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Rate Hike Expectations Slip Ahead Of BOC

  • Ahead of the BOC on Wed and with only Q4/Dec GDP and the manufacturing PMI for Feb tomorrow to come, BAX futures have seen a sizeable decline in implied yields today.
  • The largest moves have come in Dec whites and front reds, pricing out some of the recent further hike increases following strong Canadian CPI and instead leaving only an additional 13bps of hikes through 2022 compared to after the BOC/FOMC hawkish holds last month.
  • This comes despite market inflation expectations moving materially higher, e.g. the 5Y breakeven up 40bps at 2.51%.

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