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Growing Wedge To US Rates

CANADA
  • The net effect of US CPI has been BA yields maintaining large increases in front contracts (+11bp in the Mar’23, vs +21bp for EZH3) with a roughly implied policy rate peaking at 4.25%.
  • However, a solid retracement further out sees with the Dec’23 now limited to +3bp (vs +18bp for EDZ3), driving a further wedge between 2023 yield expectations and 2H23 in particular - see table.
  • Ahead: BoC’s Macklem is now set to speak tomorrow at the IMF following hawkish remarks Oct 6, hitting after a busy US session with retail sales, import prices and U.Mich. However, one eye will be on next week’s key business & consumer surveys (Oct 17, Senior DG Rogers also speaks) and CPI (Oct 19) prior to the BoC decision on Oct 26.

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