Curve Your Enthusiasm

The Bank of Canada (BoC) hiked interest rates for the first time since 2018, and the episode begins with a dissection of the statement. This week, Ian is joined by Andrew Grantham, Senior Economist in CIBC Economics. Once the pair establish what was surprising from the BoC, they spend some time discussing why C$100.0 oil in 2022 has a different impact than C$100.0 oil in 2014. Andrew discusses his upside view on inflation, while also discussing the latest trends in provincial economics. Ian and Andrew spend some time talking about what impacts terminal rates, and ultimately agree to disagree. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com

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Ian is joined this week by Josh Kay, and the duo begin the episode talking about the benefits, and dangers, of a non-standard sized hike. Ian discusses the required trade off between a higher terminal rate and a faster pace of hikes and why the curve is currently ‘trapped’. Josh spends some time discussing how credit markets are reacting to higher interest rates, while also taking a look back at recent Canadian credit performance. The pair finish the episode talking about portfolio construction and whether or not credit spreads have already reached the lows for the year. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com

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On this episode of CYE, Ian and Nick begin this episode discussing whether or not markets are priced for peak macro conditions. Ian talks about the importance of the BoE and ECB meetings on the global stock of negative yielding debt, and how that dynamic may interrupt traditional flattening trends into a hiking cycle. Nick discuss productivity trends within the context of where the market is pricing-in terminal policy rates in North America, while Ian gives a highlight on what to expect from Governor Macklem’s speech this week. The pair end the episode by looking at the long-end of the curve. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com

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Ian is joined this week by Jeremy Saunders from CIBCs XVA trading group. The duo kick-off the episode by discussing the Bank of Canada and Fed meeting this week, looking at the primary reasons why the Bank decided to delay the first hike until March. Jeremy discusses the importance of preserving forward guidance as a policy tool, and contrasts the messaging between the two post-meeting press conferences. Ian provides his view on the BoC balance sheet, and unveils the firms new central bank and interest rate forecasts. Jeremy throws cold water on the short 2yr swap spread narrative, and provides his favorite trades for the next few weeks. The pair finish the episode by looking at the difference between terminal and neutral rates in North America, and discuss the implications for longer-term forward rates. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com

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Ian is joined this week by Craig Bell, and the duo cover a lot of ground heading into the Bank of Canada interest rate decision next week. The episode begins with an in-depth discussion on why the Bank can credibly delay rate hikes in January. Craig goes on to discusses the path ahead for swap spreads, while Ian spends some time walking through what balance-sheet rolloff will look like in Canada, and why it isn’t as big a deal for the bond market as in the United States. The co-hosts spend some time discussing the misalignment in the front-end of the CAD curve, and Craig provides his favorite trading expressions over the next week. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com

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Ian is on the hunt for a new co-host, and is joined this week by Nick Exarhos to discuss a host of themes that matter right now for the bond market. The duo begin their discussion on what quantitative tightening (QT) would look like from the Bank of Canada, and the key differences we should expect relative to the Fed. Nick discusses the impact of fiscal drag in the United States on the growth outlook, and questions whether excess savings is enough offset the slowdown. Ian spends some time talking about the upcoming BoC MPR and why he doesn’t believe the Bank will hike rates this month. The pair discuss the evolution of the curve and have a friendly disagreement on the level of provincial spreads. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com

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In the final episode of 2021, Ian & Royce discuss the widened uncertainty related to new COVID variants. Royce discusses his view on the recent Canadian data, both GDP & jobs, while Ian opines on the potential for the Bank of Canada to deliver earlier-than-expected rate hikes. The two hosts go back-and-forth about the most optimal policy sequencing, specifically whether or not central bankers should shrink balance sheets before delivering rate hikes. The potential for yield-curve inversion is growing, and that may ultimately harm the recovery. Royce finishes the show by discussing how falling energy prices will matter going forward for U.S. inflation. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com

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Ian & Royce begin the episode this week discussing the most recent Labour Force Survey. They conclude that while the economy has reached a milestone in recovering all of the jobs lost during the pandemic, that’s not a sign of “mission accomplished”. Ian then takes a deep breath and speaks about the recent move in Canadian short rates, and why the profile for the Bank of Canada has been so aggressively repriced in the past week. Royce agrees, and walks us through his view on the upcoming Bank of Canada announcement, while Ian throws in a surprise by noting that he doesn’t believe the Bank will enter the reinvestment phase this month. The duo finish off the episode by touching on inflation and what the positive terms-of-trade shock does and doesn’t mean for Canada. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com

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The recent increase in COVID-19 cases is showing up in the data in different ways, in different regions. Royce describes why inflation surprises shouldn’t be taken at face value, while growth surprises aren’t as concerning as the bond market is suggesting. Ian walks through his expectation for the FOMC meeting next week, and provides a framework for thinking about how the Fed’s taper will impact bond yields. Both Ian and Royce do a deeper dive on the recent communications from the Bank of Canada, and discuss why quantitative-tightening (QT) is an elegant solution for the BoC in the coming hiking cycle. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com

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Royce and Ian take stock of the recent FOMC meeting, and discuss what new information they heard from the Fed.  Royce explains the key drivers of inflation differentials between Canada and the United States, while Ian vents his frustration over the lack of response in the bond market.  The new repo facilities are discussed within the context of how the sequencing of QE impacts the timing of U.S. rate hikes, and both Ian and Royce opine on what that means for the Bank of Canada. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com

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