Commentaires

Market Update Tsys trading lower, US 10Y 3.074% (+1.5bps), on heavy volume in TY futures (475k), risk-on as Italian bonds rally and news that China will cut import tariffs on imported autos to 15% from 20-25%.  Euro equities/S&P futures are higher, USD index 0.25% lower.  Core EGBs selling off on positive sentiment re periphery, 10Y BTP/bund spd ~12bps narrower @173bps, 10Y bund +4bps @ 1.51%.  Rally in crude weighing on fixed income as well, WTI extending three year high, now 72.60 after new US sanctions announced on Venezuela. The US auctions $22bln in 2Y notes this afternoon. In Canada, GOCs are lower, underperforming tsys across the curve , GOC curve 1bp steeper 2s10s, 10s30s barely positive 0.5/0.2, Can 27s continuing to cheapen on the butterfly vs 26s/28s with the 10Y roll 0.3/0.2.  The BOC will auction $1bln in 30Y bonds tomorrow, reopening the 2% Dec 51 issue ($1.5bln out), 51/48 roll -0.2/-0.3 – we expect the auction to go relatively smoothly given the roll has been fairly stable in a flattening environment while the June1/2nd extension supports the bid in the back end. 

News headlines

Trump Willing to Wait for Good Nafta Deal, Whatever That Is (Bloomberg) With about two weeks left until what may be the final deadline for a new Nafta this year, Mexico and Canada are signaling there’s a deal to be had — if President Donald Trump wants one. U.S. Treasury Secretary Steven Mnuchin, speaking in an interview on Fox News Sunday, said Trump’s priority is getting a good deal, even if it means disregarding “any deadlines” to let current lawmakers approve it. That would leave a vote to the next Congress, which Trump’s Republican Party may no longer control after November’s midterm elections.

China Makes Massive Cut to Car Tariffs After Truce With Trump (Bloomberg) China will cut the import duty on passenger cars to 15 percent, further opening up a market that’s been a chief target of the U.S. in its trade fight with the world’s second-largest economy. The Finance Ministry said Tuesday the levy will be lowered effective July 1 from the current 25 percent that has been in place for more than a decade, boosting shares of automakers from India to Europe. Bloomberg News reported last month that China was weighing proposals to reduce the car import levy to 10 percent or 15 percent.

Trump Set to Meet South Korea’s Moon as Doubts Shroud Kim Summit (Bloomberg) South Korean President Moon Jae-in, a champion of talks between the U.S. and North Korea, will look to restore momentum for an unprecedented summit between the foes in a White House visit on Tuesday. Optimism for next month’s meeting in Singapore between President Donald Trump and leader Kim Jong Un was punctured last week by a North Korean threat to walk away if the U.S. makes a “one-sided demand” for the regime to surrender its nuclear weapons. The New York Times reported that Trump was “surprised and angered” by that statement, and indicated he could pull out.

Stocks Rise as Risk-On Creeps Back; Italy Bonds Up: Markets Wrap (Bloomberg) A degree of risk appetite returned to global markets on Tuesday, with developing-nation stocks and currencies rebounding and the euro climbing with Italian bonds. The dollar fell as Treasury yields climbed, and the pound advanced. U.S. equity futures pointed to a higher open and the Stoxx Europe 600 Index nudged upward after the MSCI Asia Pacific gauge eked out a gain in a mixed session earlier. Emerging stocks were the stand out, ending a three-day losing streak. The euro swung from a loss to a gain as investors weigh the chances Italy’s president will seek to curtail a potential populist government, while the country’s bonds rebounded from a two-day slide. The Turkish lira fell to yet another record low. Sterling strengthened amid speculation there could be another U.K. election and after upbeat comments from a Bank of England policymaker.

