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BAX Curve Pricing Significantly Fewer Cuts Ahead Of BOC Decision

  • BAX futures are holding most of the day’s sell-off, with implied yields 3-5bps higher on the day ahead of tomorrow’s BoC decision.
  • It helps maintain the inter-meeting theme of a significant trimming of rate cut expectations, especially further into 2024, with the Sep-Dec’23 spread at +6bps and Sep’23-Dec’24 spread at -67bps.
  • The new MPR will be interesting to see whether there’s an update for the mortgage cost scenario from April. That U3/Z4 spread is significantly different to the ~160bp of cuts from 4.5% in April, which still saw the interest portion of mortgage payments continuing to increase out to 3Q23 to its highest since the late 1990s.

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