Comments

Market Update

Tsys higher, US 10Y 2.38 (-2bps) on above avg volume in TY futures (346k). No real reaction to stronger April import prices (0.5% vs 0.1% exp. Overnite bid in tsys on news Trump fired FBI director Comey & N. Korea missile test.  EGBS higher, bunds and gilt yields 2-3bps lower on FTQ and solid Portugal & German 5Y auctions, thou bunds weakening on  ECB Draghi comments, saying ‘things are clearly improving’ ,the economic recovery has evolved –  yet ‘substantial policy support still needed’. European stocks have recovered most of their earlier losses, S&P futs slightly higher, crude +1.3% 46.50. The US auctions $23bln in 10Y notes at noon with the 10Y 8ps higher than the previous auction in April. GOCs higher in line with tsys – steading cheapening in GOCs this week vs tsys a marked contrast to to last week’s 9bp outperformance – long end esp heavy on corp & provi issuance (ABIBB, Sask). The BOC auctions $3.9bln in 2Y notes at noon – new 0.5% Aug 19s with the 2Y roll (May/Feb 19) offered at 2.5bps vs 2.1bps at last auction which was also the low for the roll. Interpolating along the GOC curve would give a fair value for the WI at 2.2bps vs May 19s or 0.74%. Yet given that this is a new issue we would expect a concession of roughly 0.5 – 0.7 bps or WI roll closer to 2.7bps.

News headlines 

Stocks Edge Lower as Dollar Stalls; Oil Advances: Markets Wrap (Bloomberg) U.S. stock index futures slipped and the dollar’s rally faltered after Donald Trump fired FBI Director James Comey. Oil climbed following an industry report that showed American stockpiles declining for a fifth week.

Oil rises after U.S. inventories drop, but extra supplies weigh (Reuters) Oil prices rose on Wednesday after a larger-than-expected fall in U.S. crude inventories but failed to recoup last week’s losses due to concerns about rising output from the United States, Libya and Nigeria.

China April producer prices rise 6.4 pct, consumer prices up 1.2 pct (Reuters) China’s April producer price inflation cooled for a second straight month as iron ore and coal prices tumbled further, pressured by fears that domestic demand will not be strong enough to absorb surging supplies of steel.

Home Capital finds buyer for $1.5 billion in mortgages, tightens lending criteria (FinancialPost) Embattled mortgage lender Home Capital says it has entered into an arrangement with an “independent third party” that wishes to either purchase funded mortgages or take on its mortgage commitments and renewals, up to a total of $1.5 billion.

U.S. withdrawal from NAFTA is back on table: Wilbur Ross (TheGlobeAndMail) The Trump administration may tear up the North American free-trade agreement and negotiate separate deals with Canada and Mexico, President Donald Trump’s point-man on the file is warning.

RBC eyes bigger cut of U.S. banking market (TheGlobeAndMail) Royal Bank of Canada seeks to capture as much as 4.5 per cent of the $40-billion (U.S.) pool of U.S. investment-banking fees within three years as it expands operations in the world’s largest market for deal-making.

Overnight markets 

Overview: US 10yr note futures are up 0.2% at 125-03, S&P 500 futures are down -0.06% at 2391.75, Crude oil futures are up 1.26% at $46.46, Gold futures are up 0.47% at $1221.8, DXY is down -0.11% at 99.545, CAD/USD is down -0.18% at 0.7302.

US Economic Data

Canadian Economic Data 

There is no major economic data release for today.

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 on avg volume in TY futures, 10Y above 2.40%.  Tsys weighed by weaker German bunds/ UK gilts on a wave of sovereign supply from Austria, Netherlands & German 30Y linker sales. European stocks higher, USD higher for 2nd day at highest level in a month, S&P futures slightly higher. Gilt yields 5-6 bps higher out the curve – concerns of a hawkish slant at this week’s BOE The US sells $24bln in 3Y notes as part of monthly refunding, to be followed by 10Y supply tomorrow and 30Y on Thurs.  PIMCO sees the US 10Y going to 3.0% in the medium term as the Fed hikes at least twice this yr, the Fed reduces the size of its b.s. and the term premium will have to rise to build in higher inflation risk due to tax cuts. GOCs lower led by 10s, curve 2bps steeper. Provis unch yest on no supply, BC election today, long BC/Ont roll moving wider , rumours of Ont, Sask supply.  New $2bln ABIBB 2-tranche yest 7Y (132) & 30Y (212) both well received considering the size  and pricing 3bps below guidance trading 5-6bps tighter on the break.  We saw demand for the longs on the break.

News headlines 

Dollar Advance Saps Commodity Gain; Stocks Rise: Markets Wrap (Bloomberg) The dollar gained a second day as bets increased for a hike in U.S. borrowing costs next month. That took the shine off a bounce in commodities, though mining stocks still spurred European equities to the highest since 2015.

Oil steadies but rattled by concern about OPEC’s clout (Reuters) Oil rose on Tuesday but faced headwinds from concern over slowing demand and the rise in U.S. crude output that has shaken investors’ faith in the ability of OPEC to rebalance the market. Brent crude futures were up 9 cents at $49.43 per barrel at 1110 GMT (7.10 a.m. ET), above a session low of $49.18, while U.S. West Texas Intermediate futures were up 11 cents at $46.54 per barrel.

