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Solid Outperformance With Heavy Docket, 2Y Supply Ahead

CANADA
  • GoCs rally across the curve, led by the front end in solid outperformance to Treasuries (2YY -2.8bps vs +2.1bp) as they don’t see the same post-FOMC pressure.
  • The 2Y Can-US yield differential widens to -55bps on the move, still off recent lows of circa -60bps but a firm shift back towards levels after the BoC first announced its surprise downshift to a 50bp hike back in late Oct, having more recently touched almost -40bps after Powell’s Nov 30 Brookings comments were construed as dovish before reversing.
  • Plenty of potential drivers ahead, starting with Canadian housing data and ECB rate decision hitting 0815ET before a tranche of US data including retail sales plus 2Y GoC supply with C$3.5B of 3.75% 2025 bonds on offer.

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