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BAX Futures Rally Ahead Of CPI But Implied Yields Still Historically Elevated

CANADA
  • BAX futures are off the day’s highs but still see a solid rally on the day with the front Sep’23 +0.025, the Dec’23 +0.05 and subsequent contracts +0.07-0.09.
  • It marks a continuation of Friday’s paring of a prior sell off ahead of tomorrow’s CPI report, yet implied yields remain elevated with a peak seen at 5.605% for the Dec’23, fractionally higher than pre-Jun 7 BoC levels for 2023 rates but still higher into 2024.
  • It’s followed by just 35bp of cuts from then to the Jun’24, with the latter off sub 30bp levels last week but vs -45 to -50bps pre the Jun 7 BoC decision.
  • In the near-term, OIS implies circa two thirds odds of a hike on July 12 after the BoC resumed with a 25bp hike earlier this month.

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