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BAX Futures Chip Further Away At Recent Inversion

CANADA
  • Front end GoCs only unwinding an earlier rally to leave 2YY flat on the day belies slightly larger moves in rates, with BAX implied yields rising up to 3bps through mid-2023.
  • Little change in front contracts sees a further unwinding of recent inversion through 2023, with BAZ2/BAZ3 cut to -0.45 having been closer to -0.75 at the end of July.
  • Risk sentiment aside, the next key driver of near-term BoC expectations is likely Canadian CPI on Tue. RBC look for headline inflation to have eased from 8.1% to 7.7% Y/Y on falling gasoline prices but with inflation still much too high look for a 75bp BoC hike in Sep after July’s 100bps.

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  • Front end GoCs only unwinding an earlier rally to leave 2YY flat on the day belies slightly larger moves in rates, with BAX implied yields rising up to 3bps through mid-2023.
  • Little change in front contracts sees a further unwinding of recent inversion through 2023, with BAZ2/BAZ3 cut to -0.45 having been closer to -0.75 at the end of July.
  • Risk sentiment aside, the next key driver of near-term BoC expectations is likely Canadian CPI on Tue. RBC look for headline inflation to have eased from 8.1% to 7.7% Y/Y on falling gasoline prices but with inflation still much too high look for a 75bp BoC hike in Sep after July’s 100bps.