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Free Access2Y GoC Yields Close To Gap To Treasuries, USDCAD Doesn’t Care
- 2Y GoC yields aren’t done rising and poke to new session highs of 4.586% for +20.5bp on the day (+22bp since the decision). It sets fresh highs since Aug'07 and is within 20bps of outright 2007 highs.
- As noted earlier, the hike reflects Governing Council’s view that mon pol was not sufficiently restrictive to bring supply and demand back into balance, with excess demand more persistent than thought, something a 25bp hike in isolation is unlikely to change materially.
- Having very briefly fully priced a back-to-back hike for July, it’s since cooled closer to +20bps. Dep Gov Beaudry is still to come tomorrow but Friday’s labour market report for May provides the first stern data test after the strong ULC Q1 figures just 90 minutes before today’s BoC decision.
- The whole GoC yield curve is dragged higher but still sees a decent flattening with 2s10s falling further to -117bps.
- After only closing pre-BoC outperformance to Tsys in the initial aftermath to the decision, GoCs have since seen sizeable underperformance on the day, +20.5bps vs +12bps for Tsys, with a Can-US yield differential of just -1bp having last been positive in Sep 2022.
- USDCAD meanwhile just tracks around 1.336 (-0.35%) having earlier come close to not testing the key short-term support at 1.3315 (May 8 low).
Historical 2Y GoC yieldSource: Bloomberg
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