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Resilience In BAX Yields Whilst Waiting On New Trigger

CANADA
  • BAX futures have seen decent underperformance to Eurodollars, with declines in yields concentrated over the year ahead and limited to 3-3.5 vs 6-8bps ED.
  • It leaves front rates hanging onto the surge seen since strong Canadian core CPI on Tuesday with levels crudely consistent with a policy rate peaking between 3.5-3.75% in the Dec’22 contract.
  • The curve remains solidly inverted through 2023 with circa 45bps of cuts in BAZ2/BAZ3, helped in part by the front-loaded aspect of the BoC's guidance behind its surprise 100bp hike in July, but recent spillover from the Fed on the need for rates higher for longer has helped push BAZ3 yields some 15bps higher than after the July BOC as 2023 cuts are trimmed slightly.

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  • BAX futures have seen decent underperformance to Eurodollars, with declines in yields concentrated over the year ahead and limited to 3-3.5 vs 6-8bps ED.
  • It leaves front rates hanging onto the surge seen since strong Canadian core CPI on Tuesday with levels crudely consistent with a policy rate peaking between 3.5-3.75% in the Dec’22 contract.
  • The curve remains solidly inverted through 2023 with circa 45bps of cuts in BAZ2/BAZ3, helped in part by the front-loaded aspect of the BoC's guidance behind its surprise 100bp hike in July, but recent spillover from the Fed on the need for rates higher for longer has helped push BAZ3 yields some 15bps higher than after the July BOC as 2023 cuts are trimmed slightly.