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Large Front End GoC Outperformance With BoC Eyed

CANADA
  • Front end GoCs are holding the notable outperformance to Treasuries seen after stronger than expected US PMIs, with 2YY +1.5bp vs +6.5bp for Tsys.
  • It comes with a light local docket and attention on tomorrow’s BoC decision, which should be interesting to see how mixed revisions to economic forecasts and expected hawkish leaning guidance net out.
  • GoCs modestly underperform further out, with 10Y +3bps vs +1.5bps, but the Can-US 10Y differential is still at particularly low levels of -83bps as GoCs haven’t kept up with the particularly large steepening in the US despite 10Y GoC yields climbing 35bps since the last BoC decision seven weeks ago.

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