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Flatter Curve And USDCAD Moves Yet Lower

CANADA
  • FI: Yields are off highs but GoCs continue to underperform Tsys, up 7.5-8bps across most of the curve compared to 2.5bps for UST 2Y and 4.5bps for US 10Y.
  • Only the very long end has seen a more limited sell-off at 4.5bps, helping push 5s30s to new recent lows of sub 20bps, the flattest since Mar-2020 and less than 20bps above Dec-2019 flats (ignoring the Mar 9, 2020 spike lower early in the pandemic).
  • FX: USDCAD sits back towards the middle of today’s range, -0.1% at 1.2548 off an earlier low of 1.2510 after a recovery in broader dollar strength and whilst oil continues to drift lower.
  • For the Fed, Evans (2023) voter has been the latest to offer openness to 50bp hikes although he is more comfortable with 25bps each meeting. However, it’s made little difference to the pair with 44bp already priced for May and an increasing number of analysts calling for a 50bp hike in May (and in some cases back-to-back 50bp hikes).

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