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Mild Post-Holiday Rally Narrows Can-US Yield Differentials

CANADA
  • BA yields have pulled back off session lows along with the moves in the US but keep to declines of up to -6ps in 2023 contracts from Thursday’s close after Friday’s holiday.
  • Smaller declines of 2-3bps in 2024 contracts drive a modest flattening, contrary to large declines further along the US curve with a Dec’23 Fed Funds rate seen at 4.11% (-21bp) and largest declines in 2025-26 Eurodollars contracts.
  • This relative momentum carries over to GoC yields seeing 6-8bps underperformance to 2Y and 10Y Tsys, narrowing wide negative Can-US yield differentials to -35bp and -53bp respectively.

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