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GoCs Extend Outperformance After Subdued GDP

CANADA
  • GoCs are continuing to extend outperformance to Treasuries, kickstarted with the 0830ET data which included sluggish monthly GDP data (July 0.0% M/M vs cons 0.1, Aug advance just 0.1%).
  • Benchmarks sit between 4.5-5.5bps richer on the day vs the 0.5-1.5bp for Tsys, with the Can-US 2Y yield differential widening back out to -19bps for sustained lows for the week when allowing for the new 2Y Tsy mid-week.
  • BoC expectations have cooled, with 8.5bp for Oct and now seen topping out with 19bp of cumulative hikes early next year.
  • The mostly parallel shift through 2024 CORRA futures sees the H4/Z4 spread hold at -36.5bps for still close to recent lows in terms of cuts priced from terminal to end-2024.

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