Comments

Market Update

US tsys  rallying on Yellen’s prepared text release – the mkt focusing on comments that US rates don’t need to rise much to reach neutral, US 10Y 2.31% vs 2.36 pre Yellen. Tsys were already higher overnite with core EGBs after solid 10Y bund auction pushed up prices, thou prices has faded , weighed by strong UK labor mkt data  – employment rose 175k in 3 months to May pushing the unemployment rate down to 4.55 from 4.6%. Portugal sold E1bln in 10& 30Y bonds , at the high end of  the target. GOCs lagging the rise in tsys by 1.5-3 bps before key BOC decision at 10:00am. At this point, with mkt pricing in ~90% odds of a rate hike, BOC credibility would be severly tested should they decide to pass. For us the more relevant questions are whether we see another 25bp hike before y/e  and if so is the BOC done as the 50 bps of ‘insurance’ would have been removed.

News headlines 

Stocks Rebound as Dollar Dips on Trump Revelations: Markets Wrap (Bloomberg) European equities rebounded with oil while the dollar slipped as a fresh bout of political uncertainty in Washington damped optimism about rebounding global growth. A gauge of the U.S. dollar was lower for a third day while Treasuries rose before a testimony by Janet Yellen that may provide clues about her plans to scale back the Federal Reserve’s balance sheet. Oil bounced on reports of a decline in stockpiles, though it remains in a bear market. The pound erased losses after U.K. payrolls data beat estimates and unemployment fell to a 42-year low.

Your Guide to the Bank of Canada’s Bellwether Rate Decision (Bloomberg) Canada will likely become the first Group of Seven country to join the U.S. in raising interest rates on Wednesday, potentially fueling speculation the world’s central bankers are heading into a tightening cycle.

China June new yuan loans rise, but credit growth seen slowing (Reuters) Chinese lenders extended more credit than expected in June, as home lending stayed buoyant while a clampdown on shadow financing activities forced banks to shift more loans onto their books.

Germany tightens rules to shield businesses from foreign takeovers (Reuters) Germany has approved rules to make it easier to block the sale of strategically important companies to investors from outside the European Union, prompted by concerns about China acquiring German expertise by that route.

OPEC sees lower demand for its oil in 2018, points to surplus (Reuters) World demand for OPEC’s crude will decline next year as U.S. shale producers and other rivals pump more, OPEC said on Wednesday, suggesting the oil market will see a surplus in 2018 despite an OPEC-led output cut.

Mexico Oil Privatization Pays Off With Billion-Barrel Find (Bloomberg) Mexico’s decision to allow private companies to explore for oil and gas started to pay off after the discovery of at least a billion barrels in a new offshore field.

Overnight markets 

Overview: US 10yr note futures are up 0.424% at 125-23, S&P 500 futures are up 0.47% at 2436, Crude oil futures are up 1.78% at $45.84, Gold futures are up 0.69% at $1223.1, DXY is down -0.17% at 95.511, CAD/USD is down -0.01% at 0.7744.                                             

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, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Market Update

US tsys lower overnight after selling in Asia, rebound in Europe, volume light in TY futures (238k), 10Y 2.386 (+1.3bps). Core Euro bonds lower , curves mixed. Gilt yields 1-2.5bps higher led by the short end while the bund curve is bear steepening. Gilts weighed by supply with  GBP 2.5bln reopening of 2056 linker and ahead of comments from BOE Broadbent. Slow data day in the US with only JOLTS & Inventories, with Fed Brainard speech on balance sheet at 12:30 & US $24bln 3Y note auction at 1:00PM. GOCs slightly higher outperforming tsys byh ~1bp ahead of BOC tomorrow. Provis opening unch after closing 0.5bps tighter yest.

News headlines 

Stocks Follow Crude Prices Lower; Bonds in Retreat: Markets Wrap (Bloomberg) Stocks fell in Europe as energy producers got caught in a downdraft in crude prices and reversed an earlier gain. Bonds extended a slump triggered by last week’s hawkish rhetoric from central bankers.

Oil falls as banks cut price forecasts (Reuters) Oil prices fell on Tuesday as global oversupply encouraged several banks cut their price forecasts. Benchmark Brent crude LCOc1 was down 30 cents at $46.58 a barrel by 0945 GMT. U.S. crude CLc1 was 25 cents lower at $44.15.

Markets are baking in a rate hike — it’s what comes next that could surprise you (Financial Post) The market is convinced that the Bank of Canada will hike the overnight interest rate on Wednesday and that means investors will likely be looking beyond the decision itself to what the central bank says (or doesn’t say) about the path forward.