UK shoppers seek bargains, employers hunt staff as Brexit bites – surveys (Reuters) British shoppers are increasingly seeking bargains to offset rising inflation and employers are finding it harder to recruit migrant workers, according to surveys published on Tuesday which reflected the impact of last year’s Brexit vote. Total retail sales showed their strongest year-on-year growth in six years in April, but the jump largely reflected the timing of the Easter holiday which fell in March last year but in April in 2017, the British Retail Consortium said.

Valeant posts first-quarter profit on tax benefit, raises full-year EBITDA forecast (Reuters) Canada’s Valeant Pharmaceuticals International Inc (VRX.N) (VRX.TO) reported a first-quarter profit, compared with a year-ago loss, due to an income tax benefit, and the drugmaker also raised its full-year adjusted EBITDA forecast.

German job vacancies hit record high in first quarter (Reuters) Job vacancies in Germany hit an all-time high in the first three months of 2017, data showed on Tuesday, climbing above one million as Europe’s biggest economy expands faster than its workforce.

George Weston hikes dividend as improvements at Loblaw boost profit (TheGlobeAndMail) George Weston Ltd. is reporting a 189 per cent increase to its first-quarter profit, mostly because of improved results from its stake in Loblaw. The Toronto-based company, which also owns the Weston Foods bakery business, had $107-million or 83 cents per share of net income for common shareholders in the quarter ended March 25.

Overnight markets 

Overview: US 10yr note futures are down -0.162% at 124-28, S&P 500 futures are up 0.08% at 2397, Crude oil futures are down -0.47% at $46.21, Gold futures are down -0.53% at $1220.6, DXY is up 0.51% at 99.564, CAD/USD is up 0.32% at 0.7281.

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

Treasuries decline in morning NY action, cutting earlier opening gains, amid FX-tied pressure as US$/yen rose recently. US Treasuries prices opened NY higher after rising since about 2am ET after some initial give-back of safe-haven bid as France centrist Macron wins presidential race . Morning Fed speakers include StL Fed Bullard and Clev Fed Mester. Futures reversed gains before Fed Bullard statements aired, Bullard said he found in a recent study that much of that decline in the “natural” rate of interest could be attributed to strong demand for safe assets like U.S. Treasury securities. According to the analysis presented here, the natural rate of interest, and hence the appropriate policy rate, is low and unlikely to change very much over the forecast horizon,” Bullard said. In a speech that largely reinforced her upbeat view of the U.S. economy, Mester, a hawkish Fed policymaker, said that while risks are “roughly balanced” the central bank should not delay further policy tightening until its two key mandates are fully met.

News headlines 

Euro Slips With Stocks After Macron’s Expected Win: Markets Wrap (Bloomberg) Europe’s common currency weakened and equities dropped following a convincing defeat of populism in France’s presidential election that was already priced in by investors. Crude fluctuated as Saudi Arabia and Russia signaled output cuts will be extended.

Oil prices give up gains, U.S. output weighs against OPEC-led cuts (Reuters) Oil prices gave up early gains on Monday, as the market weighed news from OPEC and other producers about prolonging output cuts against data showing the recovery in U.S. drilling had extended for a year.

U.K. House Prices Post First Quarterly Decline Since 2012 (Bloomberg) U.K. house prices recorded their first quarterly decline in more than four years, adding to signs that the property market is cooling. In the three months to April, prices fell 0.2 percent compared with the previous three months, lender Halifax said in a report on Monday. In April alone, prices slipped 0.1 percent, meaning they haven’t risen for the past four months.

China fx reserves rise by $21 bln in April to $3.03 trillion (Reuters) China’s foreign exchange reserves rose in April for a third straight month, beating market expectations, as capital control measures and a pause in the dollar’s rally helped staunch capital outflows.

China’s April trade growth slows as commodities, electronics demand cools (Reuters) China’s import growth slowed faster than expected in April, as inbound shipments of commodities such as iron ore and copper weakened, while export growth more than halved, in line with a general cooling in demand for electronic gadgets.

Merkel vows to help Macron tackle unemployment (Reuters) Germany’s Chancellor Angela Merkel congratulated French President-elect Emmanuel Macron on his “spectacular” election success, pledging to help France tackle unemployment and to work together with him to promote European stability.

Spectre of empty houses haunt Canada’s two most expensive housing markets (Financial Post) Canada’s two most expensive cities for housing are seemingly haunted, not by ghosts but by the spectre of empty homes. Some believe vacant homes exist on a widespread basis, bought up by a stream of investors so consumed by speculation — or just a safe place to park their money — that they can’t even bother to rent out their properties in markets in where the going rate can easily top $3 a square foot.

Overnight markets 

Overview: US 10yr note futures are down 0% at 125-07, S&P 500 futures are down -0.16% at 2394, Crude oil futures are down -0.58% at $45.95, Gold futures are up 0.41% at $1231.9, DXY is up 0.28% at 98.929, CAD/USD is up 0.41% at 0.7296.

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