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Hawkish Flattening For CAD Rates

CANADA
  • BAX yields for front contracts have unwound Powell-induced increases to sit just 2bps higher on the day for BAZ2, potentially weighed by spillover from the earlier softer core PCE and spending data.
  • They hold onto larger gains further out though, with the BAZ3 +7.5bps (+3bps with Powell) on the prospect of higher for longer, surprisingly further widening the wedge between 20bps of cuts implied by BAZ2/BAZ3 to the 35bps of cuts in the Eurodollars equivalent.
  • Few key local events left before the Sep 7 BoC with the highlight GDP for Q2/Jun on Aug 31, with subsequent Jackson Hole headlines likely shaping the rate path in the interim.

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