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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

Market Update Tsys trading slightly higher, 10Y 3.06%, narrow overnight range on heavy volume in TY futures (510k). The USD index up for a third day, DXY 93.50 the highest since Dec, crude lower (WTI -0.35 @ 70.96), equity futures slightly lower.  Tsys rebounded late yest afternoon from steep losses (worst two days since Dec) on Korea summit uncertainty and TIC data showing China’s holdings of tsys actually grew in March to $1.188 trln the highest since last October. In Canada, GOCs are higher in line with tsys, 10Y 2.475 after reaching above 2.505 for the first time since April 2014, while 5s @ 2.30% have eclipsed the highs of 2013, now the most since 2011. Provis steady , all in yields supporting spreads despite heavy supply (~12bln in provi cpn & maturity flow in June). After alberta 48s @ 78.5 yest, rumour of long mani 48 (now 11/10.5 vs Ont). CMB 10Y pricing today ~9:30 in the area of 37bps. 

News headlines

Pimco Sees U.S. 10-Year Treasury Yields Topping Out at 3.5% (Bloomberg) U.S. 10-year Treasury yields will move in a 3 percent to 3.5 percent range for the rest of the year as the Federal Reserve continues raising interest rates, said Robert Mead, co-head of Asia-Pacific at Pacific Investment Management Co. “We do think this hiking cycle is quite well advanced,” Sydney-based Mead said at the Bloomberg Invest summit in Sydney. “We also know that the backdrop of the U.S. economy has been pretty strong and going for a long time. At some point we will find these high yields will become an impediment for growth.”

North Korea Threatens to Scrap Trump Meeting on Nuclear Demands (Bloomberg) North Korea threatened to walk away from its meeting with President Donald Trump next month if the U.S. made a “one-sided demand” for the regime to surrender its nuclear weapons. Kim Kye Gwan, a vice foreign minister and a top North Korea disarmament negotiator, said the regime was disappointed by recent comments from the U.S. on their goals for the summit, according to a statement published Wednesday by the state-run Korean Central News Agency. Kim said North Korea felt “repugnance” toward National Security Adviser John Bolton and rejected a “Libya model” in which the regime quickly gives away its nuclear weapons.

Trump to Use Mueller One-Year Mark to Blast Probe, Giuliani Says (Bloomberg) President Donald Trump and his legal team are planning to use the one-year anniversary this week of Robert Mueller’s appointment to ratchet up pressure on the special counsel to close his investigation. Trump and his lawyers are trying to set up the milestone on Thursday as a turning point in their campaign to end Mueller’s probe into Russian election meddling and obstruction of justice, Rudy Giuliani, Trump’s personal lawyer, said Tuesday in an interview. While he isn’t threatening specific actions, Giuliani said they haven’t ruled out additional steps if Mueller doesn’t heed their calls.

Stocks Steady With Treasuries as Dollar Edges Up: Markets Wrap (Bloomberg) U.S. equity futures edged higher and European stocks rose as global markets regained some composure following a risk-off Tuesday session. The dollar extended gains as the euro came under pressure, and Treasury yields stabilized after their spike a day earlier. Contracts for the S&P 500, Nasdaq and Dow Jones fluctuated before moving slightly higher alongside the Stoxx Europe 600 Index. Earlier in Asia, equities nudged downward, with shares in Japan and Hong Kong declining while Australia’s main gauge eked out a gain and Korean stocks were little changed.

Canada home resales fall in April, lowest in over five years: CREA (Reuters) Resales of Canadian homes fell 2.9 percent in April from March to the lowest level in more than five years, the Canadian Real Estate Association said on Tuesday. The industry group said actual sales, not seasonally adjusted, fell 13.9 percent, while the group’s Home Price Index was up 1.5 percent from April 2017. Canada’s once-hot housing market has cooled in recent months in response to rising interest rates and tighter mortgage rules – dubbed a stress-test – since January. While most economists expect a soft landing, some say there is a risk of a U.S.-style crash.

Futures slightly higher ahead of March manufacturing data (Reuters) Canada’s main stock index futures were slightly higher on Wednesday ahead of manufacturing sales data for the month of March. June futures on the S&P TSX index were up 0.1 percent at 7:15 a.m. ET. Canada’s manufacturing sales numbers, which is likely to show a 1.2 percent increase in March, is due to be released at 8:30 a.m. ET. The Toronto Stock Exchange’s S&P/TSX rose 12.20 points, or 0.08 percent, to 16,097.81 on Tuesday. Dow Jones Industrial Average e-mini futures were up 0.05 percent at 7:15 a.m. ET, while S&P 500 e-mini futures rose 0.07 percent and Nasdaq 100 e-mini futures were 0.13 percent higher.

Morneau to provide update today on Trans Mountain expansion talks (BNN) Finance Minister Bill Morneau will update the nation on his effort to save the controversial Trans Mountain expansion project Wednesday morning. A media advisory was sent late Tuesday, stating Morneau will “update Canadians on the ongoing discussions” regarding Kinder Morgan Canada’s controversial $7.4-billion pipeline proposal at 9 a.m. ET in Ottawa.

Trudeau to Trump: NAFTA deal can be done right now, if you want it (BNN) Prime Minister Justin Trudeau has reportedly told President Donald Trump that a NAFTA agreement is imminently within reach as long as some controversial demands are set aside. That high-level conversation occurred in the midst of what many insiders view as a last-ditch push for a renegotiated agreement before impending political events pause the process until next year.

Overnight markets

Overview: US 10yr note futures are up 0.066% at 118-22, S&P 500 futures are down -0.06% at 2707.25, Crude oil futures are down -0.48% at $70.97, Gold futures are down -0.26% at $1287, DXY is up 0.32% at 93.513, CAD/USD is down -0.08% at 0.7772.

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