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TD On BoC’s Macklem

  • TD see Macklem’s comments as reinforcing a 50bp hike on Oct 26, but are reluctant to extrapolate them much further given the current short shelf-life of central bank comments and with economic data starting to cool.
  • They still see a 4.25% terminal (25bps in Dec & Jan) but comments at face value imply upside risk.
  • FX: USDCAD dips should be bought, look for 1.40 this year. Have long held the view that more rate hikes will have a perverse effect on CAD as it worsens household debt servicing outlook.
  • Rates: Reiterate view of 6m6m-1y1y, 1y1y 1y5y (bull flattening option structure) and 10s30s flatteners. The risks of over hiking are growing.

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