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Market Update

US tsys higher, yields 2-3bps lower across the curve led by the short end, the 2Y 1.72%, 10s below 2.0% for the first time since Nov 2016 as markets now fully priced for 25bp cut at the July FOMC with 50% odds of a 50bp cut, 2s10s tsy curve 10bps steeper since Tuesday’s close. Prices weakening post Phili Fed despite weak headline and drop in prices paid to 12.9 vs 23.1 in May.   The Fed’s ‘dot plot’ revealed there are now eight FOMC members in favour of at least one rate cut this year. Equities rallying in the US, S&P futures +1.0% on increased prospects of stimulus. GOC yields continuing to diverge from their US counterparts, 3% surge in crude on Iran weighing on Cda/US,  +2bps wider on top of the ~10bp yest post FOMC, longs particularly heavy.  

News headlines

TSX futures rise as oil prices soar (Reuters) Futures for Canada’s main stock index rose on Thursday, as oil prices surged after Iran shot down a U.S. military drone, raising fears of a military confrontation between the two countries.

Treasury 10-Year Yield Slides Below 2% to Lead Global Decline (Bloomberg) Treasuries led a global bond rally, with 10-year yields dropping below 2% for the first time since November 2016 as expectations grow that major central banks will ease policy.

U.S. Fed scraps patient approach, opens door to potential rate cut (BNN) The Federal Reserve signaled it was ready to lower interest rates for the first time since 2008, citing “uncertainties” that have increased the case for a cut as officials seek to prolong the near-record U.S. economic expansion.

China, U.S. to resume trade talks but China says demands must be met (Reuters) Top Chinese and U.S. officials will resume trade talks in accordance with the wishes of their leaders, but China hopes the United States will create the necessary conditions for dialogue, the Chinese commerce ministry said on Thursday.

Russia’s Putin says U.S. move against Huawei aims to weaken China (Reuters) Russian President Vladimir Putin said on Thursday that U.S moves against technology giant Huawei aimed to weaken China, while U.S. tariffs sought to hold the Chinese economy back.

Trump and Trudeau to confront disputes over uranium, lumber (BNN) Canadian Prime Minister Justin Trudeau plans to take up trade disputes with President Donald Trump in Washington on Thursday and meet with congressional leaders on the proposed U.S.-Canada-Mexico trade pact.

Oil surges after Iran downs U.S. drone, Fed signals rate cut (BNN) Oil rose after Iran said it shot down a U.S. spy drone in its airspace, stoking Middle East tensions further after the attack on two tankers last week, while a more dovish stance from the Federal Reserve lifted financial markets.

Market Overview: US 10yr note futures are up 0.208% at 128-04, S&P 500 futures are up 0.95% at 2961.25, Crude oil futures are up 3.5% at $55.64, Gold futures are up 2.68% at $1384.9, DXY is down -0.48% at 96.647, CAD/USD is down -0.86% at 0.7595.

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	1.386%	2 Year	1.702%
5 Year	1.315%	5 Year	1.723%
10 Year	1.431%	10 Year	1.994%
30 Year	1.678%	30 Year	2.514%

US Economic Data

08:30 AM	Current Account Balance, 1Q  Survey: -$124.3b  Actual: — Prior: -$134.4b
	Initial Jobless Claims, Jun 15  Survey: 220k  Actual: — Prior: 222k
	Continuing Claims, Jun 8  Survey: 1680k  Actual: — Prior: 1695k
	Philadelphia Fed Business Outlook, Jun  Survey: 10.4  Actual: — Prior: 16.6
09:45 AM	Bloomberg Consumer Comfort, Jun 16  Survey: —  Actual: — Prior: 61.6
	Bloomberg Economic Expectations, Jun  Survey: —  Actual: — Prior: 52.5
10:00 AM	Leading Index, May  Survey: 0.10%  Actual: — Prior: 0.20%

Canadian Economic Data

08:30 AM

ADP Canada Releases May. Payroll Estimates

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, Émile Bordeleau

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.

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

Market Update

US tsys lower, avg volume in TY futures (345k), 10Y 2.08 (+2bps), curve 1.5bps flatter 2s30s ahead of FOMC later today. Core Euro bonds lower, gilt/bund 10Y yields 3-4bps higher, retracing most of yesterday’s  Draghi inspired gains despite some weak data in Germany  (May PPI -0.1% vs 0.1% exp). Fed not expected to cut rates today, yet may alter the statement to reflect the latest downbeat readings on the economy and threats from a prolonged trade war with China. GOCs  lower , ~1bp wider vs the US in 10s before  May CPI (0.1% exp). Provi spreads well bid yest on ‘risk-on’, despite low yields and ongoing supply – $300mln long NBs @ 105 . In corps, TD issued $1.75bln 12NC7 NVCC @ 168, closing 2bps tighter.

News headlines

U.S. Stock Futures Drift as Bonds Slip Before Fed: Markets Wrap (Bloomberg) U.S. equity futures were in a holding pattern on Wednesday while Treasuries slipped as investors prepared for the latest Federal Reserve meeting to conclude, with anticipation growing that policy makers will signal a readiness to lower rates.

China says history shows positive outcome from U.S. talks possible (Reuters) China said on Wednesday positive outcomes were possible in trade negotiations with the United States, after the presidents of the world’s two largest economies agreed to revive their troubled talks at a G20 meeting this month.

Central banks’ dovish cooing keeps world stocks lulled near two-week highs (Reuters) World stocks held near two-week highs on Wednesday as investors bet on a worldwide wave of central bank stimulus, with expectations building that the United States and the euro zone may deliver interest rate cuts as early as July.