China says ‘China responsibility theory’ on North Korea has to stop (Reuters) China hit back on Tuesday in unusually strong terms at repeated calls from the United States to put more pressure on North Korea, urging a halt to what it called the “China responsibility theory”, and saying all parties needed to pull their weight.

SocGen has filed Brexit contingency plans with Bank of England (Reuters) French bank Societe Generale (SOGN.PA) has filed its Brexit contingency plans with the Bank of England ahead of a July 14 deadline for banks operating in the country, a SocGen executive told Reuters. Deputy Chief Executive Severin Cabannes, speaking on the sidelines of a conference in Paris, also said SocGen had the advantage of dual business hubs in London and Paris and so could easily adapt to Brexit.

Air Canada jet in close call at San Francisco airport (TheGlobeAndMail) U.S. aviation authorities are investigating an apparent close call involving an Air Canada flight at San Francisco International Airport. The U.S. Federal Aviation Authority says just before midnight on Friday, an Air Canada Airbus A320 was cleared to land on one of the runways, but the pilot “inadvertently” lined up instead for a taxiway which runs parallel to the runway.

Overnight markets 

Overview: US 10yr note futures are down -0.075% at 124-32, S&P 500 futures are down -0.06% at 2423, Crude oil futures are down -1.08% at $43.92, Gold futures are down -0.22% at $1210.5, DXY is up 0.05% at 96.07, CAD/USD is up 0.19% at 0.7743.

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, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Market Update

 US tsys higher near top of overnight range on avg volume in TY futures (280k). Tsy curve ~1bp flatter led by 10s, longs lagging , 10Y 2.365 9-2.1bps). Oil weaker -0.50 @ 43.72, S&P futs +1.5 pts, DXY slightly higher. Core EGBs  higher, outperforming tsys by 1-2bps, the 10Y bund 0.535%, gilts higher on renewed concerns over Brexit – mkt awaits key data on inflation Wednesday. The latest CFTC COY report (July 3rd)  shows large specs adding to shorts/paring longs across the curve, except 30Y & ultras.  Specs are now the most net long 30Y bonds since Dec 1998. GOCs trading higher in line with tsys, curve slightly steeper, 10Y 1.865% vs high of 1.895% Friday low post Cdn employment.  Provis finished last week at the narrows, ~3bps tighter, Ont 27s 67.5/66.5 – rumours of supply never materialized.

News headlines 

Stocks Buoyant Before Earnings; Oil, Gold Retreat: Markets Wrap (Bloomberg) Stocks rose and the dollar was steady as investors prepare to parse second-quarter earnings for more evidence global economic growth is back on track. Oil traded near the lowest closing price in two weeks.

Oil falls as evidence points to rising global supply (Reuters) Oil fell on Monday, adding to heavy losses at the end of last week due to rising drilling activity in the United States and no let-up in supply growth from both OPEC and non-OPEC exporters. Prices dropped even as OPEC signaled it may widen its production caps to include Nigeria and Libya, whose output has recovered in recent months after being curtailed by years of unrest.

Materials Stocks Set to Shine With Poloz Preparing Rate Hikes (Bloomberg) If Governor Stephen Poloz does the expected and raises Canadian interest rates on Wednesday, it may be time to load up on potash, copper and gold stocks. A review of equity performances following Bank of Canada tightening cycles over the past dozen years shows that materials stocks including Lundin Mining Corp. and Potash Corp. of Saskatchewan Inc. significantly outperform all other sectors of the Canadian market.

China’s June factory price inflation subdued on modest raw materials recovery (Reuters) China’s producer price inflation was unchanged in June and remained well off highs seen earlier this year, amid lingering oversupply issues in the steel sector and as signs of economic weakness weighed on the outlook for prices.

Markets No Longer Make Sense to Macro Managers  (Bloomberg) Financial markets no longer make sense to macro managers like Mark Spindel. After spending three decades focusing on things like economic trends, currency moves, politics and policy, Spindel has been confounded by markets shaped by low volatility, algorithms and more. He finally gave up and closed his nine-year-old hedge fund.

Facing Brexit challenge, Britain’s May vows to fight on (Reuters) Britain’s Theresa May will promise to fight on as prime minister and pursue bold domestic reform despite her diminished authority in a speech this week relaunching her leadership after 12 tumultuous months in power.

Overnight markets 

Overview: US 10yr note futures are up 0.15% at 125-01, S&P 500 futures are up 0.03% at 2423.25, Crude oil futures are down -0.9% at $43.83, Gold futures are down -0.06% at $1209, DXY is up 0.17% at 96.17, CAD/USD is up 0.21% at 0.775.

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, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230