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Market Update

Tsys moving lower in NY trade after Fed Dudley comments on wages and inflation, US 10Y 2.167%. Dudley noted inflation is lower than the Fed would like while wage growth should pick up. Overnite was mostly range bound, quiet action, European equities are higher, crude unch 44.75. Core Euro bonds lower, UK gilts 2.5bps higher, 10Y bund 0.29% (+1.5bps) – long end supported by opening of EU Brexit talks. GOCs unch,  curve 1bp flatter longs outperforming. Provis opening unch, Ont 27s 75.5, Ont 48s 84.5.

News headlines 

Macron Boosts Europe Stocks; Gold Slips Fourth Day: Markets Wrap (Bloomberg) European stocks jumped a second day, boosted by French equities after the country’s new president won a free hand to drive through economic reforms. The pound edged higher and the euro was steady as Brexit talks began.

Oil prices pause after sharp falls (Reuters) Oil prices edged higher on Monday, pausing for breath after coming under pressure over the past month from rising production in the United States, Libya and Nigeria, which has taken the edge off an OPEC-led initiative to support the market by cutting production.

U.S. bank investors hope Fed stress test results lead to big payouts (Reuters) Investors are hoping the Federal Reserve will allow big U.S. banks to put an estimated $150 billion in idle capital toward stock buybacks, dividends and profit-boosting investments in the coming weeks after conducting a regular examination of financial strength.

Chinese state oil giants take petrol price battle to the pumps (Reuters) Chinese state oil giants Sinopec and PetroChina are waging war at the nation’s gas pumps, slashing prices at unprecedented rates in an effort to reclaim sales lost to private local and foreign rivals in the $440 billion retail fuel market.

IMF says Japan needs to stick with fiscal, monetary stimulus (Reuters) The International Monetary Fund urged Japan to avoid withdrawing fiscal policy stimulus and said monetary policy should be loosened further if risks to the economy materialize, warning of weak consumption that remains vulnerable to external shocks.

U.S. Wants Quick Lumber Deal Yet Canada Says Much Work Remains (Bloomberg) Canada’s envoy to Washington says President Donald Trump’s administration is interested in a quick deal to end a softwood lumber dispute although Prime Minister Justin Trudeau’s government sees no imminent agreement

Overnight markets 

Overview: US 10yr note futures are down -0.099% at 126-20, S&P 500 futures are up 0.34% at 2439.25, Crude oil futures are up 0.02% at $44.75, Gold futures are down -0.45% at $1250.9, DXY is up 0.13% at 97.293, CAD/USD is up 0.11% at 0.756.

US Economic Data

There is no major economic news release 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, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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

Market Update

Tsys slightly weaker  off the lows after May housing starts fell 5.5%  vs 4.1% increase exp to the lowest pace since Sep 2016, US 10Y 2.165%. Euro equities higher, S&P futures +1.25, crude bouncing off the lows 44.85. Core Euro bonds lower led by longs, bunds reversing flattening trend, curve ~2bps steeper. Peripherals mixed, Italy & Spain yields higher, Greece 20bps lower after securing E8.5bln in bailout funding. GOCs lower in line with tsys, curve 0.5 bps steeper, 10Y 1.54%.  Provis opening softer, long Ontarios traded down at 84.5 earlier, Ont 48/27 box 0.3bps steeper. Quebec reopened  10Y yest @ 74.5 saw solid demand, now 75.5/74.5.

News headlines 

Shares End Week Stronger as Havens Yen, Bonds Fade: Markets Wrap (Bloomberg) Global stocks bounced back from the previous session’s losses as shares in Europe were buoyed by corporate news. Havens including the yen and bonds declined while oil rose with metals.

BOJ upgrades view on consumption, rules out early exit from stimulus (Reuters) The Bank of Japan kept monetary policy steady on Friday and upgraded its assessment of private consumption for the first time in six months, signaling its confidence in an export-driven economic recovery that is gaining momentum.

Oil prices bounce but stuck near 2017 lows on supply overhang (Reuters) Oil prices edged up from 2017 lows on Friday but remained on track for a fourth consecutive week of losses because of excess supplies despite OPEC-led production cuts. Brent crude futures were up 43 cents at $47.35 per barrel by 1026 GMT. U.S. West Texas Intermediate (WTI) crude futures were at $44.70 per barrel, up 24 cents.

ECB needs ‘more clarity’ on debt relief to buy Greek bonds: source (Reuters) The European Central Bank needs more clarity on what kind of debt relief Greece will get from its international creditors if it is to buy Greek government bonds as part of its monetary stimulus program, a source close to the matter said.

Yen hits two-week low after BOJ stays pat on policy (Reuters) The yen fell to two-week lows on Friday after the Bank of Japan kept interest rates steady and signaled it was in no hurry to follow the Fed’s example in tightening its ultra-loose monetary policy.

