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Rates Outperform With Easing Vacancies, Soft GDP Momentum

CANADA
  • Canadian rates see sizeable outperformance to the US from the Mar'23 onward e.g. BAZ3 -0.045 vs EDZ3 -0.11.
  • Nevertheless, yields are still up from yesterday across the curve, maintaining a Dec'22 peak roughly consistent with a policy rate of 4% (i.e. 75bp more hikes over two meetings left this year).
  • Macro drivers for outperformance: i) the July GDP beat was offset by a weak August flash, ii) the SEPH report for July showed signs of cooling labour demand as the vacancy rate fell 0.4pts to 5.4% (April peak 6.0%) and iii) the CFIB barometer showed a further decline in the outlook along with price and job plans.

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