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CANADA: GoC Yields Soften On CAD CPI But USDCAD Unchanged

CANADA
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  • GoC yields have fallen 2bps through 2-10Y tenors on the December CPI report (vs 1-1.5bps for Tsys) but USDCAD sees very little net impact.
  • The Can-US 2Y yield differential at -138bps would be its lowest close this cycle at lows since the late 1990s.
  • BoC-dated OIS meanwhile pushes a little closer to fully supporting a 25bp cut from the BoC next week, with ~21bp priced vs ~19bp pre-release.
  • Main outturns very close to median expectations which was impressive considering the wide range of analyst views on the back of uncertainty over the impact from the temporary GST/HST tax holiday.
  • Headline CPI came in at 1.8% Y/Y (BBG median 1.9, our survey of analysts 1.8) in a range that spanned from 1.2-2.1% Y/Y.
  • The average of the BoC's preferred median and trim CPI was as expected at 2.45% Y/Y, averaging 2.6% in Q4 to confirm a beat of the 2.3% the BoC had forecast back in October. It will provide new forecasts next week.
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  • GoC yields have fallen 2bps through 2-10Y tenors on the December CPI report (vs 1-1.5bps for Tsys) but USDCAD sees very little net impact.
  • The Can-US 2Y yield differential at -138bps would be its lowest close this cycle at lows since the late 1990s.
  • BoC-dated OIS meanwhile pushes a little closer to fully supporting a 25bp cut from the BoC next week, with ~21bp priced vs ~19bp pre-release.
  • Main outturns very close to median expectations which was impressive considering the wide range of analyst views on the back of uncertainty over the impact from the temporary GST/HST tax holiday.
  • Headline CPI came in at 1.8% Y/Y (BBG median 1.9, our survey of analysts 1.8) in a range that spanned from 1.2-2.1% Y/Y.
  • The average of the BoC's preferred median and trim CPI was as expected at 2.45% Y/Y, averaging 2.6% in Q4 to confirm a beat of the 2.3% the BoC had forecast back in October. It will provide new forecasts next week.