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GoCs Maintain Modest Underperformance As Treasuries Cheapen

CANADA
  • GoCs see modest underperformance to Tsys, most pronounced in the 5Y, in a relative rates play similar to that after the open, only now with yields 3.5-4.5bp higher across the curve.
  • On the data side, the 0.7% bounce in the manufacturing sales advance for July helped GoCs at the margin keep pace with Tsy cheapening, with the wholesale advance tomorrow (but of course the Fed’s Powell most keenly awaited).
  • The 5Y auction didn’t have a notable impact as the bid-to-cover ticked up off particularly low levels.
  • Sept 1 extension starts to get more attention. RBC “estimate a duration extension of 0.045 for September 1, about half the size of the extension last year and below the 0.075-0.078 range seen for 2019-2021."

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