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Market Update US tsys lower on above avg volume (335k TY), 10Y close to 3.0% (2.99% +2bps),little reaction to April ADP (204k vs 198k) – focus on FOMC meeting with the Fed widely expected to leave rates unch. US quarterly refunding announcement this morning –  the US Treasury expected to boost auction sizes across all maturities. Core Euro bonds lower, led by UK gilts , yields 4-6bps higher. Risk on tone  GOCs opening weaker, underperforming tsys by 1-1.5bps  – Poloz sounding a note of caution over raising rates in the face of the ‘sheer size’ of Canadas debt burden, while at the same time noting that the process of removing accommodation is made easier in a growing economy. 

News headlines

The Fed Has a Tricky Inflation Issue to Navigate (Bloomberg) Federal Reserve officials have a tricky problem to navigate at this week’s meeting: how to describe inflation that has just bounced back to their elusive 2 percent target. The policy-setting Federal Open Market Committee is expected to leave interest rates unchanged at its two-day meeting in Washington. How it opts to describe price pressures will shape expectations for the pace of future rate increases. A policy statement is scheduled for 2 p.m. on Wednesday.

Euro-Area Factories Fret About Euro as Economic Growth Cools (Bloomberg) Euro-area economic growth slowed in the first quarter, posing a challenge for the European Central Bank as it contemplates paring back monetary stimulus measures. The 0.4 percent expansion was the weakest in six quarters and followed a reading of 0.7 percent at the end of 2017. While temporary factors such as bad weather played a part, another report showed manufacturing continued to cool this quarter and some firms are concerned about the stronger euro.

Mueller to Cite Subpoena Power If Trump Won’t Do Interview (Bloomberg) Prosecutors working for Robert Mueller have made clear to Donald Trump’s legal team that the special counsel would consider a subpoena compelling the president to testify before a grand jury if he refuses to participate in a voluntary interview, according to two current U.S. officials.

Stocks Are Mixed, Treasuries Retreat Before Fed: Markets Wrap (Bloomberg) European stocks advanced and U.S. futures drifted as many investors returned from holidays to digest the latest earnings reports and shift their focus to the Federal Reserve’s imminent rate decision. The dollar nudged lower and Treasuries fell.

Canada economy grows 0.4 percent, first-quarter could be better than forecast (Reuters) The Canadian economy grew 0.4 percent in February, Statistics Canada said on Tuesday, a sign that first-quarter growth could outperform the Bank of Canada’s relatively weak expectations. Analysts in a Reuters poll had forecast February gross domestic product would increase by 0.3 percent after shrinking 0.1 percent in January. Even if March’s GDP figures are flat, Statistics Canada analysis shows that annualized first quarter growth would be 1.6 percent, greater than the 1.3 percent in the Bank of Canada’s latest forecast on April 18.

Asia sees signs of export weakness before key U.S.-China trade talks (Reuters) Manufacturing activity remained relatively solid in major Asian economies such as China and Japan in April, but exports showed signs of weakness across the region, a worrying development given heightened Sino-U.S. trade tensions. High-level U.S. and Chinese officials meet in China this week, with trade expected to be top of the agenda as both sides have threatened reciprocal tariffs on hundreds of billions of dollars worth of imports.

Stephen Poloz delivers wake-up call to most indebted Canadians (BNN) Bank of Canada Governor Stephen Poloz says the central bank is keeping a close eye on a small group of disproportionately indebted Canadians as it mulls the timing and impact of its next interest rate hike. In a speech in Yellowknife Tuesday, Poloz sounded the alarm, stating that about eight per cent of indebted households owe 350 per cent or more of their gross annual income, and that group is carrying about a fifth of total Canadian household debt.

Overnight markets

Overview: US 10yr note futures are down -0.065% at 119-10, S&P 500 futures are up 0.06% at 2653.75, Crude oil futures are up 0.22% at $67.4, Gold futures are up 0.22% at $1309.7, DXY is down -0.06% at 92.398, CAD/USD is down -0.18% at 0.7796.

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 starting mostly unch on very light volume in TY futures (140k), 10Y 2.953%, much of Europe closed for May holiday, as well as Asia. Focus on  ISM Manufacturing & FOMC decision tomorrow aft.  Equities slightly lower (S&P fut -3.5), crude lower @ 67.88 (-0.70).  UK gilts higher, flatter following disappointing UK Manufacturing PMI.  GOCs slightly lower before Feb GDP (0.3% exp). BOC Poloz speaks on household debt this aft in the wake of TD’s decision to raise their 5Y mortgage rate by 45bps to 5.59%, the largest hike since 2010. CIBC is expected to announce a 15bp increase in its 5Y rate later today. 

