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CANADA: Goldman Sachs Recommend CORZ4/M5 Flattener

CANADA
  • “Our economists have maintained their baseline of back-to-back 25bp cuts to a 2.75% terminal rate (to be achieved next June)", implying "50bp of cuts by year-end, less than market pricing for around 65bp.”
  • “We think the near-term cutting profile embeds some risk premium for spillovers from the US while also reflecting the continued increase in labor market slack in Canada, with the unemployment rate ticking up another 20bp in September.”
  • “While the BOC has arguably reduced some concerns about being behind the curve having already cut three times this cycle, the case for deeper rate cuts is a compelling one, in our view.”
  • “The market implies about 140bp of cumulative cuts through June, compared with our economists’ 150bp, but the relatively front-loaded nature leaves scope to price more into the first half of next year. We’d previously highlighted CORM5 as an attractive spot to receive and recommend doing so in the form of CORZ4/M5 flatteners.”
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