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TD Hold Firm On Short Can-US 10s And Look For 5s30s Steepeners In January

  • StatCan projecting 0.1% leaves “Q4 GDP tracking just below projections from the October MPR.”
  • “However, we believe inflation dynamics will be the larger factor in the timeline for BoC rate cuts, and the upside surprise on the November CPI report should help reinforce that the Bank could stay on the sidelines into mid-2024.”
  • “This [GDP] print does not help our short Canada vs US view in 10s, but we also do not see it as a material impediment to cross-market normalization. We hold firm on short Can-US 10s, look to enter 5s30s steepeners outright as we enter January and look to put 5s30s steepeners on vs the US as well.”
  • “As we move towards CMB purchases in February we will look to be overweight the belly but with broken fly weights that are notional/cash neutral (this provides us with an expression that isn't correlated to a steepener as the 3s7s30s fly is very much a quasi-2s10s steepener expression).”

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