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National Bank Looking For Cuts From 3Q23

CANADA
  • National see one final 50bp hike in October [BOC-dated OIS pricing low 40s] to a peak 3.75%, with the same terminal in the US.
  • However, with a now higher end point to their forecast, they also pull forward cuts to 3Q23 for both the BoC and Fed, reaching 3% in 4Q23, with the Fed going to 2.5% in 2Q24 vs 2.75% for BoC.
  • They see shorter-term bonds decidedly attractive, but whilst there is also some downside to interest rates further out the curve we’re much closer to a longer-run equilibrium here, setting up curve steepeners even if it might not be time to fight the Fed or BoC right now.

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