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Yields Extend To New Highs With Macklem Remarks

CANADA
  • Macklem’s line that “inflation will likely remain too high for some time” in the National Post post-CPI appears to be getting the most attention even if it could still be consistent with BoC forecasts from the July MPR with headline still seen up at 7.5% Y/Y in Q422.
  • 2Y GoC yields have continued to extend to new session highs of 3.34% (+13bps) as they approach levels last seen just after the BoC’s surprise July hike.
  • BAX futures meanwhile see BAZ2 yields touch new session highs (leading the way with +15.5bps on the day) with BAZ3 not far off the initial snap reaction to Canadian CPI earlier (+14bps).
  • The implied peak in the Dec’22 contract is crudely consistent with a policy rate between 3.5-3.75% whilst BoC-dated OIS currently sits with 67bp for the Sep 7 decision.

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  • Macklem’s line that “inflation will likely remain too high for some time” in the National Post post-CPI appears to be getting the most attention even if it could still be consistent with BoC forecasts from the July MPR with headline still seen up at 7.5% Y/Y in Q422.
  • 2Y GoC yields have continued to extend to new session highs of 3.34% (+13bps) as they approach levels last seen just after the BoC’s surprise July hike.
  • BAX futures meanwhile see BAZ2 yields touch new session highs (leading the way with +15.5bps on the day) with BAZ3 not far off the initial snap reaction to Canadian CPI earlier (+14bps).
  • The implied peak in the Dec’22 contract is crudely consistent with a policy rate between 3.5-3.75% whilst BoC-dated OIS currently sits with 67bp for the Sep 7 decision.