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Can-US Yield Differentials Nudge Off Cycle Lows

CANADA
  • GoCs see a smaller intraday rally than Treasuries, minimising further outperformance to Tsys with 2Y GoCs currently +1.5bps vs Tsys +2bps.
  • It does little to change the sharp decline in Can-US yield differentials though, most notably the 2Y now -45bps (lows of circa -50bp shortly after open and lowest since Jun'19) from +5-10bps prior to US CPI strength two weeks ago, adding upside to USDCAD momentum in the process.
  • This widening could be maintained in the near-term as aside from today’s 5Y auction, the next idiosyncratic driver is likely GDP for July on Thursday.

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