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AU-CA Official Rate Differential Set To Narrow Later Today

STIR

The RBA’s official rate is currently 40bps below that of the BoC, but this differential appears set to narrow to +15 bps later today if market pricing proves accurate.

  • The market is pricing in around a 90% chance of a rate cut today, up from less than 50% two weeks ago.
  • A narrowing in the AU-CA official rate differential today aligns with market expectations that the official rate in Canada will fall below that of Australia by year-end. If this occurs, it would be the first time since 2018.
  • Even more interestingly, looking 12 months ahead using 3-month swap rates 1-year forward (1Y3M), the market now expects the RBA’s official rate to be 75 bps higher than the BoC’s.


Figure 1: AU & CA 1Y3M Rates (%)



Source: MNI – Market News / Bloomberg

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