Commentaires matinaux

Market Update

US tsys higher, 10Y 2.105% (-3bps), tsy curve 2bps flatter. The ECB left rates unch at 0.25%, saying it expects to leave rates unchanged through 2020 in order to deal with low inflation, German bunds lower and flatter on the news with the 2Y -0.67% (+3bps)  and the EUR spiking higher 1.1267 (+0.40%) – somewhat hawkish as more easing had been priced in. GOCs higher , in line with tsys, 10Y 1.42%. May Ivey PMI  scheduled for 10:00am.  Marked divergence in Can/US over the past week – underperformance at the short end , while at the long end Can/US is ~4bps tighter – buying in the 10Y yesterday post weak ADP seemed to drag longs higher as well.  The bid in 2s seems to have stalled here, as evidenced by price action following yesterday’s strong 2Y auction.

News headlines

Trump threatens China with tariffs on further $300 billion of goods (Reuters) U.S. President Donald Trump threatened to hit China with tariffs on “at least” another $300 billion worth of Chinese goods but said he thought both China and Mexico wanted to make deals in their trade disputes with the United States.

Debt blamed in credit crisis could help Canada with housing risk (BNN) The type of securities blamed for triggering a credit crisis in the U.S. a decade ago could now be part of the solution in Canada, where a cooling housing market is a key risk to its US$1.7 trillion economy. The Bank of Canada is discussing ways to encourage a more robust market for residential mortgage-backed securities with potential investors. Only about $1.5 billion of Canadian uninsured mortgages have been pooled in RMBS deals, or about 0.1 per cent of the country’s mortgage debt, according to rating company DBRS Ltd. No lender has widely marketed such a deal since September, when private lender MCAP sold $254 million of the notes.

Ontario government moves to cap wage increases at 1 per cent for public-sector employees (TheGlobeandMail) The Ontario government is moving to cap wage hikes for more than a million public-sector workers to no more than 1 per cent a year as the province enters negotiations with several teachers’ unions. Treasury Board President Peter Bethlenfalvy introduced legislation on Wednesday to cap wage increases for the broader public sector on new contracts negotiated for a three-year period. The bill came with no notice to unions and the province’s public-service union decried the legislation as unconstitutional.

Loonie will surge if Poloz doesn’t follow Fed on cuts: Rosenberg (BNN) If the U.S. Federal Reserve cuts interest rates, the Bank of Canada will follow suit, says David Rosenberg, who also warns that the loonie will surge if it doesn’t. “My sense is that Poloz seems to be very confident and wants to keep interest rates stable here,” the chief economist and strategist at Gluskin Sheff + Associates told BNN Bloomberg in an interview Wednesday. “But think about what the risks are if the Fed eases, and the Bank of Canada operates policy here in a vacuum and doesn’t follow suit. What ends up happening is the Canadian dollar is going to ratchet higher.” Rosenberg warned that a higher loonie is “the last thing” Canada’s manufacturers and resource producers need right now, and that the fundamentals don’t support the Canadian dollar heading toward 80 cents US. 

U.S. trade deficit narrows; gap with China widens (Reuters) The U.S. trade deficit unexpectedly narrowed in April as imports of goods dropped to a 15-month low, offsetting an aircraft-led decline in exports. The Commerce Department said on Thursday the trade deficit fell 2.1% to $50.8 billion. Data for March was revised up to show the trade gap increasing to $51.9 billion instead of the previously reported $50.0 billion. The government revised trade data from 2014. Economists polled by Reuters had forecast the trade gap widening to $50.7 billion in April.

Markets Overview: US 10yr note futures are up 0.123% at 127-05, S&P 500 futures are up 0.28% at 2835.75, Crude oil futures are up 0.79% at $52.09, Gold futures are up 0.56% at $1341.1, DXY is down -0.29% at 97.035, CAD/USD is down -0.08% at 0.746.

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	1.323%	2 Year	1.837%
5 Year	1.286%	5 Year	1.848%
10 Year	1.422%	10 Year	2.1%
30 Year	1.725%	30 Year	2.597%

US Economic Data

07:30 AM	Challenger Job Cuts YoY, May  —  10.90%
08:30 AM	Revisions: Trade Balance,   0.00%  0.00%
	Trade Balance, Apr  -$50.7b  -$50.0b
	Nonfarm Productivity, 1Q F  3.50%  3.60%
	Unit Labor Costs, 1Q F  -0.90%  -0.90%
	Initial Jobless Claims, 37043  215k  215k
	Continuing Claims, 45778  1660k  1657k
09:45 AM	Bloomberg Consumer Comfort, 37408  —  6080.00%
12:00 PM	Household Change in Net Worth, 1Q  —  -$3730b

Canadian Economic Data

08:30 AM	Int’l Merchandise Trade, Apr  -2.80b  -3.21b
10:00 AM	Ivey Purchasing Managers Index SA, May  —  5590.00%

