Ian is joined by Jeremy Saunders this week, and the duo begin the episode discussing the recent bond market selloff. They reach an interesting conclusion early in the episode, highlighting that the ‘way’ in which the market is repricing has not been seen in all of 2023. Ian believes the market is pricing-in more inflation and lower growth in longer-dated yields, which Jeremy suggests is a function of where we are in the cycle. Jeremy discusses his view on the upcoming Bank of Canada meeting, while discussing the ‘big’ global macro themes and what they mean to the bond market and swap spreads. Ian finishes the episode by opining on recent data from the labour market, and highlights his favorite trades for the week ahead.
This selloff has a deeper meaning
In this series: Curve Your Enthusiasm
Is the BoC mispriced enough?
Ian is joined by Jeremy Saunders and the duo begin the show discussing recent central bank decisions. With four major central banks abandoning their tightening bias, the data has undermined the market reaction by showing a stronger underlying economy. Jeremy talks about the problem with short-end pricing in Canada versus the United States, while Ian shows why US and Canadian inflation is more comparable than meets the eye. Jeremy provides his view on the latest Treasury refunding announcement and the implications on QT, while Ian discusses why recent BoC measures to bring CORRA back to target won’t work. The duo spend some time opining on the path of swap spreads, and have a friendly disagreement on whether the belly is cheap or rich in Canada.
The Rates vs Credit Intergalactic Royal Rumble
Ian is joined this week by Josh Kay, and the show begins with a lookback at the Bank of Canada rate decision this week. Ian walks through the material differences between the statement and the updated forecasts, painting a more dovish outright picture. After talking through the most likely paths for the BoC, the duo discuss which asset class is likely to provide better total returns in 2024, rates versus credit. Josh discusses why credit is turning into a defensive asset class and why it is attractive at current levels, while Ian discusses the relative supply outlook to government bonds. The show finishes with both talking about their favorite trade ideas for the next few weeks.
Make duration great again
Ian is joined this week by Mike Larson, and the duo kick off the episode by discussing the elephant in the room – the level of interest rates. Ian discusses the mechanics behind the ungluing of global long-end interest rates, while Mike gives his view on swap spreads. The pair talk about why the level of swap spreads should continue to decline, especially given how much 10yr Canadian rates have underperformed the United States recently. Ian gives his view on the absurdity of trading the ‘higher for longer’ and the ‘soft landing’ narrative at the same time. The show finishes with Ian and Mike outlining their favorite trades and which positions are the most crowded.
Two types of easing cycles
Ian and Jeremy begin the episode by discussing the FOMC meeting from last week. Jeremy spends some time dissecting the disinflationary narrative used by Chairman Powell, while Ian discusses the extremely strong data which came out after the meeting. The duo do a victory lap as many of the trading themes discussed in the prior episode ended up working quite well, and the co-hosts discuss the driving forces of markets in an otherwise quiet week ahead. Ian discusses why the front-end of Canada remains very vulnerable to a repricing higher, while in the balance of the show the pair discuss why easing is priced the way it is for 2024 and what that means for long rates.
Why does the ‘Close Elevator’ button never work?
The first CYE episode of 2023 sees Ian joined by Jeremy Saunders, and the conversation starts with a discussion on global macro shifts. Stronger global growth outside the United States is an unexpected development, and the duo discuss what it means for global bond yields. Jeremy asks why the BoC spent so much optionality so early into the year, while Ian talks about the market implications of a conditional pause. The duo agree that spreads look toppy, though they disagree on whether or not market pricing for eases can realistically move from 2023 to 2024. The episode ends with both Ian and Jeremy speaking about their favorite near-term trades
Big conversations in the short-end
Ian is joined this week by Brenden Donaher, and the duo begin the episode by discussing Bank of Canada pricing for the upcoming meeting. Ian walks through various scenarios around the meeting, and Brenden provides his view on what that means for 2023 pricing. Brenden introduces the idea that the USD still remains the most important factor driving Canadian short-end pricing, despite some idiosyncratic developments which will occur next year. Ian spends some time walking through his outlook for rates in 2023, while Brenden provides his view on the year-end turn as well as the reasons why CDOR-OIS looks too cheap compared to spot pricing.
Bank of Canada preview
Ian and Andrew discuss their expectations for the Bank of Canada interest rate decision next week. The duo walk through the reasons why the Bank will need to hike by another 75.0bps next week, and look at the most likely path of short-rates over the rest of the year. Ian talks about his favorite trades going into the release, noting that the forward expectations for BoC policy are too flat. Andrew spends some time detailing his expectation of forecast changes in the MPR, while the pair spend time talking about the impact that a weaker Canadian dollar has on both CPI and the stance of policy.
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