BOC SAYS DOESN'T NEED TO ALTER PATH OF QT RIGHT NOW

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Front End Sees Push Back To Highs Late In The Session

US TSYS
  • Front end Tsys have pushed back to earlier highs but further out the curve keep within session ranges.
  • Yields sit 1.5-5bps lower on the day, led by 3s, bull steepening with 2s10s at -39.3bps (+1.3bps).
  • The day’s drivers were initially some European spillover before more notably a miss for CAD CPI and then the first stop for a 20Y auction since Nov. Auction details included a solid 2bp trade through along with the highest bid-to-cover since Jun and lowest dealer take since Sep.
  • TYM4 trades at 110-05+ (+ 11+), off a post-auction high of 110-08. Resistance is seen at 110-26 (20-day EMA) but yesterday’s 109-24+ pierced the bear trigger at 109-25+ (Feb 23 low) and has opened 109-14+ (Nov 28 low).
  • TY cumulative volumes of 1.2m again lag recent averages (70-75%) for the time of day, with tomorrow’s FOMC decision looming.
  • Fed Funds implied rates have drifted lower from the June meeting onwards, whilst the Dec implied rate continues to hover around the median dot from the Dec SEP ahead of tomorrow’s new dot plot and forecasts.
  • Cumulative cuts from 5.33% effective: 0.5bp Mar, 2.5bp May, 16.5bp Jun, 26.5bp Jul and 73bp Dec.
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