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Real Yields Drive Belly Sell-Off

CANADA
  • The belly-led sell-off has cooled marginally but leaves 5Y yields +11bps, driven primarily by real yields cranking nearer to recent highs as front rates re-price in hike expectations.
  • Can-US yield differentials narrow in trend terms from last week’s recent highs but remain solid at 6bps for the 2Y and 3.5bps for the 10Y.
  • Moves have been heavily down to broad risk-on sentiment but were boosted by stronger than expected US retail sales despite a surprise slide in the NAHB housing index. Fedspeak has been relatively uneventful but Powell in 15mins is of note before attention turns to Canadian CPI tomorrow.

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