TSX futures lifted by higher oil prices (Reuters) Stock futures pointed to a higher opening for Canada’s main stock index on Tuesday as oil prices rose toward $80 per barrel on concerns about declining Venezuelan output and a possible fall in Iranian exports. June futures on the S&P TSX index were up 0.25 percent at 7:15 a.m. ET. Wholesale trade data for March is due at 8:30 a.m. ET and is expected to show a rise of 0.6 percent. The Toronto Stock Exchange’s S&P/TSX rose 18.76 points, or 0.12 percent, to 16,162.31 on Friday, extending its recent streak of higher closes to an 11th day. Canadian markets were closed on Monday for Victoria Day.

Canada granting refugee status to fewer illegal border crossers (Reuters) Canada is rejecting more refugee claims from people who crossed the border illegally as Prime Minister Justin Trudeau’s government seeks to dissuade, block and turn back thousands more, according to new data obtained by Reuters.

Canadian retail sales post strongest gain in five months on autos (BNN) Canadian retailers recorded their largest sales gain in five months in March, as the nation’s households continued their car buying binge. Receipts were up 0.6 per cent during the month, as sales in the auto sector jumped 3 per cent, Statistics Canada reported Friday. Economists were anticipating a 0.3 per cent gain in sales. It was a strong end to a quarter for retailers, after a sluggish start to a year — a rebound that may ease concerns about any dramatic pullback in spending by consumers. Even with the higher sales in March, receipts in the first quarter were down from the last three months of 2017, the first quarterly decline since 2015.

Overnight markets

Overview: US 10yr note futures are down -0.066% at 118-25, S&P 500 futures are up 0.18% at 2738, Crude oil futures are up 0.26% at $72.43, Gold futures are up 0.26% at $1294.3, DXY is down -0.31% at 93.39, CAD/USD is down -0.15% at 0.7831.

US Economic Data

Canadian Economic Data

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

Market Update Tsys trading slightly higher, 10Y 3.10% (-1.7bps), avg volume in TY futures. USD index reaching a new high 93.64, crude/equities slightly higher as well. Core EGBs higher led by UK gilts, safe haven bid as Italian 10Y yields hit a ten-month high 2.22% (+33bps this week) spread 10 bunds ~10bps wider, on news of a deal to form a populist coalition govt.  US data calendar thin (only GDP now forecast), multiple Fed speakers.  In Canada, GOCs weaker, 1.5-2bps wider vs tsys before March Retail Sales/April CPI, 10Y near yest high 2.52%. CPI expected to remain unch at 2.3% y/y, with the core also unch at 2.1%. Provincials well bid, part in  longs,  Mani 48 deal yest @ Ont +11 now 10.5 bid, Ont 48/27  14.1/13.8, 0.5bps narrower  wk/wk despite  $2.3bln of long provi supply this week 

News headlines

China’s Greatest Ally in Trump Trade Talks May Be North Korea (Bloomberg)  North Korea may turn out to be Chinese President Xi Jinping’s greatest ally in negotiating a trade deal with President Donald Trump. As Trump heads toward a high-stakes summit with North Korean leader Kim Jong Un next month, the president will look for all the help he can get, especially from Beijing — Pyongyang’s closest ally. That’s giving China added leverage in simultaneous talks with the Trump administration aimed at averting a trade war.

EU Acts to Counter U.S. Sanctions on Iran, Preserve Nuclear Deal (Bloomberg) The European Union started to activate measures to preserve the Iran nuclear agreement and to protect EU companies operating in the country, as the bloc reiterated support for the landmark deal after President Donald Trump’s decision to withdraw from it. The European Commission, the EU’s executive arm in Brussels, on Friday began putting a so-called blocking statute in place to shield European companies doing business with Iran from U.S. sanctions. It’s the first time in more than two decades that the measure is being invoked.

Long End of Canada Yield Curve Inverts for First Time Since 2007 (Bloomberg)  How much is 20 years of extra risk worth? Nothing, at least in Canada. The yield on Canada’s 10-year government bond briefly rose above the nation’s 30-year securities for the first time in more than a decade Thursday. The shorter-maturity notes have sold off in the last few days, pushing yields above 2.5 percent for the first time since 2014. Canada is the only developed economy with that part of its yield curve inverted, according to data compiled by Bloomberg.

