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Can-US 10Y Yield Differentials Set For Highest Close Since Mid-Oct

CANADA
  • GoCs trade 0-3.5bp cheaper, with the front-end leading the day’s sell-off but unable to keep pace with the 6bp increase in 2Y Tsy yields. The belly and long end track in line with Tsys meanwhile.
  • Can-US differentials see the 2Y at -32.5bps, off last week’s high of -26.5bps but still at the high end of the past couple months, whilst the 10Y of -65bps holds near highs since mid-Oct.
  • The BoC decision is on Wed with analysts unanimously expecting rates on hold at 5%. It’s likely too early to start guiding towards rate cuts although we suspect any dovish surprises in the language/forecasts could see a sizeable reaction.
  • OIS has shifted from fully pricing a cumulative first cut in April at the start of the week to currently 17bps.

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