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Modest Sell-Off, Lower USDCAD On Macklem

CANADA
  • GoC yields climbed throughout Macklem's second Q&A session, led by the short-end.
  • 2YY increased +1bp to 1.355%, 1bp below yesterday's pandemic era high of 1.365%, whilst further out the curve, the increase only really unwound the dip from the US 10Y auction stopping through.
  • USDCAD sits at lows of 1.2666, 16pips off initial support of 1.2650 (Jan 27 and Feb 2 lows), after which it would open firm support of 1.2560 (Jan 26 low).
  • He clarified that the need for "ultra-low" interest rates has passed, added that productivity and investment growth are an important factor at determining the required level of rates and that rates would have to go up without more investment.
  • Headlines are a little misleading on the neutral rate discussion, with a two-sided discussion on scenarios for rates both higher and lower than the neutral rate midpoint of 2.25% entered into BOC models (with a +/-1pp band), rather than just the upside case reported.


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