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Rate Path Back To Post July BoC Levels After Yields Surge

  • Rising as much as 18bps through 2H2023, BAX implied yields are back to very similar levels seen after the surprise front-loaded 100bp hike at the Jul BoC.
  • As such it sees the Dec’22 contract crudely implying an overnight rate a little above 3.5% (vs OIS currently showing a peak above 3.6% in Jan) from 2.5% at present.
  • Inversion in 2023 is trimmed very slightly in the process, but still shows almost 60bps of cuts through BAZ2/BAZ3.
  • Looking ahead to next week, US CPI sits front and centre in an extremely quiet week for local releases.

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