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GoCs Underperform With QT Plans Intact

CANADA
  • GoCs have seen some underperformance to Treasuries today, coming after BoC’s Gravelle indicated no imminent change in the Bank’s QT policy (still aiming for C$20-60bn settlement balances, seen coming sometime in 2025 vs previously late 2024 or early 2025).
  • The initial reaction was limited but Can-US yield differentials sit 0.5-2.5bp higher on the day, led by the long end with the Bank ultimately wanting to shorten its maturity profile to pre-pandemic levels.
  • They remain at the lower end of recent ranges though, with the 2Y at -48bps and 10Y at -76.5bps.
  • The Bank also explicitly said it can continue QT once it starts cutting rates (barring a sharp slowdown) and can do so until going below the neutral policy rate.

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