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$-Bloc – BoC Removes Pause Phrase, Hike Talk Stays

STIR

The latest US CPI data and FOMC Minutes did not have a significant impact on US STIR with pricing for the May meeting suggesting a 74% chance of a 25bp hike.

  • As expected, the BoC left the overnight rate at 4.5%. However, they removed the language suggesting that they were likely done with rate hikes but kept a phrase indicating a potential increase to address inflation that is now expected to remain above target for longer than anticipated. The BoC’s new guidance aligns more closely with that of the Fed hawks, further widening the gap with investors who are forecasting a rate cut by year-end. CA STIR firmed by 4bp for upcoming meetings, with only a 10% chance of a 25bp cut priced in by July. There is still an expectation of more than a 25bp cut by year-end, but this is lower than the 60bp priced before the Easter holiday.
  • RBA-dated OIS pricing has a 22% chance of a 25bp hike in May with year-end easing expectations at 16bp versus 29bp last week.
  • RBNZ-dated OIS has 20bp of tightening priced for the May meeting with 46bp of easing priced for Feb-24 off a terminal OCR expectation of 5.48% (July).
Figure 1: $-Bloc STIR

Source: MNI – Market News / Bloomberg

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