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GoCs Holding Decent Sell-Off, BAX Curve Steepens Some More

CANADA
  • GoCs head towards the end of the session unwinding a move richer after the FOMC minutes. They remain off lows but still translate to a solid 4.5-5.5bp increase in yields on the day and a return of modest underperformance to Treasuries at the long end (10Y Tsys +3.1bps).
  • The opposite is true in rates space as BAX futures outperform SOFR. 2023 BAX contracts see only a modest -0.02 decline for the front Jun’23 and Sep’23 before building to -0.04 for the Dec’23 and -0.07 in 2024 (Dec’23 SOFR currently -0.09). It sees the BAM3/Z3 spread move further into rare positive territory at +0.06.
  • Debt talk gyrations aside, tomorrow sees US data in focus with the 2nd release of Q1 GDP and weekly initial claims. RBC and TD bank earnings headline domestically with second tier data releases and the next main data release not until May 31 with Q1 GDP.
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