it an expert in an issue that has vexed officials for years. The Imperial College Business School professor will replace Ian McCafferty, who is known for voting for tighter policy. He begins a three-year term on Sept. 1, according to the Treasury. Oxford Economics said he’s likely to be more dovish than his predecessor.
Stock Rebound Loses Steam on Italy, Trade Worries: Markets Wrap (Bloomberg) U.S. stock futures fluctuated and European equities struggled for traction as investors sought to rebuild their confidence amid a muddled political outlook in Southern Europe and uncertainty over global trade. The dollar fell while the euro climbed, and Italian bond yields declined. The Stoxx Europe 600 Index traded in the green but pared an earlier gain as Italy’s populists battled to revive plans for a coalition government, Spain’s prime minister teetered on the brink and the region braced for potential U.S. tariffs. The euro strengthened as inflation in the bloc hit the fastest pace in more than year. In Asia, Hong Kong and Chinese stocks outperformed after China’s official factory gauge underscored robust growth despite ongoing trade tensions. S&P 500 futures swung between gains and losses while the yield on 10-year Treasuries rose.
TSX futures flat ahead of first-quarter GDP data (Reuters) Canada’s main stock index futures was trading flat on Thursday, with investors awaiting the country’s gross domestic product data for the first quarter. June futures on the S&P TSX index were down 0.21 percent at 7:15 a.m. ET. The Canadian economy is expected to have grown at an annualized 1.8 percent pace in the first quarter, largely in line with the previous quarter as growth was likely restrained by weak exports and a slowdown in housing. The GDP data is scheduled to be released at 8:30 a.m. ET.
Rising oil prices bring hope to gloomy Canada sector (Reuters) Years of low oil prices and high costs spurred a stampede by multinational majors out of Canada’s oil sands last year, leaving the remaining crude producers struggling to weather painful drops in profit. Environmentalists derided the “tar sands” as too dirty for investment, and analysts said the region’s high production costs made little sense in a world of $50-a-barrel oil. But this month, global benchmark prices rebounded to $80 per barrel, cheering oil executives in the Canadian energy capital of Calgary, Alberta, who are shifting from survival mode to cautious expansion to capitalize on healthier cash flow expected this year.
‘Game-changer’: BMO data breach reportedly included SIN data (BNN) New details about the data breach at the Bank of Montreal have emerged. CTV News reported Wednesday it discovered an online document that included 100 BMO client names, along with crucial data including those customers’ social insurance numbers, dates of birth, and bank account information. Those details, according to CTV News, were included in a dataset posted to an online forum called Postbin on May 28, and was accessible for about five hours, between 2 p.m. and 7 p.m. ET before it was removed.
Soros view on global crisis is ‘ridiculous,’ Morgan Stanley CEO says (BNN) Morgan Stanley Chief Executive Officer James Gorman said that investor George Soros’s contention another major global crisis may be in store is unrealistic, and that the Federal Reserve will probably hike interest rates three more times in 2018 despite recent volatility. “Honestly I think that’s ridiculous,” Gorman said in an interview with Bloomberg Television in Beijing Thursday when asked about Soros’s comments this week, which included a warning that the European Union is at risk of breaking up amid Italy’s challenges. “I don’t think we’re facing an existential threat at all,” Gorman said of the EU.
Overnight markets
Overview: US 10yr note futures are down -0.156% at 120-04, S&P 500 futures are up 0.03% at 2725.25, Crude oil futures are down -0.88% at $67.61, Gold futures are up 0.13% at $1308.2, DXY is down -0.23% at 93.855, CAD/USD is down -0.14% at 0.7779.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.947% | 2 Year | 2.427% |
| 5 Year | 2.145% | 5 Year | 2.695% |
| 10 Year | 2.277% | 10 Year | 2.864% |
| 30 Year | 2.304% | 30 Year | 3.032% |
US Economic Data
| 7:30 AM | Challenger Job Cuts YoY, May -4.8% (-1.4% prior) |
| 8:30 AM | Personal Income, Apr est 0.3% (0.3% prior) |
| Personal Spending, Apr est 0.4% (0.4% prior) | |
| PCE Deflator MoM, Apr est 0.2% (0.0% prior) | |
| PCE Deflator YoY, Apr est 2.0% (2.0% prior) | |
| PCE Core MoM, Apr est 0.1% (0.2% prior) | |
| PCE Core YoY, Apr est 1.8% (1.9% prior) | |
| Initial Jobless Claims, May 26th est 228k (234k prior) | |
| Continuing Claims, May 19th est 1733k (1741k prior) | |
| 9:45 AM | Chicago Purchasing Manager, May est 58.3 (57.6 prior) |
| Bloomberg Consumer Comfort, May 27th (55.2 prior) | |
| 10:00 AM | Pending Home Sales MoM, Apr est 0.4% (0.4% prior) |
| Pending Home Sales NSA YoY, Apr (-4.4% prior) |
Canadian Economic Data
| 7:23 AM | CFIB Business Barometer, May 62.5 (56.6 prior) |
| 8:30 AM | Quarterly GDP Annualized, 1Q est 1.8% (1.7% prior) |
| GDP MoM, Mar est 0.2% (0.4% prior) | |
| GDP YoY, Mar est 2.9% (3.0% prior) |
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