August 19, 2022 18:40 GMT
- BAX yields have seen a further pivot towards an unwinding of inversion through 2023, with front contracts little changed from early this morning (+2bps for the Dec’22) but larger increases thereafter (+6bps Dec’23).
- Having surged 18bps since strong core CPI inflation on Tuesday, the Dec'22 saw little today to sway it from an aggressive near-term hiking path (OIS still holding around 68bps priced for the Sept 7 BoC), with an ultimately mixed retail sales report not moving the needle.
- The continued increases further out though see the Dec’23 yield circa 30bps higher since both CPI and after last month’s BoC decision to “front-load” with a surprise 100bp hike. That has helped BAZ2/BAZ3 inversion reverse to an implied 37bps of cuts from a peak of 75bps in late July after the latest FOMC.