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Msg  69849 of 70166  at  6/9/2021 12:27:36 PM  by


The Launch Pad

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The Launch Pad
June 9, 2021
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Futures are wandering close to the flat line. The S&P has been subdued for much of the last two weeks losing momentum as it approached the highs from May 7th. Bond yields continue to move lower, with U.S. 10s at 1.5% at the bottom of a three-month range and the lowest level since briefly trading here in early May. For all the talk about inflation, the bond market doesn’t appear too worried. Canadian government bond yields are also at their lowest level since early March. The Canadian dollar remains locked in a tight range in the low 80s with no real movement to report this morning despite oil prices moving above $70/bbl (WTI).

Ever since he entered the White House in January, Joe Biden has articulated one foreign policy goal above others — to work with allies to restrain China. Step one is to repair the fractured relationship appears a go with the two sides reportedly planning to end the tariff battle with Biden making his maiden overseas trip during a U.S.-EU summit next week. Step two would be to coax Europe to work more closely on restraining China. The U.S. and EU intend to update the WTO rulebook focusing on improved disciplines on industrial subsidies, unfair behavior of state-owned enterprises, and other trade and market distorting practices.

Late Tuesday, the chamber approved the U.S. Innovation and Competition Act, a $250B package aimed at challenging China's technological ambitions. The centerpiece of the legislation is $50 billion in emergency funding for the Commerce Department to boost domestic semiconductor production, in light of the global chip shortage.

Surprisingly, Canada flipped back into a trade surplus in the month of April. A trade surplus meaning our exports exceeded our imports. A surplus of $0.6 Billion was surprising as expectations were around a deficit of $0.7 billion. Difficulties in the auto sector due to chip shortages hit imports much more than it hit exports in April. Two-way trade in the auto sector hit its lowest level since 2014, ignoring the bottom of the pandemic.

Diversion: When you become a billionaire... do you throw spears while listening to Audioslave?
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Company news

Intending to reduce its debt and double its store count over the next two decades, Pet Value Holdings will soon go public as pet ownership increased as a result of the pandemic. Biohaven announced the U.S. FDA’s approval on Nurtec ODT, their new drug for preventive treatment of migraines. According to the company’s CEO, this is the first single medication approved for both acute treatment and prevention of migraines. After demand for outdoor living surged during the the pandemic, Thor Industries continues to see a sustainable demand and a growing order backlog equivalent to $14.32 billion. Additionally the company’s sales doubled to $3.46 billion from $1.68 billion a year earlier. Shares of electric-vehicle maker Arcimoto, were trading 13.91% higher at $15.17 after announcing it is set to join to join the Russell 2000 and Russell 3000 Indexes by the end of this month. Enbridge has workers returning to the line 3 construction site in Minnesota a day after they were evacuate because of violent protests. There were as many as 1,000 protesters at the site.


Oil prices are back positive again this morning. At the time of writing, NYM WTI Crude futures are up +0.36% to US$70.30/bbl. ICE Brent Crude futures are up +0.57% to US$72.63/bbl. The big news this morning is the US secretary of state announcing the return of Iranian supplies is unlikely as sanctions were unlikely to be lifted. That coupled with prospects of strong fuel demand rising in North America are elevating prices this morning. Inventory data will be released by the EIA later today hopefully showing signs of stronger summer demand.

Spot Gold is once again relatively flat this morning as investors await inflation data on Thursday. At the time of writing, the yellow metal is down -0.11% to US$1,890.99/oz.

Fixed income and economics

Want to get paid an income stream while having an exposure to Bitcoin? Look no further than Microstrategy Inc.’s new junk bond deal that was launched yesterday for the sole purpose of funding the purchase of bitcoin tokens. The USD 2028 senior secured issue priced with a 6.125% coupon, is rated Ba3 by Moody’s, and saw enough demand to warrant a 25% deal upsizing to $500MM. Note that the final terms struck tighter than initial targets for a 6.25% to 6.50% range. Secondary action saw the bond trade nearly two points higher on the break. MicroStrategy purchased 20,857 bitcoins for $1.086 billion in the first quarter this year and has added another 253 bitcoins for $15 million in Q2. The company will be taking a $284.5 million hit in the current quarter as an impairment charge based on the fluctuations in the market price of the underlying. Most importantly in all this however, is that their new deal saw Jefferies Group LLC act as the sole underwriter, portending the acceptance of cryptocurrency assets within the broader financial and fixed income community.

The Bank of Canada will provide us with a scheduled monetary policy update at 10AM EST today that will be short on headline updates but hopefully long on forward guidance. Lots has changed since their last meeting, with a pair of dour labor reports putting some murkiness into the rate tightening waters. There is virtually zero chance that Governor Macklem can engage on his Q1 comments that he’d like to see higher interest rates by the end of 2021 given the current scenario. But that won’t stop the market from scrutinizing every word in today’s language. Note that the Canadian dollar remains near the 1.2000 level against greenbacks and looking to have formed a bottoming range from the past five weeks. Nobody at the BoC wants to see too strong of a loonie as it will adversely affect the trade winds with our largest partner. A buoyant CAD will actually help naturally tighten growth and do the central bank’s work for them, so watch for any chatter about that phenomenon today.

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I do not want people to be very agreeable as it saves me the trouble of liking them a great deal.

- Jane Austin

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