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Front Yields Outclimb Tsys After Labour Reports

  • Front end GoCs are holding to small underperformance to Tsys following respective labour reports that both saw surprise declines in the unemployment rate.
  • The curve has seen a broadly parallel shift higher since the release, with yields +6-8bps as 2YY move further above 4% and with 2s10s at -66bps.
  • In what could have been seen as a mixed Canadian report with wage growth coming in softer than expected and tepid full-time job growth, the market appears to put more weight on the u/e rate moving back closer record lows (from 5.4% to 5.2%, vs cons unchg - first chart) as the overall participation rate continues to trend the wrong direction for the BoC (second chart).

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