TD Securities analysts word Canadian Client Worth Index (CPI) accelerated to 2.4% year-on-year in March, pushed by greater Oil costs, however core measures remained subdued. They see the print as dovish and in step with Financial institution of Canada (BoC) steering to look by momentary spikes. They anticipate present market momentum to persist and maintains a bias towards lengthy 2-year bonds and Jun/Dec flatteners.
Delicate core inflation and curve trades
“Headline inflation accelerated to 2.4% y/y as costs rose 0.9% m/m, lacking the market’s expectations by 0.2 p.p (market: 2.6%, TD: 2.5%).”
“Greater oil costs drove the headline, however stabilization in core inflation saved the print on the dovish facet. Additional particulars additionally contributed to the dovishness, with ex-food/power falling barely and 3m annualized charges of core inflation nonetheless beneath goal.”
“All in all, the BoC has clearly signalled they’re keen to look by near-term inflation spikes and as such, we see this print in step with their present tone and continued cautiousness.”
“Regardless of the draw back shock, there wasn’t an enormous response from charges as yields stay a bp inside ranges previous to the print and CAN-US spreads solely 1-2 bps tighter. We would anticipate it to take a pair extra prints like this to persuade the market to totally get better from the height pricing in March, however anticipate present momentum that we have seen up to now to proceed.”
“We’re nonetheless biased towards lengthy 2s and Jun/Dec flatteners, as hawkish pricing for 2026 is walked again by the market.”
(This text was created with the assistance of an Synthetic Intelligence software and reviewed by an editor.)
