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BAX Futures Unwind Some Inversion Ahead Of US CPI

CANADA
  • BAX yields have again broadly taken their cue from Eurodollars today, with a sizeable firming through 2023 and less so 2024 to leave the Dec’23, with BAZ2 unch, BAZ3 +10.5bps and BAM4 +7.5bps.
  • It sees the Dec’23 implied yield almost 10bps higher than Friday’s close after US payrolls (which remember was lessened somewhat by a more mixed Canadian labour report) and at the highest levels since Jul 21.
  • With no change in front rates, the BoC’s policy rate is crudely implied to peak a little about 3.5% from the current 2.5% but inversion is reduced through 2023 to ‘just’ 53bps of cuts from the recent 60-70bps priced judging by BAZ2/BAZ3.

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  • BAX yields have again broadly taken their cue from Eurodollars today, with a sizeable firming through 2023 and less so 2024 to leave the Dec’23, with BAZ2 unch, BAZ3 +10.5bps and BAM4 +7.5bps.
  • It sees the Dec’23 implied yield almost 10bps higher than Friday’s close after US payrolls (which remember was lessened somewhat by a more mixed Canadian labour report) and at the highest levels since Jul 21.
  • With no change in front rates, the BoC’s policy rate is crudely implied to peak a little about 3.5% from the current 2.5% but inversion is reduced through 2023 to ‘just’ 53bps of cuts from the recent 60-70bps priced judging by BAZ2/BAZ3.