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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 rallying after weak ADP (27k vs 185k exp), short end leading the rally with the 2Y 6bps lower @ 1.82%, breaking below Monday’s low  with the 10Y 2.08%. US equity futures coming off after the data, S&P +6 (from +15 pre data). GOCs  outperforming tsys in the rally 1-2bps, 10Y 1.41% (-6bps). 2Y auction in Canada today – $3.0bln in reopened Can 1.5 August 21s with eh Aug 21/May 21 inverted at -1.2bps, just off the lows of -1.9bps of late May.  With benchmark 2Y yields ~1.34% there is little value outright in our opinion , yet relative to other rolls in the sector (i.e. the 2Y roll May/Feb21 -3.2bps) the August 21s look fairly cheap.

News headlines

Chinese importers to apply for tariff waivers on U.S. goods (Reuters) Chinese importers are preparing applications for waivers on import tariffs levied on more than 700 U.S. goods in the Sino-U.S trade war, after the finance ministry said it would start taking submissions.

Fed’s slipstream leaves stocks beaming, dollar subdued (Reuters) Global stocks gained for a third straight day on Wednesday, bolstered by investors’ growing hopes that the Federal Reserve might cut interest rates this year to boost a slowing global economy, while the dollar languished near seven-week lows.

Mexican officials hope to avert U.S. tariffs in last-ditch talks (Reuters) Mexican officials will seek to persuade the White House in talks hosted by U.S. Vice President Mike Pence on Wednesday that their government has done enough to stem immigration and avoid looming tariffs.

Canada says China will increase examination of meat imports (FP) Concerns over swine fever, smuggling and ‘non-compliance of pork shipments’ cited. China’s customs agency plans to increase inspections of Canadian meat and meat product imports, a move that could seriously damage the Canadian industry, officials said Tuesday. A Canadian agriculture ministry notice to industry seen by Reuters said the embassy in Beijing had been told the Chinese would open all containers of Canadian meat and meat products and in some cases 100 per cent of the contents will be inspected.

Enbridge’s Line 3 setback in Minnesota is more bad news for oil workers, group CEO says (BNN) A court ruling in Minnesota that could further delay Enbridge Inc.’s Line 3 oil pipeline replacement project spells more bad news for Canadian oil field workers, says the CEO of the Petroleum Services Association of Canada. Investor confidence in Western Canada’s oil industry is at a low ebb and that has resulted in less producer spending on exploration and production, said Gary Mar. « Whenever there is a delay or some impediment to takeaway capacity, that has a direct affect on the interest of producers in committing capital to projects, » he said.

Trump just banned US cruise ships, yachts, and private planes from traveling to Cuba (BI)  President Donald Trump’s administration is restricting travel to Cuba, the US State Department said on Tuesday. The Trump Administration is ending an educational travel program and banning « passenger and recreational vessels » — which include cruise ships and yachts, as well as private and corporate planes — from traveling to Cuba. The State Department cited as reasons for the ban the Cuban government’s repression of its citizens and support of Venezuelan president Nicolas Maduro, who faces a challenge to his tenure from opposition leader Juan Guaido amid a spiraling economic crisis.

Mitsubishi Heavy in talks to buy Bombardier’s regional jets in industry shake-up (Reuters) Japan’s Mitsubishi Heavy Industries Ltd said on Wednesday it is holding talks to buy Bombardier Inc’s CRJ program, in a deal that would shake up the market for regional jets with fewer than 100 seats.

Overview markets: US 10yr note futures are up 0.172% at 127-06, S&P 500 futures are up 0.38% at 2815.75, Crude oil futures are down -1.01% at $52.94, Gold futures are up 1.08% at $1343.1, DXY is up 0.04% at 97.115, CAD/USD is down -0.01% at 0.7467.

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	1.344%	2 Year	1.819%
5 Year	1.3%	5 Year	1.84%
10 Year	1.436%	10 Year	2.099%
30 Year	1.727%	30 Year	2.606%

US Economic Data

07:00 AM	MBA Mortgage Applications, 1.5%    Prior: 3.30%
08:15 AM	ADP Employment Change, May  Actual: 185k Prior:   275k
09:45 AM	Markit US Services PMI, May F  Survey: 50.9 Prior:   50.90
	Markit US Composite PMI, May F  —  Prior: 50.9
10:00 AM	ISM Non-Manufacturing Index, May  55.40  Prior: 55.5

Canadian Economic Data

08:30 AM

Labor Productivity QoQ, 1Q  Survey: 0.40%  – Prior: 0.40%

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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 under pressure, yields 4-7bps higher led by the short end, tsy 2s30s 3bps flatter on heavy volume in TY futures (~600k). Big day for Fedspeak with Chair Powell speaking at 10:00ET as well as Brainard and Williams.  US equity futures higher (S&P +17), Mexican president saying talks are going well with the US after constructive comments from the Mexican foreign minister. Aussie bonds little changed after RBA cuts rates 25bps as expected. Core Euro bonds mixed, UK gilts lower while bunds are slightly higher. In Canada, GOCs are lower, lagging the pullback in tsys by 1bp, no data in Canada yet expect provi issuance all in yields are at the lows, 10Y ontario spreads barely 4bps wider over the month despite  a 35bp rally in 10Y yields.

