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Underperformance To US Clear In BAX Futures

CANADA
  • Similar to the moves in front-end GoCs vs Tsys, the rally in BAX futures hasn’t been able to keep up with that of Eurodollars, with yields down 11.5-13.5bps through 2023 vs 17-19bps for Eurodollars.
  • The difference is likely a combination of softer than expected US data and haven demand, although is surprising considering yesterday’s Canadian CPI miss even if at this stage it hasn’t materially changed analyst rate calls with the next meeting not until Sep 7.
  • Canadian retail sales for May/Jun flash and especially the US preliminary S&P Global PMI for July could further shape the BAX and Eurodolllars curves, with 53.5bp and 66bp of cuts priced for Z2/Z3 spreads respectively.
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  • Similar to the moves in front-end GoCs vs Tsys, the rally in BAX futures hasn’t been able to keep up with that of Eurodollars, with yields down 11.5-13.5bps through 2023 vs 17-19bps for Eurodollars.
  • The difference is likely a combination of softer than expected US data and haven demand, although is surprising considering yesterday’s Canadian CPI miss even if at this stage it hasn’t materially changed analyst rate calls with the next meeting not until Sep 7.
  • Canadian retail sales for May/Jun flash and especially the US preliminary S&P Global PMI for July could further shape the BAX and Eurodolllars curves, with 53.5bp and 66bp of cuts priced for Z2/Z3 spreads respectively.