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Market Update

US tsys slightly higher before  May Payrolls (175k exp, 3.6% unemp rate), 10Y  2.11%, low volume in Ty futures overnite (257k).  Core Euro bond mixed, gilts lower while bunds slightly higher in the long end – ECB rate guidance to leave rates lower for longer adding momentum to flattener trade.  GOCs unch before  May employment – 5K forecast after April’s blockbuster 107k increase. Wage growth has also been ticking up since Dec, 2.4% in April, back above the 5Y avg 2.2%.

News headlines

Pence says Mexico tariffs still set for Monday as talks continue (BNNBloomberg) Vice President Mike Pence said the U.S. still plans to impose tariffs on Mexico next week, as American and Mexican officials planned further talks aimed at defusing a crisis between the two countries over the flow of undocumented migrants into the U.S. Negotiations wrapped up on Thursday evening without an agreement, Mexican Foreign Minister Marcelo Ebrard said, adding that another round of discussions would take place on Friday in Washington to head off the tariffs.

Trudeau worried China could target imports of other Canadian products (BNNBloomberg) Prime Minister Justin Trudeau says he’s worried China could block imports of other Canadian products — in addition to its recent rejection of canola shipments. Speaking to reporters Thursday in France, Trudeau says he will see if it’s appropriate to have a conversation directly with China’s President Xi Jinping about a number of bilateral difficulties later this month at the G20 summit in Japan. Relations between Canada and China have deteriorated since the December arrest in Vancouver of Huawei senior executive Meng Wanzhou at the behest of the United States.

Mexico pushing forward with ratification of new NAFTA despite Trump tariff threat (FP) Mexico’s ambassador to Canada says his country is pushing forward with the ratification of the new NAFTA despite ongoing threats from U.S. President Donald Trump to slap tariffs on Mexican goods. But Juan Jose Gomez Camacho — just two and a half months into his appointment as Mexico City’s top diplomat in Ottawa — wouldn’t speculate on the deal’s fate if Trump follows through on his pledge to impose the levies by Monday.

Strong U.S. jobs growth expected in May, trade tensions a threat (Reuters) U.S. job growth likely increased solidly in May, with wage gains expected to pick up, showing strength in the labor market before an escalation in trade tensions that analysts have cautioned could pressure an already slowing economy. Futures rise ahead of May jobs report, U.S. stock index futures rose on Friday, as hopes of an interest rate cut by the Federal Reserve continued to buoy sentiment ahead of a highly awaited jobs report.

Beyond Meat sees sales more than doubling in 2019, shares jump 21% (Reuters) Beyond Meat Inc, a maker of plant-based burgers and sausages, said it expects to more than double its revenue and report breakeven EBITDA this year, sending the its shares up over 21 percent. The company said it expects to record revenue of $210 million in 2019, with break-even earnings, before interest, tax, depreciation and amortization (EBITDA). Analysts on average forecast full-year sales of $205 million, and a loss, before interest, tax, depreciation and amortization, of $10.28 million, according to Refinitiv IBES data.

Elliott Management in talks to buy Barnes & Noble (Reuters) Hedge fund Elliott Management Corp is in talks to acquire Barnes & Noble Inc, in a deal that would mark the end of the once-dominant U.S. book retailer as a publicly listed company, a source familiar with the matter said on Thursday.

Markets Overview: US 10yr note futures are up 0.086% at 127-02, S&P 500 futures are up 0.25% at 2853, Crude oil futures are up 1.2% at $53.22, Gold futures are down -0.16% at $1340.5, DXY is up 0.04% at 97.079, CAD/USD is down 0% at 0.7484.

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	1.375%	2 Year	1.872%
5 Year	1.321%	5 Year	1.873%
10 Year	1.45%	10 Year	2.112%
30 Year	1.738%	30 Year	2.603%

US Economic Data

08:30 AM	Change in Nonfarm Payrolls, May  Survey: 175k  Prior: 263k
	Change in Private Payrolls, May  Survey: 174k  Prior: 236k
	Change in Manufact. Payrolls, May  Survey: 3k  Prior: 4k
	Unemployment Rate, May  Survey: 3.60%  Prior: 3.60%
	Average Hourly Earnings MoM, May  Survey: 0.30%  Prior: 0.20%
	Average Hourly Earnings YoY, May  Survey: 3.20%  Prior: 3.20%
	Average Weekly Hours All Employees, May  Survey: 34.50  Prior: 34.40
	Labor Force Participation Rate, May  Prior: 62.80%
	Underemployment Rate, May  Prior: 7.30%
10:00 AM	Wholesale Trade Sales MoM, Apr  Survey: -0.20%  Prior: 2.30%
	Wholesale Inventories MoM, Apr F  Survey: 0.70%  Prior: 0.70%
03:00 PM	Consumer Credit, Apr  Survey: $13.000b  Prior: $10.281b

Canadian Economic Data

08:30 AM	Net Change in Employment, May  Survey: 5.0k  Prior: 106.5k
	Unemployment Rate, May  Survey: 5.70%  Prior: 5.70%
	Participation Rate, May  Survey: 65.80%  Prior: 65.9%
	Full Time Employment Change, May  Survey: 9.00%  Prior: 7.3%
	Part Time Employment Change, May  Survey: 50.00%   Prior: 33.60%
	Capacity Utilization Rate, 1Q  Survey: 81.00%   Prior: 81.70%

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 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