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Market update

US tsy yields 2-5bps higher, curve 2bps steeper as European bonds decline, stocks rise on latest Brexit polls which show ‘remain’ firmly in the lead. Euro stocks up 2.0% led by banks with the Euro Stoxx bank index up 3.0%, its fourth straight up day. Tsys pressured in Europe on heavier volume in TY futures (335k) as teo polls showed ‘remain’ camp leading as voting gets underway. Core Euro bonds lower led by 10Y gilts which are 6.5bps higher at 1.37% – yields have now retraced 50% of the April -June rally. GOCs sharply lower led by 5bp underperformance in 10s which are above 1.30% for the first time since June 1st. Provi spds in another 1bp, 7bps over the past week. In corps, we’ve seen client buying of NVCC and 5Y reits/telecom.

News headlines

• Stocks Rise With U.S. Futures as Pound Gains While U.K. Votes (Bloomberg) Stocks gained with U.S. equity-index futures and the pound strengthened to its highest level this year as the U.K.’s referendum on membership of the European Union got under way. European shares rose to a three-week high in above-average trading amid a vote that past opinion polls indicated was too close to call. A gauge of sterling advanced for a second day, while a measure of implied overnight price swings versus the dollar climbed to a record. Mexico’s peso and Russia’s ruble led gains among oil-exporting nations as crude advanced. The yen fell with gold as demand for haven assets eased, while perceived corporate credit risk fell for a fifth day.
• Sterling hits 2016 high, stocks climb as UK votes on Brexit (Reuters) Sterling hit a 2016 high and world stocks climbed for a fifth day running on Thursday, as British voters headed to the polls for a crucial vote on their European Union membership. Financial markets have been wracked for months by worries about what a potential Brexit would mean for Europe’s stability but the latest opinion polls showing the “Remain” camp holding a small lead have provided some comfort.
• Oil rises as investors focus on Britain’s EU referendum (Reuters) Oil prices rose by up to 2 percent on Thursday, shrugging off a smaller than expected draw on U.S. crude stocks as money and equity markets firmed after the last sweep of Brexit opinion polls raised optimism over Britain remaining in the EU. Global markets, including commodities, have been on tenterhooks for weeks ahead of Britain’s referendum on European Union membership on Thursday. The majority of results are expected to come in between 0100 and 0300 GMT following a YouGov poll shortly after voting closes at 2100 GMT.
• Euro zone business growth slows in June as services struggle (Reuters) Euro zone business growth decelerated more than expected this month, suggesting the current quarter’s economic performance won’t match the strong pace set at the start of the year, a survey showed. A surprising bounce in manufacturing activity was not enough to offset a marked slowdown in service industry growth, according to Markit’s flash Purchasing Managers’ Indexes. One of the first growth indicators in a month, the composite PMI fell to a 17-month low of 52.8 from May’s 53.1. A Reuters poll had predicted a more modest dip to 53.0.
• China industrial investment slowing amid tepid demand: deputy minister (Reuters) Growth in investment in China’s industry is slowing amid tepid external demand, the deputy industry minister said on Thursday. It will require hard work to meet China’s industrial growth targets for 2016, Feng Fei said, according to a statement on the Ministry of Industry and Information Technology’s website. China will accelerate reductions in capacity in some sectors in the second half this year, using market-based measures, he added.
• Air Canada Inc threatens to walk away from Bombardier Inc CSeries deal if legislation over maintenance isn’t passed (Financial Post) Air Canada is threatening to walk away from its plan to buy up to 75 CSeries jets from Bombardier Inc. unless the federal government gives it more flexibility over where it does its maintenance work. In testimony that appears to contradict the airline’s claims that politics had nothing to do with its decision to order the CSeries, an executive told a Senate committee reviewing changes to the legislation that governs Air Canada that it won’t buy the aircraft unless the government gives it more latitude.
• BlackBerry Misses Sales Estimates as Phone Unit Shrinks Further (Bloomberg)  BlackBerry Ltd. reported earnings that exceeded analysts’ earnings estimates but came up short on revenue, dragged down by ever-shrinking smartphone sales that offset efforts to boost the company’s bottom line through software products.