News headlines

U.S. Extends Steel Tariffs Relief for EU and Other Allies (Bloomberg) President Donald Trump will delay imposing steel and aluminum tariffs on the European Union, Mexico and Canada until June 1 as he finalizes deals with them, the White House said in a statement. The administration has reached agreements-in-principle with Argentina, Australia and Brazil, according to the statement, which the White House released late Monday night. The details “will be finalized shortly,” the statement added. The U.S. will also extend exemptions for the EU, Canada and Mexico for 30 days to allow for further talks.

The U.S. Just Borrowed $488 Billion, a Record High for the First Quarter (Bloomberg) U.S. Treasury Secretary Steven Mnuchin said he’s unconcerned about the bond market’s ability to absorb rising government debt after his department said it borrowed a record amount for the first quarter. “It’s a very large, robust market — it’s the most liquid market in the world, and there is a lot of supply,” he said in a Bloomberg TV interview on Monday. “But I think the market can easily handle it.”

Netanyahu’s Iran Revelations Were Aimed at an Audience of One (Bloomberg) Israeli Prime Minister Benjamin Netanyahu took the stage in Tel Aviv on Monday to expose what he said was more than a decade of Iranian nuclear deception. Critics said he didn’t reveal anything new. That may never have been the point. From his decision to speak in English to the simplicity of the slides he unveiled — including one that just said “Iran Lied” — Netanyahu’s presentation appeared to be aimed at an audience of one: Donald Trump. And the U.S. president, who is days away from deciding whether to pull out of the Iran nuclear accord, was listening.

U.K. Data Cast Fresh Doubt Over Strength of British Economy (Bloomberg) U.K. manufacturing slowed more than predicted in April and consumers borrowed at the weakest pace in 5 1/2 years in March, adding to signs that the economy’s poor first-quarter performance could persist. IHS Markit said its monthly Purchasing Managers Index was at 53.9, from a downwardly revised 54.9 in March. A 17-month low, it was worse than economists had forecast and hardened expectations the Bank of England will refrain from raising borrowing costs on May 10. The pound fell as much as 0.7 percent.

TSX futures up after Trump extends tariff exemptions (Reuters) Canada’s main stock index was poised to open higher on Tuesday after U.S. President Donald Trump postponed the imposition of steel and aluminum tariffs on the country, the European Union and Mexico.

Canada repeats that U.S. steel tariffs would hurt American jobs (Reuters) Canada has repeated its position that imposing punitive measures would hurt jobs in both countries, in reaction to U.S. President Donald Trump’s decision to postpone the imposition of steel and aluminum tariffs. The Trump administration said on Monday that tariffs on steel and aluminum from Canada and Mexico would be suspended until June 1. Speaking a few hours before the announcement, Canadian Prime Minister Justin Trudeau said tariffs were a “very bad idea” guaranteed to disrupt trade between the two nations.

Amazon to create 3,000 jobs in Vancouver, expand tech hub (BNN) Amazon announced plans on Monday to expand its tech hub in Vancouver, B.C., in a move the company says will create 3,000 new jobs. “Vancouver is home to an incredibly talented and diverse workforce, and these thousands of new employees will invent on behalf of our customers worldwide,” said Alexandre Gagnon, VP of Amazon Canada and Mexico, in a release. 

Overnight markets

Overview: US 10yr note futures are down -0.104% at 119-16, S&P 500 futures are down -0.11% at 2644, Crude oil futures are down -1.14% at $67.79, Gold futures are down -0.86% at $1307.9, DXY is up 0.49% at 92.295, CAD/USD is up 0.23% at 0.7768.

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 Quiet start to what promises to be a busy week data wise in the US, with tsys slightly weaker, 10Y 2.96% (+0.5bps) on low volume in TY futures (~210k), equity futures higher, reflecting a string of better than expected earnings as well as the Sprint/T-Mobile, Sainsbury/Asda deals. McDonald’s Q1 eps beat highest estimates: $1.79 vs $1.67, comp sales +2.9% vs 2.7% exp. Core EGBs mixed, bunds weaker , curve 1.5bps steeper despite softer regional German CPI.  Gilts are higher, with yield curve bull steepening and as a May BOE looks less likely after last week’s poor GDP figure. In Canada, GOCs are slightly lower, in line with tsys before monthly IPPI/Raw Materials data, while provis have traded down so far this morning, Ont 48s @ 78.0, Ont 27s @ 65 on expectations of more supply. 

