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GoC Yields Lift and USDCAD Pushes Towards August Support On Stronger CPI

CANADA
[correcting Can-US yield differential for lowest close *in absolute terms*]
  • 2Y GoC yields have increased 6bps on the CPI report with stronger than expected readings across both the headline and underlying levels, vs Tsys +1.5bp over the same period.
  • It pushes the Can-US 2Y yield differential to -42.5bps for what would be its lowest close in absolute terms in a month.
  • March cut pricing has been trimmed from 15-16bps pre-release to a 50/50 call of perhaps slightly below, whilst the CORZ3/Z4 spread tightens to -126bps vs -130bps prior.
  • USDCAD is holding most of its ~40 pip decline at 1.334. Support seen at 1.3320 (Aug 4 low) below which lies 1.3283 76.4% retracement of the Jul 14 - Nov 1 bull phase.

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