Europe Stock Rally Stumbles; Treasury Yield Steady: Markets Wrap (Bloomberg)  Stocks in Europe slipped, failing to follow Asian peers higher amid conflicting reports over progress on trade talks between the world’s largest economies. U.S. futures and the dollar both gained while Treasury yields edged lower after reaching the highest level since 2011. The euro retreated and Italian 10-year bond yields jumped to the highest since October amid uncertainty over the Five Star Movement-League coalition’s policy platform as they attempt to form a government. Risk sentiment was dampened earlier after Chinese state media described reports that it would attempt to slash its trade surplus as “nonexistent.”

Canada adds 30,200 jobs in April: ADP (Reuters) Canada added 30,200 jobs in April, led by hiring in professional and business services, trade, and manufacturing, according to a report from ADP released on Thursday. The report, which is jointly developed with Moody’s Analytics, is derived from ADP’s payrolls data of about 40,000 companies.

Futures flat ahead of inflation, retail sales data (Reuters) Futures for Canada’s main stock index were little changed on Friday as investors awaited inflation and retail sales data. Canada’s annual inflation rate is expected to have remained at 2.3 percent in April while retail sales are likely to have increased by 0.3 percent in March. Both the reports are scheduled to release at 8:30 a.m. ET.

U.S.’s Lighthizer says NAFTA deal ‘nowhere near close’ (BNN) The United States declared the NAFTA countries were nowhere close to a deal in a statement Thursday designed to douse expectations that an agreement might be just a few minor adjustments away. It rebuffed an effort from Prime Minister Justin Trudeau, Foreign Affairs Minister Chrystia Freeland, and several high-ranking staffers who were in the U.S. on Thursday urging a quick deal.

Quebec rejects restaurateurs’ request to add tip-pooling to labour code (BNN) The Quebec government is nixing a proposal by restaurant owners to have a tip-pooling clause added to the province’s labour code to address a considerable wage gap among their employees. The association representing the restaurant owners made the request earlier this week, citing an income discrepancy between servers and kitchen workers. 

Overnight markets

Overview: US 10yr note futures are up 0.079% at 118-20, S&P 500 futures are up 0.09% at 2721.25, Crude oil futures are up 0.18% at $71.62, Gold futures are down -0.12% at $1287.8, DXY is up 0.13% at 93.593, CAD/USD is down -0.03% at 0.781. 

US Economic Data

There is no US economic data for today. 

Canadian Economic Data

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

Market Update Tsys trading slightly weaker, 10Y above 3.10%, (3.11 +1bp), tsy curve steeper led by long end which reached 3.245% in early trading, now 3.23% (+1.5bps). Crude surging above $72, Brent above $80 highest since June 2015 – crude inventories fell 1.4mln bbls last week according to DOE data, while the mkt deals with the prospects of a sharp drop in shipments from Iran. In Canada, GOCs are lower, curve steeper out to tens, 10Y 2.52% – the 10s30s curve inverted for the first time since 2007. The BOC auctions $3.0bln in 5Y notes at noon – reopened 2% Sep 1 23s with the Sep23/5Y roll 4.2/4 vs ~3bps when the bonds were first issued on April 4^th.  The ~20bp rise in five year yields to a seven year high 2.34% is supportive as is relatively attractive pick vs current 5s, as the M23/S22 is ~2.6bps.Provis remain well bid  – Ontario 49 deal @ 76 now 74.5/74. CMB 10Y deal @ 37 yest well received, 36.5/36. 

News headlines

Nafta Deadline Arrives With Little Prospect for an Agreement (Bloomberg)  House Speaker Paul Ryan warned a new Nafta deal had to be completed by Thursday, but Donald Trump’s trade chief told lawmakers he expects that deadline will not be met. Citing American trade law, Ryan had said May 17 was the last day to receive notice of intent to sign a deal for a new North American Free Trade Agreement that could be passed by the current Congress before a new crop of lawmakers change the political calculus. Talks, however, remain hung up on key issues.

