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Retail Sales Miss Helps Reverse US-Led Cheapening

CANADA
  • GoCs are holding the earlier move off highs but still see a sizeable rally on the day, and not just purely on the retail sales miss.
  • 10s outperform, with yields currently -7.4bps lower on the day, of which -2.9bps came since the report. The move more than reverses yesterday's US-led cheapening as domestic factors come back to the fore.
  • 2s and 5s have also seen yields fall -2 and -3bp since the data for -4.3bp and -6.1bp on the day.
  • The BoC has put emphasis on the persistence of excess demand with its July forecast now only seeing a closing of the positive output gap in 2024. The fading in retail sales momentum should help push at the margin in its bid for below trend growth, but other areas have still been growing strongly ahead of next Friday's monthly GDP for May.

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