 Overnight markets                                                                                         

• Overview: US 10yr note futures are down -0.3569% at 130-28, S&P 500 futures are up 0.91% at 2095.75, Crude oil futures are up 1.53% at $49.88, Gold futures are down -0.54% at $1263.2, DXY is down -0.58% at 93.172.

 US Economic Data

• 8:30 AM: Chicago Fed Nat Activity Index, May, -0.51, est. 0.11 (prior 0.10, revised 0.05)
  Initial Jobless Claims, June 18, 259k, est. 270k (prior 277k)
  Continuing Claims, June 11, 2142k, est. 2150k (prior 2157k, revised 2162k)
• 9:45 AM : Markit US Manufacturing PMI, Jun P, est. 50.9 (prior 50.7)
• 10:00 AM: New Home Sales, May, , est. 560k (prior 519k)
  New Homes Sales, m/m, May, , est. -9.5% (prior 16.6%)
  Leading Index, May, est. 0.1% (prior 0.6%)
• 11:00AM: Kansas City Fed Manufacturing Activity, June, est. -5 (prior -5)

 Canadian Economic Data

• There is no major economic data 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

US tsys slightly higher on light volume in TY futures (220K), US 10Y 1.70 (-0.5bps). Tsys pressured in Europe as stocks rose for a third day, German bunds lower & steeper in thin trade ahead of Brexit vote – latest poll shows ‘remain’ with a one point lead. Prices also weighed by 30Y bund auction – E820mln Aug 2046 reopening at 0.65% vs 0.88% in May. Fed gov Powell on CNBC saying Fed is ready for Brexit vote, can’t rely too much on one month’s job figures. GOCs slightly lower, underperforming tsys for a second day after yesterday’s 3bp cheapening – which could have something to do with today’s $3bln June 26 reopening – as the CTD for CGBs is now the June 25 bond (was 24s up until last month). The 10Y roll unch at 11.1/10.9. The roll is ~1bp cheaper than the last auction on April 20th, thou outright yields are 10bps lower. provis well bid to start with supply expected, Ont 26 93/92, ont 46 105/104. Alberta/Ont roll 2bps narrower from last Fri, now 16/15.

