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Canadian 5-year yields break 1%
USD/CAD is below 1.25 as the market continues to digest the strong February jobs report and the likelihood of BOC rate hikes.
The great debate of next year will be which central bank hikes first and the top two contenders are the BOC and Fed.
The Canadian central bank has also boxed itself into a corner by buying too many bonds too quickly. It will have to taper again in April and could ramp up the pace afterwards.
Canadian 5-year yields just crossed 1.00% and that compares to US 5s at 0.84%. Out to ten years the differentials reverse though with US 10s a 1.63% compared to 1.55% north of the border.
As for USD/CAD, the Feb low of 1.2468 is a big line and there isn’t much support for 200 pips below that.
I expect oil and commodities will be part of the story but I’ve been encouraged by the resilience of oil in the turmoil of the past two weeks. WTI is down 27-cents to $65.76 today.