China snub, drought and debt shake finances of Canada’s farmers (Reuters) For years, the financial stability of Canadian farmers was the envy of their American counterparts, but rising costs, drought and a dispute with China have weakened their bottom lines.

U.S. Federal Reserve seen signaling cut by losing patience (BNN) Facing pressure from Wall Street and President Donald Trump, Federal Reserve Chairman Jerome Powell and his colleagues may be running out of patience.

Dollar near two-week high before Fed and after dovish ECB (Reuters) The dollar traded near two-week highs against the euro on Wednesday as investors waited to see whether the U.S. Federal Reserve would sound as dovish on future interest rate cuts and stimulus as the European Central Bank.

Market Overview: US 10yr note futures are down -0.184% at 127-09, S&P 500 futures are down 0% at 2926.25, Crude oil futures are down -0.07% at $53.86, Gold futures are down -0.38% at $1345.5, DXY is down -0.11% at 97.54, CAD/USD is down 0% at 0.7475.

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	1.424%	2 Year	1.895%
5 Year	1.351%	5 Year	1.864%
10 Year	1.454%	10 Year	2.084%
30 Year	1.692%	30 Year	2.564%

US Economic Data

07:00 AM	MBA Mortgage Applications, Jun 14  Survey: —  Actual: -3.40% Prior: 26.80%
02:00 PM	FOMC Rate Decision (Upper Bound), Jun 19  Survey: 2.50%  Actual: — Prior: 2.50%
	FOMC Rate Decision (Lower Bound), Jun 19  Survey: 2.25%  Actual: — Prior: 2.25%

Canadian Economic Data

08:30 AM	CPI NSA MoM, May  Survey: 0.10%  Actual: — Prior: 0.40%
	CPI YoY, May  Survey: 2.10%  Actual: — Prior: 2.00%
	Consumer Price Index, May  Survey: 136.2  Actual: — Prior: 136.0

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, Émile Bordeleau

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.

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

Market Update

Tsys surging higher, following EGBs after ECB Draghi hints on potential stimulus if outlook doesn’t improve, US 10Y 2.025% (-7bps) lowest since Sep 2017, curve bull flattening. Euro equities 1.5% higher, S&P futures +17, crude unch.  Draghi comments and six month low in German ZEW expectations push German bund yields to record lows, 10Y -0.32%, French 10Y 0.0% for first time. With FOMC tomorrow odds of a rate cut now almost fully priced for July. Focus will be on removal of the word ‘patient’ signalling more of a dovish shift, as well as dot plots.  GOCs higher,  in line with tsys, 10Y below 1.40% for first time since May 2017.  Today sees April manufacturing sales ahead of CPI tomorrow and April Retail Sales Friday.

News headlines

Stocks, Bonds Climb as Draghi Fuels Stimulus Hopes: Markets Wrap (Bloomberg) Stocks climbed and bonds rallied on Tuesday as comments from ECB officials added fuel to investors’ hopes for easier monetary policies from the world’s biggest central banks.

Draghi puts further ECB easing firmly on the table (Reuters) The European Central Bank will ease policy again if inflation fails to accelerate, ECB President Mario Draghi said on Tuesday, signaling one of the biggest policy reversals of his eight-year tenure.

CANADA STOCKS-TSX futures up on rising gold prices ahead of Fed meeting (Reuters) Futures pointed to a higher opening for Canada’s main stock index on Tuesday, as gold prices edged up on hopes of a rate cut from the U.S. Federal Reserve, which begins its two-day interest rate meeting later in the day.

For Fed’s Powell, a gap with markets and Trump may need explaining (Reuters) Bond investors expect an aggressive set of U.S. interest rate cuts this year, and a voluble president pines for the “old days” when his predecessors bullied central bankers to get their way.

EU trade surplus with U.S. expands, deficit with China larger (Reuters) The European Union’s trade surplus in goods with the United States increased in the first four months of 2019 while its deficit with China widened, figures that could further strain global tensions.

Oil prices slip for second day on global growth fears (Reuters) Oil prices fell for a second day on Tuesday on signs that global economic growth is being hit by the U.S.-China trade war, though losses were capped by Middle East tensions after last week’s tanker attacks.

German 10-yr yield hits -0.30% on Draghi’s stimulus klaxon (Reuters) The euro dropped and German government bond yields hit -0.30% for the first time on Tuesday after European Central Bank chief Mario Draghi said the bank would provide more stimulus if inflation failed to pick up.

Market Overview: US 10yr note futures are up 0.417% at 127-28, S&P 500 futures are up 0.63% at 2914.5, Crude oil futures are down -0.13% at $51.86, Gold futures are up 0.77% at $1353.3, DXY is up 0.16% at 97.71, CAD/USD is up 0.04% at 0.7452.

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	1.356%	2 Year	1.811%
5 Year	1.282%	5 Year	1.781%
10 Year	1.387%	10 Year	2.022%
30 Year	1.649%	30 Year	2.519%

US Economic Data

08:30 AM	Housing Starts, May  Survey: 1240k  Actual: — Prior: 1235k
	Housing Starts MoM, May  Survey: 0.40%  Actual: — Prior: 5.70%
	Building Permits, May  Survey: 1293k  Actual: — Prior: 1296k
	Building Permits MoM, May  Survey: 0.20%  Actual: — Prior: 0.60%

Canadian Economic Data

08:30 AM

Manufacturing Sales MoM, Apr Survey: 0.40%  Actual: — Prior: 2.10%

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, Émile Bordeleau

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.

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