News headlines

Ross Says U.S. to Extend Duty Relief to Some Allies, Not All (Bloomberg) The Trump administration plans to extend relief from steel and aluminum tariffs to some countries, but not all, when their temporary exemptions expire on Tuesday, said Commerce Secretary Wilbur Ross. Ross, in an interview in Washington with Bloomberg late Saturday, declined to identify which nations would be spared from the tariffs. He said the announcement will be made right before the May 1 deadline for the duties to kick in. The secretary indicated on Friday that nations have been asked to accept import quotas in return for tariff-free access of the metals into the U.S.

Oil Pares Monthly Gain as U.S. Rigs Counter Iran-Deal Risk (Bloomberg) Oil fell as the U.S. oil rig count rose for a fourth week, but was still poised for a second monthly advance. Futures in New York are up 3.7 percent this month, even after a 1 percent drop on Monday, following data that showed an increase in U.S. drilling activity. A potential withdrawal in May by U.S. President Donald Trump from a 2015 nuclear deal between world powers and Iran would reimpose sanctions on the Middle Eastern producer and curb its exports. Meanwhile, OPEC is trimming output even after concluding it has cleared 97 percent of the surplus that has weighed on prices.

Stocks Advance as Deals Greet Week; Dollar Climbs: Markets Wrap (Bloomberg) Stocks in Europe drifted higher, U.S. futures advanced, and equities across Asia gained as dealmaking activity brought some excitement to the start of a busy week. The dollar climbed while the pound faced pressure as Prime Minister Theresa May lost a key ally. Media and real estate companies led advances in Europe as most national gauges rose, while raw material providers were among the biggest losers as commodities fell. Shares in the FTSE 100 Index climbed to the highest in almost three months, with retailer J Sainsbury Plc jumping the most on record as it plans to buy Walmart Inc.’s U.K. arm, Asda. The pound dropped after Amber Rudd quit as U.K. home secretary, and Housing Secretary Sajid Javid was named her replacement.

Fed Far From Ready to Declare Mission Accomplished on Inflation (Bloomberg) The Federal Reserve is closing in on its elusive 2 percent inflation target but that doesn’t mean policy makers are ready to pronounce mission accomplished. The central bank’s preferred measure of inflation probably clocked in at that level last month after spending much of the past six years below target, government data due out on Monday are expected to show.

Canada stock market shutdown pushes investors to explore options (Reuters) A rare outage at Canada’s major stock exchanges could dent the credibility of operator TMX Group Ltd (X.TO) and encourage investors to explore alternative trading channels, fund managers and traders told Reuters. Canada’s stock market suffered a partial shutdown on Friday, forcing TMX to halt trading more than an hour early. TMX has since said the exchanges will resume trading on Monday after “internal technical issues” were resolved.

TSX set to open higher after Friday’s rare shutdown (Reuters) Stock futures pointed to a higher opening for Canada’s main stock index on Monday after the world’s sixth largest exchange was forced to halt trading on Friday due to an outage. June futures on the S&P TSX index were up 0.27 percent at 7:15 a.m. ET. The operator of Canada’s stock exchange said over the weekend that it had fixed the error that halted the market for several hours on Friday afternoon.

U.S. economic growth slowed to 2.3% pace in Q1 (BNN) The U.S. economy slowed to a moderate 2.3 per cent annual growth rate in the first quarter as consumer spending turned in the weakest performance in nearly five years. Still, the January-March increase came in better than expected and was enough to propel growth over the past year to come close to the 3 per cent goal set by the Trump administration.

NAFTA ministers head home, plan to reconvene talks in a week’s time (BNN) The politicians leading the NAFTA negotiations left Washington without a deal on Friday, under a cloud of question marks about the continental trading relationship. Canada’s Chrystia Freeland and Mexico’s Ildefonso Guajardo returned home after a week-long round with plans to reconvene around May 7 in hopes of obtaining an agreement this spring. 

Overnight markets

Overview: US 10yr note futures are down -0.039% at 119-15, S&P 500 futures are up 0.29% at 2679.25, Crude oil futures are down -1.01% at $67.41, Gold futures are down -0.74% at $1313.6, DXY is up 0.36% at 91.871, CAD/USD is up 0.3% 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