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Terminal Yields Maintain Post CPI Climb

CANADA
  • BA yields are up strongly following the CPI report, led by front contracts +8-10bps out to Jun’23 and pushing BAZ2 +12bp, BAH3 +11bp on the day.
  • The moves aren’t completely in isolation (EDZ2 +4.5bp, EDZ3 +10.5bp) but nevertheless helps push an implied terminal policy rate to new highs and more firmly between 4.25% and 4.5% in the Dec'22/Mar'23 contracts, i.e. 100-125bps of additional rate hikes to come.
  • It helps 2Y GoC yields keep pace with Tsys on the day, both +9bps and limiting the 2Y Can-US diff to ‘just’ -42bp.

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