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CANADA: Can-US Yield Differentials Pull Back From Dovish Extremes On Strong Jobs

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  • The clearly stronger than expected Canadian jobs report has seen a sizeable lift in Can-US yield differentials, with the 2Y rising 5bps since the 0830ET data (which included US PPI).
  • However, that’s only to -83.5bps from a particularly low -88.5bps that had approached relative dovish extremes of circa -90bps seen after the BoC first started its cutting cycle in June.
  • USDCAD meanwhile is holding a decline of ~30 pips on the release, currently at 1.3754 having pared some of its initial decline to 1.3725.  
  • This takes some of the pace out of what has been a surge higher in recent days, topping out at 1.3784 just ahead of the data to come close to resistance at 1.3791 (Aug 7 high).
  • Up ahead, the U.Mich consumer survey at 1000ET before the BoC BOS/CSCE surveys for Q3 at 1030ET.
  • BoC-dated OIS has already adjusted from 38bp to 34bp of cuts for the Oct 23 BoC meeting (using the Bloomberg implied o/n rate of 4.29% rather than target 4.25%) and has scope to move further if the surveys don’t have any notably dovish angles to them. 

 

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  • The clearly stronger than expected Canadian jobs report has seen a sizeable lift in Can-US yield differentials, with the 2Y rising 5bps since the 0830ET data (which included US PPI).
  • However, that’s only to -83.5bps from a particularly low -88.5bps that had approached relative dovish extremes of circa -90bps seen after the BoC first started its cutting cycle in June.
  • USDCAD meanwhile is holding a decline of ~30 pips on the release, currently at 1.3754 having pared some of its initial decline to 1.3725.  
  • This takes some of the pace out of what has been a surge higher in recent days, topping out at 1.3784 just ahead of the data to come close to resistance at 1.3791 (Aug 7 high).
  • Up ahead, the U.Mich consumer survey at 1000ET before the BoC BOS/CSCE surveys for Q3 at 1030ET.
  • BoC-dated OIS has already adjusted from 38bp to 34bp of cuts for the Oct 23 BoC meeting (using the Bloomberg implied o/n rate of 4.29% rather than target 4.25%) and has scope to move further if the surveys don’t have any notably dovish angles to them.