News headlines

• Stocks Trade Near Week High Before Brexit Vote; Commodities Gain (Bloomberg) Global equities traded near a one-week high and the pound approached its strongest level in five months a day before Britons vote on membership in the European Union. Oil and copper led gains in commodities. The MSCI All-Country World Index was little changed following three days of gains as bookmakers’ odds implied there’s only about a one-in-four chance that Britons will opt to leave the EU in Thursday’s referendum. Sterling rose against most of its 16 peers and shares in emerging markets advanced for a fourth day. Crude oil was set to close above $50 a barrel for the first time in almost two weeks.
• Janet Yellen Hints That Fed May Hold Back on Raising Interest Rates (NY Times) Weak economic growth in the United States could force the Federal Reserve to hold off on any imminent interest rate increases, the Federal Reserve chairwoman, Janet L. Yellen, told Congress on Tuesday. While Ms. Yellen said that the American economy’s long-term prospects remain favorable, she signaled that headwinds, including slower employment gains in recent months, weak productivity growth and the persistence of a sluggish pace of inflation have prompted the Fed to adopt a more cautious stance.
• Nervy global investors revisit 1930s playbook (Reuters) Global investors are once again dusting off studies of the 1930s as fears of protectionism, nationalism and a retreat of globalization, sharpened by this week’s Brexit referendum, escalate anew. With markets on tenterhooks over Thursday’s “too close to call” vote on Britain’s future in the European Union, the damage an exit vote would deal business activity and world commerce is amplified by the precarious state of the global economy and its inability to absorb any left-field political shocks.
• EU Bank Regulator Says Retail Bond Holdings May Affect Bail-Ins (Bloomberg) European Union officials newly charged with handling troubled banks would take account of the “public interest” before imposing losses on retail bondholders. Some weak banks may have sold bonds to vulnerable households, rather than big investors, which should be considered before the Single Resolution Board decides on a so-called bail-in, Vice Chairman Timo Loyttyniemi said at a Euromoney conference in London.
• Oil rises further above $50 on API report, braced for Brexit volatility (Reuters) Oil rose further above $50 a barrel on Wednesday supported by an industry report that showed a large drop in U.S. crude inventories and a boost in investor risk appetite ahead of Britain’s referendum on EU membership. U.S. crude inventories fell by 5.2 million barrels, the American Petroleum Institute (API) said on Tuesday, far more than analysts expected. Official stocks data is due later on Wednesday from the U.S. Department of Energy (DOE).
• Pound Resumes Rally as Odds Signal U.K. Will Vote to Stay in EU (Bloomberg) The pound climbed toward a five-month high versus the dollar as traders took cues from betting odds that point to the U.K. voting to stay in the European Union, rather than opinion polls showing the referendum is too close to call. A gauge of sterling against a basket of currencies rose toward its June 20 closing level, which was its strongest this month. With a day left before the referendum on Thursday, an index of betting odds compiled by Oddschecker put the vote to remain at 80 percent.
• Top U.S. regulators discuss possibility of Britain leaving EU – Treasury (Reuters) The heads of the U.S. financial regulatory agencies, including Treasury Secretary Jack Lew, conferred on Tuesday about the upcoming “Brexit” vote in a regularly scheduled meeting closed to both the public and the press, according to a statement from the Treasury Department. “During the executive session, the council discussed recent market developments, including the possibility of the United Kingdom’s separation from the European Union,” it said in a summary of the meeting

 Overnight markets                                                                                         

• Overview: US 10yr note futures are down 0% at 131-8, S&P 500 futures are up 0.11% at 2082.75, Crude oil futures are up 0.54% at $50.12, Gold futures are down -0.16% at $1270.5, DXY is down -0.28% at 93.751.

 US Economic Data

• 9:00AM: FHFA House Price Index, m/m, April,  est. 0.6% (prior -0.7%)
• 10:00AM: Existing Home Sales, May,  est. 5.55m (prior 5.45m)
  •        Existing Home Sales, m/m,  May, est. 1.8% (prior 1.7%)

 Canadian Economic Data

•  8:30AM: Retail Sales, m/m, April, 0.9 %, est. 0.8% (prior -1.0%, revised -0.8%)
  •      Retail Sales Ex Auto, m/m, April, 1.3%,  est. 0.7% (prior -0.3%, revised -0.1%)

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 slightly higher despite higher Euro stocks & bond yields, US 10Y 1.685%.  Risk of Brexit continues to slide, while better than expected German ZEW index weighed on bunds, part the long end with 2s30s ~3.5bps steeper and the 10Y bund 0.067% – a two week high. With the eco calendar bare, tsy prices will be dictated by Fed chair Yellen’s testimony at 10:00am in front of the Senate Banking Committee.  The US will auction $34bln in 5Y notes at 1:00PM after a weak 2Y yesterday (0.2bps tail b/c 2.72x and lowest direct bidders since jan 15). Despite recent cheapening the 5Y at 1.17% is still 20bps below levels of the last auction on May 25th.  GOCs opening lower, 5s30s curve 1.5bps steeper. Provis unch after closing 2bps better yest with Ont & Que possible today after Mani 10Y yest ($800mln with $500mln carve out 5Y 109.5), Ont 10/30 steeper as 10s led the rally 11.6/11.4.

