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Solid Rates Rally As BoC Expectations Dampened

CANADA
  • BAX futures are off highs but still see a large rally on the day, initially bolstered by the softer underlying details behind retail sales before a further US-driven rally for only mild outperformance to US rates on the day.
  • The front Sep’23 trades +0.05, Dec’23 +0.085, Jun’24 +0.14 and Dec’24 +0.16, leaving the broad implied rate path back at Aug 14 levels, whilst the BAU3/Z4 spread of -59bps last closed lower on Aug 18.
  • As for near-term meetings, BoC-dated CORRA OIS implies +6bps for the Sep 6 BoC (based off the recent 2bp increase in CORRA to 5.02%) building to a cumulative +17bp by year-end from ~22bps earlier in the week.

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