Poloz Talk Leads Investors to Price in 2017 Rate Hike (Bloomberg) It’s been a pivotal week for Bank of Canada watchers. Investors and economists are recalibrating rate forecasts after the central bank’s surprise talk of tightening this week signaled a policy move could come sooner rather than later.

Oilsands production to rise by 500,000-bpd over next two years, exceeded only by U.S. shale: HIS (Financial Post) Oilsands production growth will slow in the coming years as expansion projects currently underway wrap up and new projects are sanctioned at a more measured pace, according to a new report from IHS Markit.

Overnight markets 

Overview: US 10yr note futures are up 0.074% at 126-24, S&P 500 futures are down 0% at 2432, Crude oil futures are up 0.83% at $44.83, Gold futures are up 0.21% at $1257.2, DXY is down -0.1% at 97.339, CAD/USD is down -0.21% at 0.7553.

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

Tsy yields 1.5-2.5 bps higher on higher than avg volume in TY futs (440k), long end steeper reversing some of yesterday’s post FOMC bull flattening which had seen longer tsy yields at YTD lows, US 10Y now 2.148 (+2.5bps). Core EGBs lower, underperforming tsys by 3-5bps. Gilt yields 6-9 bps higher after BOE rate decision showed 5-3 vote to leave rates unch with 3 members in favor of hiking rates vs exp 7-1 split. 10Y bund spread -187bps approaching recent narrows (-185 from late May).  In Canada, GOCs  lower in line with tsys, 10Y 1.52% (+2.8bps) , 5s30s 20bps flatter over the week, 10s30s accounting for ~8bps of the narrowing. Given the hawkish rhetoric from the BOC of late  it is not surprising that the GOC curve has out flattened the US tsy curve of late, the 10s30s BOX is at the richest level since Nov (i.e. our back end looks relatively rich vs the US). Today the BOC auctions $3.3bln of 3Y- 0.75% Sep 2020s, the final reopening as outstanding is set to rise to $19.5bln post auction. 3Y yields are 20bps higher since the last 3Y May 4th, 25bps higher in the last two weeks, 2s5s 8bps flatter since the last auction, thou the Sep20/May 19 (3Y2Y) roll is ~1.5bps steeper going into supply. PSP Capital (AAA/Aaa) 5Y just launched at ~56.5 ( Onts +3). Provincials opening unch, Ont 48 issued at 85 yest was well received, immediately went 84.5 bis, Ont 48/27 curve flatter 9.3/9.1  showing demand for long provis despite lower all in long term yields, outperformance of GOC long end.

News headlines 

Commodity Drop Saps Stocks; Dollar Gains After Fed: Markets Wrap (Bloomberg) A broad decline in commodities dragged European equities lower, while U.S. stock futures also dropped on a report the probe into Russian meddling in the 2016 election may also examine President Donald Trump’s conduct. The dollar rose after the Fed’s hawkish tone on Wednesday.

BOE Policy Split Deepens as Three Officials Seek Rate Hike (Bloomberg) The split among Bank of England policy makers widened this month as two officials joined Kristin Forbes in her call for a rate increase, warning that inflation could rise more than previously thought.

Oil hits six-week low as OPEC fails to curb oversupply (Reuters) Oil prices dropped to six-week lows on Thursday, under pressure from high global inventories and doubts about OPEC’s ability to implement agreed production cuts. Brent crude oil fell 30 cents to $46.70 a barrel, its weakest since May 5 and just above six-month lows, before recovering a little to trade around $46.90 by 0945 GMT.

Growth worries push stocks lower, Fed hike lifts dollar (Reuters) Stocks fell in Europe and Asia on Thursday as investor concern over the pace of U.S. economic growth overshadowed a widely telegraphed rise in Federal Reserve interest rates that lifted the dollar off recent lows.

Hunt for Yield Leads to Canada Hospitals, Universities Debt (Bloomberg) Investors who own the debt of McGill University, University of Toronto and Canada’s biggest hospitals are reaping the rewards midway through a year defined by a global search for yield.

Election means ‘new game’ of Brexit negotiations for the City (Reuters) Large banks are planning to step up their lobbying of the British government as they sense an opportunity to change its priorities in the upcoming Brexit negotiations, John McFarlane, who chairs the UK’s main financial lobby group, told Reuters.

Overnight markets 

Overview: US 10yr note futures are down -0.197% at 126-22, S&P 500 futures are down -0.57% at 2421.25, Crude oil futures are down -0.36% at $44.57, Gold futures are down -1.7% at $1254.2, DXY is up 0.48% at 97.401, CAD/USD is up 0.25% at 0.753.

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