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Yields Rise Ahead of Important CPI Report Tomorrow

CANADA
  • Front end GoC yields and BAX implied yields alike rise with today’s risk-on sentiment, with BAX yields in particular seeing sizeable gains of 8-9bps through 2022-23.
  • This is back towards highs seen after the BoC’s front-loaded 100bp hike last week, driving minimal changes in inversion with more than 50bps of cuts through BAZ2-BAZ3.
  • There is one more CPI report (Aug 16) before the next BoC (Sep 7, currently 72bp hike priced) but this will still be looked very closely after inflation received so much attention at last week’s BoC. Most troubling for the Bank will likely be the further sizeable increases expected in the three preferred core measures, with the average seen rising 25bps to 5.0%.

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