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BAX Inversion Trimmed But Still 40+bps Of Cuts Through 2023

CANADA
  • BAX implied yields have increased solidly today after hawkish implications to US and Canadian jobs reports as labour supply tightened and in the case of Canada the u/e rate fell to a new multi-decade low.
  • The front end has been relatively more restrained, with the Dec’22 rising 5bps with an already steep curve considering the BoC is widely expected to hike 75bp next week (per recent Reuters survey, with many Bloomberg responses currently not updated).
  • Larger increases further out, lead by +11.5bps in 1H24, have helped unwind some of the recent inversion but still see -42.5bps through BAZ2/BAZ3.

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