Trump Shows Flexibility on North Korea Talks (Bloomberg) The White House distanced itself from the hard-line North Korea stance of President Donald Trump’s top security adviser, indicating his administration is committed to keeping next month’s summit with Kim Jong Un on track. Press Secretary Sarah Huckabee Sanders told reporters Wednesday that she was “not aware” of the administration advocating a so-called Libya model, in which North Korea would quickly ship his nuclear weapons program to the U.S. North Korea had earlier attacked National Security Adviser John Bolton for trying “to force our unilateral nuclear abandonment” and threatened to walk away from the June 12 summit in Singapore.

EU Hardens Against Trump With United Stand on Trade and Iran (Bloomberg)  European Union leaders presented a determined front to stand up to U.S. President Donald Trump’s threats to penalize EU businesses and scupper the Iran nuclear deal. As the bloc paved the way for retaliation, its 28 leaders meeting in the Bulgarian capital Sofia made a rare demonstration of unity in the face of what EU President Donald Tusk called the “capricious assertiveness” of the Trump administration.

Treasury Yield Hits 3.1%; Customs Talk Roils Pound: Markets Wrap (Bloomberg) Ten-year U.S. Treasury yields hit 3.1 percent on Thursday as global markets continued to adjust to an upbeat outlook for the world’s largest economy. The pound jumped but then erased the move amid conflicting reports over Britain’s future in the EU customs union. Treasuries pared an earlier drop to trade little changed, with the yield hovering around the 3.1 percent level. Italian notes led the retreat as most European bonds fell, extending their plunge from Tuesday as efforts to form a populist government drag on. Gilts followed suit and sterling wiped out all of its advance amid reported denials of a Telegraph story claiming the U.K. is prepared to stay in the customs union beyond 2021.

Stock futures little changed amid a rise in oil prices (Reuters) Stock futures pointed to a flat opening for Canada’s main stock index on Thursday even as oil prices hit $80 a barrel on concerns that Iranian exports could drop due to reimposed U.S. sanctions. June futures on the S&P TSX index were down 0.01 percent at 7:15 a.m. ET. March data on foreign investment in Canadian securities is scheduled for release at 8:30 a.m. ET. The Toronto Stock Exchange’s S&P/TSX rose 10.25 points, or 0.06 percent, to 16,108.06 on Wednesday.

Alberta passes bill allowing it to block oil shipments to B.C. (BNN) Alberta has passed landmark legislation giving it sweeping power to intervene in oil and gas exports that could result in punitive price spikes in British Columbia in the dispute over the Trans Mountain oil pipeline expansion. Premier Rachel Notley won’t say when and how the power will be used, but said she won’t wait long.

Manufacturing sales up 1.4%, signalling growth in economy (BNN) Canadian manufacturing sales rose a better-than-expected 1.4 per cent in March, as weakness in motor vehicle sales was more than offset by gains in the metals and aerospace industries, Statistics Canada reported Wednesday. Economists had expected an increase of 1.2 per cent, according to Thomson Reuters Eikon. Sales rose to $57.1 billion in March. Excluding motor vehicles, parts and accessories, Canadian manufacturing sales were $49.1 billion, up 1.8 per cent from February.

Two banks back Home Capital with new $500-million credit line (Toronto Star) Home Capital Group Inc., the Canadian alternative lender that was bailed out by Warren Buffett’s Berkshire Hathaway Inc., received a commitment for a new credit line from two banks as backing from the billionaire investor expires next month.

Overnight markets

Overview: US 10yr note futures are down -0.053% at 118-16, S&P 500 futures are down -0.17% at 2718.5, Crude oil futures are up 0.9% at $72.13, Gold futures are down -0.26% at $1288.1, DXY is up 0.11% at 93.494, CAD/USD is down -0.14% at 0.783.

US Economic Data

Canadian Economic Data

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