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GoCs Play Partial Catch-Up After Victoria Day

CANADA
  • GoCs play partial catch-up with Treasuries after yesterday’s Victoria Day closure, with 2YY +10.3bps (Tsys +7.5bps) and 10YY +6.6bps (Tsys +3.1bps).
  • The former isn’t enough to stop a modest two-day widening in the 2Y Can-US yield spread to -30bps, off -10bps mid-last week after CPI with BoC’s Macklem not significantly dialling up hawkish rhetoric. As such, 2Y GoC yields at 4.10% remain below last week’s highs compared to Tsy yields back at mid-March highs.
  • Nevertheless, there are some increasingly hawkish analyst calls, with Goldman late Fri recommending paying Sep BoC OIS (entry 4.63%, target 4.90%, stop 4.40%) following Scotia joining a longer standing Citi call for a 25bp hike in June.
  • Up next sees cost price pressures in focus with the IPPI for April at 0830ET.
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