News headlines

Mexico draws red line on asylum as Trump tariff risk rises (Reuters) Mexico said on Monday it would reject a U.S. idea to take in all Central American asylum seekers if it is raised at talks this week with the Trump administration, which has threatened to impose tariffs if Mexico does not crack down on illegal immigration. President Donald Trump said last week he would impose a blanket tariff on Mexican imports on June 10 to try to pressure Mexico to tackle large flows of mostly Central American migrants passing through en route to the United States. The move has spooked global markets worried about a new front in the U.S. trade war.

Powell to open Chicago conference as rate cut talk intensifies (Reuters) Federal Reserve Chairman Jerome Powell gives opening remarks on Tuesday at a monetary policy conference focused on long-term issues, but set now to the backdrop of intensifying market speculation that global trade worries may force an imminent Fed rate cut. While Powell’s remarks may well stay true to the theme of the two-day session at the Chicago Federal Reserve, organized as an exploration of broad monetary policy strategy and methods, investors will be attuned to any hint of his developing economic outlook. Since the Fed last met, President Donald Trump has slapped new 25 percent tariffs on $200 billion of Chinese imports, taken aim at Chinese telecoms giant Huawei and extended the use of tariffs to achieve unrelated goals by threatening new import taxes on Mexico unless immigration slows. 

Ottawa announces new measures to prevent steel dumping (GlobeandMail) The Canadian government announced new measures Monday to prevent the dumping of low-priced foreign steel into the Canadian market as it seeks to maintain its privileged trade status with the United States.  Finance Minister Bill Morneau said the measures are necessary because Canada risks becoming a target for steel dumping following last month’s agreement between Canada and the U.S. to eliminate steel and aluminum tariffs on trade between the two countries.

Donald Trump’s trade war has already cost investors up to $7 trillion (FP) Trump’s effort to reorient the U.S.’s place in world trade could end up being much more costly than most people think.

Morgan Stanley sees recession within year if trade war gets any worse (FP) Wall Street’s biggest banks lined up to warn investors of growing recession risks from the escalating trade war between the U.S. and China. A global recession could start within nine months if President Donald Trump imposes 25 per cent tariffs on an additional US$300 billion of Chinese exports and Beijing retaliates, according to Morgan Stanley. Separately, JPMorgan Chase & Co. said the probability of a U.S. recession in the second half of this year had risen to 40 per cent from 25 per cent a month ago.

Australia dodges Trump tariffs on metals, thanks to U.S. politician (FP) Defense, State departments dissuade President from straining relationships with allies important to U.S. defence. The Trump administration considered imposing tariffs on imports from Australia last week, but decided against the move amid fierce opposition from military officials and the State Department, according to several people familiar with the discussions.

U.K. Retail Crisis Deepens as Stores Report Plunging Sales (Bloomberg) U.K. retail sales plunged in May, reinforcing a gloomy picture for the industry that’s seen a number of high-profile businesses run into trouble. Also, U.K. Construction Declines at Sharpest Pace in More Than a Year.

Canadian dollar rallies to six-day high as investors dump the greenback (GlobeandMail) The Canadian dollar strengthened to a nearly one-week high against its U.S. counterpart on Monday as rising expectations of a Federal Reserve interest rate cut this year weighed on the greenback. The U.S. dollar tumbled against a basket of major currencies after St. Louis Federal Reserve President James Bullard said an interest rate cut “may be warranted soon,” given the rising economic risk posed by global trade tensions as well as weak U.S. inflation. “It’s a broader move on the U.S. dollar following these comments,” said Simon Côté, managing director, risk management solutions at National Bank Financial. “The market is getting what it was waiting for, a reason to take some profit, sell some (U.S.) dollars.”

Overnight markets

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	1.385%	2 Year	1.904%
5 Year	1.322%	5 Year	1.899%
10 Year	1.455%	10 Year	2.121%
30 Year	1.728%	30 Year	2.575%

US Economic Data

10:00 AM	Factory Orders, Apr Survey: -1.00%  Prior: 1.90%
	Factory Orders Ex Trans, Apr  – Prior:  0.80%
	Durable Goods Orders, Apr F  –  Prior:-2.10%
	Durables Ex Transportation, Apr F  – Prior:  0.00%
	Cap Goods Orders Nondef Ex Air, Apr F  Prior: -0.90%
	Cap Goods Ship Nondef Ex Air, Apr F  – Prior:  0.00%

Canadian Economic Data

There is no CDA 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, 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