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CANADA: CORRA Futures See Rare Underperformance Through 2025, Minutes Ahead

CANADA
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  • CORRA futures have mostly kept to today’s US-led steepening on the back of the strong ISM services report, although they actually underperform through most 2025 contracts with arguably a helping hand from some healthier details within the services PMI (CORU5 implied yield +6.5bps on the day).
  • There remains a historically wide wedge in perceived BoC-Fed policy setting ahead, with the BoC terminal still below 3% despite recent increases (BoC neutral seen between 2.25-3.25%) vs a Fed implied terminal now above 3.7%.
  • That still sees Can-US 2Y yield differentials at an extremely low of -107bps, albeit off multi-year low of -110bps late last week.
  • The BoC minutes are worth being aware of at 1330ET after it upped its cutting pace to 50bps following three 25bp cuts. We don’t expect much impact though – they have a habit of being overshadowed by Fed decisions and this time come close to the US election.
  • BoC’s Macklem said at the press conference that “We had a good discussion - what I can tell you is that there was a clear consensus that 50bps was appropriate.”
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  • CORRA futures have mostly kept to today’s US-led steepening on the back of the strong ISM services report, although they actually underperform through most 2025 contracts with arguably a helping hand from some healthier details within the services PMI (CORU5 implied yield +6.5bps on the day).
  • There remains a historically wide wedge in perceived BoC-Fed policy setting ahead, with the BoC terminal still below 3% despite recent increases (BoC neutral seen between 2.25-3.25%) vs a Fed implied terminal now above 3.7%.
  • That still sees Can-US 2Y yield differentials at an extremely low of -107bps, albeit off multi-year low of -110bps late last week.
  • The BoC minutes are worth being aware of at 1330ET after it upped its cutting pace to 50bps following three 25bp cuts. We don’t expect much impact though – they have a habit of being overshadowed by Fed decisions and this time come close to the US election.
  • BoC’s Macklem said at the press conference that “We had a good discussion - what I can tell you is that there was a clear consensus that 50bps was appropriate.”