Commentaires

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%

mso-sty

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

Market Update

Risk-off rally in tsys resumes after President Trump’s latest move to impose tariffs on Mexico, heavy volume in TY futures (925k), 10Y 2.16% (-4bps),  rate cut prob 92%, with three rate cuts priced in over the next year based on FF futures.  S&P futures -1.2% (GM -5%, Ford -4%) crude another 2% lower, -6% wk/wk lowest since March. GOCs higher in line with tsys, 10Y below 1.50% for the first time since June 2017. Provis opening 1-1.5bps wider, CMBs 1bp wider , 10Y Ontario still only 3 bps off recent tights.

News headlines

Stocks Sink, Havens Gain on Sparring Over Trade: Markets Wrap (Bloomberg) U.S. equity futures slumped as the trade-war rhetoric heated up, with Beijing saying it’s ready to restrict the sale of rare-earth minerals to America and President Donald Trump threatening to place escalating tariffs on Mexico. Bund yields sank to a record as investors sought havens.

TSX futures fall on lower oil prices (Reuters) Futures for Canada’s main stock index were lower on Friday as oil prices fell with U.S. President Donald Trump’s new trade threat weighing on the demand outlook.

Oil Heads for Biggest Monthly Slump This Year on Trade-War Fears (Bloomberg) Oil headed for its biggest monthly slump this year as fears that the U.S.-China trade war will hurt demand overshadowed concern over rising political tensions in the Persian Gulf.

Trump vows rapid, high tariffs on Mexico unless illegal immigration ends (Reuters) U.S. President Donald Trump, responding to a surge of illegal immigrants across the southern border, vowed on Thursday to impose a tariff on all goods coming from Mexico, starting at 5% and ratcheting much higher until the flow of people ceases.

China threatens corporate hit-list on eve of new tariffs on U.S. imports (Reuters) China threatened on Friday to unveil an unprecedented hit-list of “unreliable” foreign firms, groups and individuals that harm the interests of Chinese companies, as a slate of retaliatory tariffs on imported U.S. goods was set to kick in at midnight.

U.S. wants new trade pact with Canada, Mexico passed by summer: Pence (Reuters) U.S. Vice President Mike Pence said on Thursday he was pushing to get the U.S. Congress to ratify the new North American trade agreement this summer after both Canada and Mexico signaled they are ready to start the approval process.

Trump poised to lift curbs on E15 gasoline in latest boost to U.S. farmers (Reuters) The Trump administration will announce an end to a summertime ban on sales of higher ethanol blends of gasoline as early as Friday, a spokesman for a federal regulator said, keeping a campaign promise to farmers suffering from the trade war with China, but inviting a legal challenge from the oil industry.

Overnight markets

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	1.476%	2 Year	1.99%
5 Year	1.401%	5 Year	1.957%
10 Year	1.502%	10 Year	2.158%
30 Year	1.766%	30 Year	2.597%

US Economic Data

08:30 AM	Personal Income, Apr Survey 0.30% Prior 0.10%
	Personal Spending, Apr Survey 0.20% Prior 0.90%
	Real Personal Spending, Apr Survey 0.00% Prior 0.70%
	PCE Deflator YoY, Apr Survey 1.60% Prior 1.50%
	PCE Core Deflator MoM, Apr Survey 0.20% Prior 0.00%
	PCE Core Deflator YoY, Apr Survey 1.60% Prior 1.60%
09:45 AM	MNI Chicago PMI, May Survey 54.0 Prior 52.6
10:00 AM	U. of Mich. Sentiment, May F Survey 101.5 Prior 102.4

Canadian Economic Data

08:30 AM	Quarterly GDP Annualized, 1Q Survey 0.70% Prior 0.40%
	GDP MoM, Mar Survey 0.40% Prior -0.10%
	GDP YoY, Mar Survey 1.20% Prior 1.10%
	Industrial Product Price MoM, Apr Survey 0.70% Prior 1.30%
	Raw Materials Price Index MoM, Apr Survey — Prior 2.80%

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