Canada: CPI data to be the bigger driver for rates - TDS

According to analysts at TD Securities, the Canadian CPI data will be the bigger driver for rates as the collapse in risk assets over the last few weeks put a significant bid into Canadian fixed income, with 10-year yields moving almost 20 bps lower since Nov.

Key Quotes

“8th with a similar rally in Dec. 2019 BAXs. Now that risk sentiment has stabilized somewhat, an upside surprise on CPI could trigger a disproportionate sell-off in CAD rates, and we like selling U9s and Z9s an outright basis heading into the release.”

“Moving out the curve, we maintain a core short Canada-long US view in 10s and 30s, and the risk-reward tradeoff around the data reinforces that view. Lastly, looking at the curve our highest conviction here is to own long bonds versus 10s heading into Dec. 1.”