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BAX Yields Slide On Growth Concerns

CANADA
  • BAX yields have rebounded recently but are still down almost 20bps through most of 2023/1H24 today, with the US service PMI miss accounting for about half of the decline as it built on earlier growth concerns spilling over from Europe.
  • It sees end-2023 implied yields some 25bps below where they were once last week’s 100bp front-loaded hike had been digested and also below where they were after the Jun 1 BoC when it hiked 50bp for the second meeting running and dialled up hawkish guidance with preparedness to act “more forcefully”.
  • With both US and EA growth indicators cooling, and importantly after CAD CPI came in softer than expected on Wed, latest “front-loaded” guidance is starting to more seriously be considered as meaning a choice of 50/75bp in Sep (OIS pricing 63bp) with end’22 peak crudely between 3.25-3.5% before 60bps of cuts through 2023.

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  • BAX yields have rebounded recently but are still down almost 20bps through most of 2023/1H24 today, with the US service PMI miss accounting for about half of the decline as it built on earlier growth concerns spilling over from Europe.
  • It sees end-2023 implied yields some 25bps below where they were once last week’s 100bp front-loaded hike had been digested and also below where they were after the Jun 1 BoC when it hiked 50bp for the second meeting running and dialled up hawkish guidance with preparedness to act “more forcefully”.
  • With both US and EA growth indicators cooling, and importantly after CAD CPI came in softer than expected on Wed, latest “front-loaded” guidance is starting to more seriously be considered as meaning a choice of 50/75bp in Sep (OIS pricing 63bp) with end’22 peak crudely between 3.25-3.5% before 60bps of cuts through 2023.