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Goldman OIS Flattener Post Friday’s Employment Report

CANADA
  • Goldman recommend Jan/Mar BoC meeting OIS flatteners, opened at 14bp with a target 5bp and stop 20bp.
  • Although Friday’s employment report was strong, our economists think the implications for the BoC are probably more limited than the headline increase on its own would imply because the participation rate also moved up and sequential wage growth declined.
  • Given this, and the combination of goods deflation and falling house prices, we think the BoC will pause rate hikes after January, i.e., the January meeting isn’t fully priced (currently 20bp), and there’s probably more priced than is warranted in March (~14bp).

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