Market Update

Tsys lower, yields higher out the curve, short end outperforming, 10Y 2.222 (+1.4%). Narrow range overnite on low volume in TY futures.  Core Euro bonds lower, 10Y bund 0.295% despite weaker core eurozone inflation fell (0.9% in May from 1.2%) & decline in German retail sales (-0.2% in April vs +0.3% exp), Euro stocks are higher for 2nd day, crude off 2% before inventory data this morn. GOCs lower after Q1 GDP rose 3.7% vs 4.2%, 0.5% m/m in March vs 0.2% exp.RRB auction today at noon – $700mln new 0.50% Dec 1 2050s with the WI roll 2.5/1.8, implied yield ~0.47%. Breakevens have declined ~12bps since the last RRB auction on Feb 8th which came at 0.578% and a sub avg b/c of 2.244x.  Provis opening unch after yest 1-1.5bps widening on supply – York issuing $$150mln 10Y @ 93.5 (Ont + 17) and Alberta $700mln new Dec 48s @ 98 (11 over ont).

News headlines 

Election Jitters Hit Pound; Oil Drops Before Data: Markets Wrap (Bloomberg) The British pound was the stand-out amid muted moves in many markets, weakening on the prospect of a hung parliament in next week’s U.K. election and handing a boost to stocks. Crude fell a second day before the release of supply data.

Oil at three-week low as rising output risks OPEC-led deal (Reuters) Oil fell to a three-week low on Wednesday on news that Libyan output was recovering from a technical issue at an oilfield, fuelling concerns that OPEC-led output cuts on reducing global inventories were being undermined by producers outside the deal.

Euro-Area Inflation Slows More Than Forecast Before ECB Meeting (Bloomberg) Euro-area inflation slowed more than economists forecast, giving ammunition for European Central Bank policy makers who say it’s too early to commit to an exit from monetary stimulus.

British PM May could lose majority in June 8 election: YouGov projection (Reuters) Prime Minister Theresa May could lose control of parliament in Britain’s June 8 election, according to a projection by polling company YouGov, raising the prospect of political deadlock just as formal Brexit talks begin.

National Bank hikes dividend as quarterly profit rebounds (TheGlobeAndMail) Profit at National Bank of Canada rebounded strongly in the second quarter of 2017 after the company took a big hit in the same period last year. Canada’s sixth biggest bank by assets posted net income of $484-million for the quarter that ended on April 30, compared to $210-million a year earlier.

Why this bond fund manager is girding for inflation in the U.S., but not in Canada (FinancialPost) The U.S. economy may be in a cyclical upturn that leads to higher inflation and rising interest rates, but its real long-term growth prospects appear stuck at about two per cent. In a world where interest rates generally track real growth, that’s making it difficult for fixed-income managers to find attractive total returns in the bond market.

Overnight markets 

Overview: US 10yr note futures are down -0.012% at 126-05, S&P 500 futures are up 0.21% at 2415.75, Crude oil futures are down -2.24% at $48.55, Gold futures are up 0.25% at $1268.9, DXY is down -0.12% at 97.163, CAD/USD is down -0.11% at 0.7438.

US Economic Data

7:00 AM MBA Mortgage Application, May 26, -3.4% (prior 4.4%)
9:45 AM Chicago Purchasing Manager, May, est. 57.0 (prior 58.3)
10:00 AM Pending Home Sales, m/m, Apr, est. 0.5% (prior -0.8%)
  Pending Home Sales NSA, y/y, Apr, (prior 0.5%)
2:00 PM US Federal Reserve Releases Beige Book

Canadian Economic Data

8:30 AM Quarterly GDP Annualized, 1Q, 3.7%, est. 4.2% (prior 2.6%, revised 2.4%)
  GPD, m/m, Mar, 0.5%, est. 0.2% (prior 0.0%)
  GPD, y/y, Mar, 3.2%, est. 2.9% (prior 2.5%, revised 2.4%)


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