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GoCs Track Treasuries After Trend Cheapening Since Mid-Dec

CANADA
  • GoCs rallying 1-4.5bps across the curve are broadly tracking Tsys today after recent swings that on balance have pushed a sizeable narrowing in Can-US yield differentials despite some outperformance yesterday.
  • The 2Y diff at -33bp (mid-Dec lows of -60bp) and 10Y diff at -52bp (-70bp) is at levels from before the BoC’s surprise 50bp downshift back in October.
  • TD yesterday noted an overly cheap setup versus the US but don’t see any obvious catalysts and instead will watch January data before adding back Can vs US risk.
  • 5Y GoC auction ahead today at 1200ET.

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