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CANADA: Higher Odds Of BoC 50bp Cut But Can-US Differentials Little Changed

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  • Despite CAD underperformance today, Can-US yield differentials have seen declines of just 0.5-1bps across 2Y to 10Y tenors.
  • With 2Y GoC yields currently -6.5bps on the day and Tsys -6bps, the 2Y differential stands at -65.5bps to leave it mid-range over the past couple weeks ahead of today’s early close at 1300ET ahead of Monday’s National Day for Truth and Conciliation.
  • BoC-dated OIS meanwhile has seen a more abrupt reaction to today’s Canadian GDP data with now ~45bp of cuts priced for Oct 23 vs 38bp prior for an unusually large move.
  • That’s part of a near-term path with ~75bp over the Oct/Dec meetings combined for an upsizing from the pace of three 25bp cuts that the BoC has moved at consecutive meetings since June.
  • There are still the September labour (Oct 11) and CPI (Oct 15) reports to be seen along with the BoC’s BOS/CSCE surveys for Q3 (Oct 11).
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  • Despite CAD underperformance today, Can-US yield differentials have seen declines of just 0.5-1bps across 2Y to 10Y tenors.
  • With 2Y GoC yields currently -6.5bps on the day and Tsys -6bps, the 2Y differential stands at -65.5bps to leave it mid-range over the past couple weeks ahead of today’s early close at 1300ET ahead of Monday’s National Day for Truth and Conciliation.
  • BoC-dated OIS meanwhile has seen a more abrupt reaction to today’s Canadian GDP data with now ~45bp of cuts priced for Oct 23 vs 38bp prior for an unusually large move.
  • That’s part of a near-term path with ~75bp over the Oct/Dec meetings combined for an upsizing from the pace of three 25bp cuts that the BoC has moved at consecutive meetings since June.
  • There are still the September labour (Oct 11) and CPI (Oct 15) reports to be seen along with the BoC’s BOS/CSCE surveys for Q3 (Oct 11).