News headlines

• Stocks Gain With Pound as Dollar Falls Before Yellen’s Testimony (Bloomberg) Investors took a positive cue from the latest polls on Britain’s referendum over European Union membership, with global stocks advancing and the pound extending the biggest rally since 2008. The dollar weakened before Federal Reserve Chair Janet Yellen speaks on monetary policy. Sterling strengthened for a third day even as separate opinion polls showed leads for both the “Remain” and “Leave” campaigns two days before the vote.
• Oil prices slip after rally as market turns cautious (Reuters) Oil prices fell on Tuesday after a strong two-day rally abated amid volatility fed in part by a vote later this week in Britain that will determine whether the country will leave the European Union. A one-month ceasefire between the government and Nigerian militants whose attacks have curtailed the country’s crude oil exports also added a bearish signal to a market that had firmed on the back of supply disruptions. Brent crude August futures LCOc1 were trading at $50.05 at 1100 GMT, down 60 cents a barrel. The contract has risen by more than 6 percent since Thursday’s settlement, after dropping 10 percent in six previous sessions.
• Yellen makes ‘uncertainty’ new mantra as market doubts Fed view (Reuters) The U.S. Federal Reserve’s dwindling confidence in its own outlook and resulting confusion among investors are creating a policy problem that may require chief Janet Yellen to lay out her own views more forcefully. The Fed chair’s next communications test comes on Tuesday and Wednesday during her semi-annual testimony to U.S. lawmakers, less than a week after the central bank kept interest rates unchanged near record lows and lowered its projections for hikes in 2017 and 2018.
• ECB Set to Test Attraction of Paying Banks to Take Its Money (Bloomberg) The European Central Bank is about to find out how attractive its offer to pay lenders to lend really is. Starting tomorrow, euro-area banks can bid for a four-year loan from the ECB at an interest rate that begins at zero and could ultimately be negative. The net take-up, after institutions repay their borrowings from an earlier and less-generous program, is likely to be 50 billion euros ($57 billion), according to a Bloomberg survey of economists. The result of the operation, the first of four, will be published on Friday.
• Brexit Vote in Balance in Polls as Soros Warns of Pound Plunge (Bloomberg) Britain’s referendum on European Union membership remained too close to call two days before the vote, with separate polls showing leads for both sides and billionaire investor George Soros warning of a slump in the pound should voters back a so-called Brexit. A YouGov poll of 1,652 voters for the Times newspaper published late Monday showed “Leave” at 44 percent and 42 percent for “Remain,” while a survey of 800 people by ORB for the Daily Telegraph had “Remain” at 53 percent and “Leave” at 46 percent once “don’t knows” were stripped out.
• Housing crash in Canada could cost mortgage lenders almost $12 billion, Moody’s warns (FinancialPost) There are “systemic vulnerabilities” in the Canadian mortgage market that would be exposed if the country were hit by a U.S.-style housing meltdown, according to a report from Moody’s Investors Service. A crisis on that scale could result in combined losses of more than $17 billion for the Canadian banks and mortgage insurers, with house prices falling by as much as 35 per cent, the ratings agency said in the report, published Monday.
• Russia doesn’t merit rating stabilization yet – Moody’s (Reuters) The steadying of Russia’s economy does not yet merit a stabilization of its sovereign rating outlook, credit rating agency Moody’s said on Tuesday. “We have a negative outlook which reflects Russia’s ongoing challenges, including – despite a recent recovery – an environment of subdued commodity prices relative to pre-crisis,” Moody’s top European sovereign analyst Dietmar Hornung told the Reuters Global Markets Forum.

 Overnight markets                                                                     

• Overview: US 10yr note futures are down 0% at 131-15, S&P 500 futures are up 0.22% at 2078.75, Crude oil futures are down -1.94% at $48.41, Gold futures are down -1.18% at $1276.9, DXY is up 0.09% at 93.694.                                                                                                                                                                                                                                                                

US Economic Data

• There is no major economic data for today

 Canadian Economic Data

• There is no major economic data 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