July 21, 2022 18:20 GMT
- Mixed performance for GoCs vs Tsys so far today, underperforming at the front end and outperforming at the long end with 2YY -9bps and 10YY -13bps, driving the 10Y Can-US diff further towards recent lows at just 6bps.
- The move sees the 10YY dip below 3% for the first time since Jun 2, driven by a 10bp decline in the inflation breakeven to 1.9%, a new recent low and finally back to pre-Ukraine war levels.
- That is as opposed to in the US where the breakeven has fallen faster and is at pre-taper levels, but at the same time the Canadian breakeven was starting from a lower base.
- However, the fall in the breakeven appeared of little consolation for the BoC last week, which put weight on the surveyed measures of inflation expectations from the Q2 survey which had shown a further climb higher.
Canadian 10Y breakeven (white), US 10Y breakeven (yellow)Source: Bloomberg