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BAX Futures Chip Further Away At 2023 Inversion

CANADA
  • BAX futures have cheapened further in early trade, only slightly lagging moves on the day in Eurodollars despite yesterday’s sizeable underperformance.
  • Front contract yields are limited to 1.5-2bp increases out to the Dec’22s, with larger increases beyond including 3-3.5bps for Dec’23, continuing to chip away at inversion with BAZ2/BAZ3 pricing 40bps of cuts from a peak of 75bps in late July.
  • The Dec’22 crudely implies a peak policy rate of circa 3.75% from the current 2.5%, with further large increases expected for the upcoming Sep 7 BoC meeting (OIS hovering around 68bps, analysts tilting towards 75bps).
  • No further CPI or labour prints before then, with focus on upcoming Jackson Hole before GDP for Q2/June on Aug 31.

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  • BAX futures have cheapened further in early trade, only slightly lagging moves on the day in Eurodollars despite yesterday’s sizeable underperformance.
  • Front contract yields are limited to 1.5-2bp increases out to the Dec’22s, with larger increases beyond including 3-3.5bps for Dec’23, continuing to chip away at inversion with BAZ2/BAZ3 pricing 40bps of cuts from a peak of 75bps in late July.
  • The Dec’22 crudely implies a peak policy rate of circa 3.75% from the current 2.5%, with further large increases expected for the upcoming Sep 7 BoC meeting (OIS hovering around 68bps, analysts tilting towards 75bps).
  • No further CPI or labour prints before then, with focus on upcoming Jackson Hole before GDP for Q2/June on Aug 31.