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Slightly Smaller Near-Term Hikes, Large Reduction In 2024 Cuts

CANADA
  • GoC outperformance to Tsys has built as both the BoC statement and the US ISM services beat are digested, with 2Y GoC yields +2.5bps since shortly before 1000ET vs +6bps for Tsys.
  • Near-term BoC expectations have softened (CORRA OIS showing ~11bp of additional hikes to year-end from 12.5bps pre-decision), mirrored in BAX with the Sep’23 -3bps and Dec’23 unch.
  • Subsequent implied rates have pushed higher though (BAX Jun’24 +3bps, Dec’24 +7bps post statement) to push the BAU3/Z4 to -55.5bps (+9bps) to approach recent lows of -50bps that were last seen in Sep’22.

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