Macro Minutes

BoC/Fed/BoE/ECB are all on tap over the coming week. How high rates will go, whether there will be a quick U-turn to rate cuts in 2023 and by how much, is a central theme for markets that will influence not only yield levels and curve shapes, but also important for FX and broader risk assets.

Participants: 

• Jason Daw (Desk Strategy), Head of North America Rates Strategy
• Simon Deeley (Desk Strategy), Canada Rates Strategist
• Blake Gwinn (Desk Strategy), Head of US Rates Strategist
• Peter Schaffrik (Desk Strategy), Head of UK/European Rates & Economics
• Elsa Lignos (Desk Strategy), Head of FX Strategy

* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

2022 was complicated, but it was dominated by a one-sided risk event - how high would rates go. 2023 should be even more complicated; policy scenarios could oscillate between various outcomes depending on the depth of the growth slowdown and inflation dynamics.

Participants: 

• Jason Daw (Desk Strategy), Head of North America Rates Strategy
• Blake Gwinn (Desk Strategy), Head of US Rates Strategy
• Peter Schaffrik (Desk Strategy), Head of UK/European Rates & Economics
• Adam Cole (Desk Strategy), Chief Currency Strategist
• Amy Wu Silverman (Desk Strategy), Head of Equity Derivatives Strategy

* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

All year market pricing for terminal rates in most countries has been a moving target and one directional - higher. Last week the Fed signaled a slower pace of rate hikes but a terminal value that was higher than their previous forecast. Where does this cycle end?

Participants: 

• Jason Daw (Desk Strategy), Head of North America Rates Strategy
• Simon Deeley (Desk Strategy), Canada Rates Strategist
• Peter Schaffrik (Desk Strategy), Head of UK/European Rates & Economics
• Daria Parkhomenko (Desk Strategy), FX Strategist
• Lori Calvasina (Research), Head of U.S. Equity Strategy

* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

Most central banks are at a maturing stage of the hiking cycle, putting terminal policy rates firmly in focus at upcoming meetings both sides of the Atlantic.

Participants: 

• Peter Schaffrik (Desk Strategy), Head of UK/European Rates & Economics
• Elsa Lignos (Desk Strategy), Head of FX Strategy
• Blake Gwinn (Desk Strategy), Head of US Rates Strategy
• Simon Deeley (Desk Strategy), Canada Rates Strategist
• Michael Tran (Research), Global Energy Strategist

* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

A made in UK fiscal crisis has led to sharp rises in gilt yields, with the BoE's buyer of last resort interventions disappointing those expecting more QE-type operations. The yield rises have permeated to Treasuries and other developed markets, with important cross-asset implications.

Participants: 

• Jason Daw (Desk Strategy), Head of North America Rates Strategy
• Blake Gwinn(Desk Strategy), Head of US Rates Strategy
• Peter Schaffrik (Desk Strategy), Head of UK/European Rates & Economics
• Daniel Rico (Desk Strategy), Latin America FX Strategist

* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

Fiscal policy has cracked the UK bond market, opened fissures in the Pound, causing ruptures in other bond markets and by extension risk and cyclically sensitive assets. Whether the fault lines in bond markets and risk assets turn into a full blown earthquake remains to be seen, but what is clear is that the high volatility should remain in place for the rest of the year. Stay tuned for our Macro Minutes series to hear from RBC experts on these developments.

Participants: 

• Cathal Kennedy (Desk Strategy), UK Economist
• Adam Cole (Desk Strategy), Chief Currency Strategist
• Simon Deeley (Desk Strategy), Canada Rates Strategist
• Jason Daw (Desk Strategy), Head of North America Rates Strategy
• Lori Calvasina (Research), Head of U.S. Equity Strategy

* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

Central banks are going full throttle to fight inflation by delivering outsized rate increases over multiple meetings. Their job isn't over, and more policy tightening should be forthcoming over the next few months. As they try to find the level of rates that is sufficient to contain inflation, it leads to a high possibility of over-tightening and recession. There are wild times ahead for the bond market and other asset classes. Stay tuned.

Participants:

• Jason Daw (Desk Strategy), Head of North America Rates Strategy
• Blake Gwinn (Desk Strategy), Head of US Rates Strategy
• Peter Schaffrik (Desk Strategy), Head of UK/European Rates & Economics
• Gordon Scott (Research), Australia Economics & Fixed Income
• Adam Cole (Desk Strategy), Chief Currency Strategist
• Adam Jones (Trading), Head of US Credit Algo Trading

* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

Many G10 central banks have moved policy rates to a neutral policy setting and are set to send them into restrictive territory with further super-sized rate hikes. Meanwhile, the late-coming ECB is contemplating an accelerated tightening path in the near-term as natural gas and power prices skyrocket due to supply concerns from Russia. How high can policy rates go and when will this cycle end for different central banks?

Participants:

• Peter Schaffrik (Desk Strategy), Head of UK/European Rates & Economics
• Blake Gwinn (Desk Strategy), Head of US Rates Strategy
• Simon Deeley (Desk Strategy), Canada Rates Strategist
• Elsa Lignos (Desk Strategy), Head of FX Strategy
• Michael Tran (Research), Global Energy Strategist

* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

The bond market overreacted to inflation fears in June and yields overshot on the topside. July was a complete reversal (and some) as growth fears escalated and yields overshot on the downside. Bond market volatility should remain high until there is better clarity on inflation, central bank terminal rates and how deep the impending recession will be, and this will continue to impact all asset class.

Participants: 

• Jason Daw (Desk Strategy), Head of North America Rates Strategy
• Simon Deeley (Desk Strategy), Canada Rates Strategist
• Blake Gwinn (Desk Strategy), Head of US Rates Strategy
• Adam Cole (Desk Strategy), Chief Currency Strategist
• Daria Parkhomenko (Desk Strategy), FX Strategist

* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

Central banks are full throttle on rate increases in a throwback to the early 1980's inflation fighting era. The ultimate end game of current central bank policy will be recession. Will this surprise anyone? How quickly will it happen? And what does it mean for financial markets?

Participants: 

• Tom Porcelli (Research), Chief US Economist
• Blake Gwinn (Desk Startegy), Head of US Rates Strategy
• Peter Schaffrik (Desk Strategy), Head of UK/European Rates & Economics
• Jason Daw (Desk strategy), Head of North America Rates Strategy
• Elsa Lignos (Desk Strategy), Head of FX Strategy
• Lori Calvasina (Research), Head of U.S. Equity Strategy

* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts