May 23, 2024 17:15 GMT
Can-US 2Y Yield Differential Getting Back To Extremes
CANADA
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- GoCs have seen unusually little spillover from the sell-off in Treasuries on today’s flash PMI beat and jobless claims showing another week of relative resilience.
- The difference is starkest at the front end where 2Y GoC yields are +1.3bps vs +6.4bps for Tsys. Further, compared to levels shortly before Tuesday’s CAD CPI, 2Y GoC yields are 1bp lower vs +11bps for Tsys.
- It sees the Can-US 2Y differential drop another 5bps on the day to -73bps, a sharp turnaround from last week’s high of -55bps and getting back towards historical extremes. Its recent low at the close was a short-lived -84bps on Apr 25.
- BoC-dated OIS remains in the 15-16bp region for June cuts seen after CPI, along with roughly 60bps for 2024 as a whole vs 35bps for the Fed.
- A reluctance to have policy diverge too far from the US saw HSBC earlier revise their rate call with a first BoC cut in July (from June) and 125bp of total cuts by end-2025 (from 200bps).
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