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Reds Lead Weakness Alongside Cheaper Tsys

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Softer Growth Boosts GoCs, Analysts See Steepening Ahead

CANADA
  • Risks of softer growth, hinted at most strongly by the large miss in the US Empire State manufacturing survey have dominated GoC trade so far today, with a belly- to long-end led rally (2YY -4.5bps, 5YY -7bps, 10YY -6bps).
  • The modest flattening on the day sees 2s10s dip to -51bps, closer to pre-US CPI lows of -58bps and the lowest since 1990.
  • The latest Bloomberg analyst survey implies an expected steepening ahead to circa -35bps for year-end, with a median 2YY of 3.24% and 10YY of 2.9%. The lifting is seen being done by the 10Y considering current yields of 2Y 3.19% and 10Y 2.68%.

Source: Bloomberg

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  • Risks of softer growth, hinted at most strongly by the large miss in the US Empire State manufacturing survey have dominated GoC trade so far today, with a belly- to long-end led rally (2YY -4.5bps, 5YY -7bps, 10YY -6bps).
  • The modest flattening on the day sees 2s10s dip to -51bps, closer to pre-US CPI lows of -58bps and the lowest since 1990.
  • The latest Bloomberg analyst survey implies an expected steepening ahead to circa -35bps for year-end, with a median 2YY of 3.24% and 10YY of 2.9%. The lifting is seen being done by the 10Y considering current yields of 2Y 3.19% and 10Y 2.68%.

Source: Bloomberg