Trading the Macro using the Micro

Brenden Donaher: So until something happens mechanically to that, or to QT, it’s kind of the sweet equilibrium spot where the BoC is happy, people still get funding and, at the end of the day, in a QT environment, it does make sense to have funding trade higher than the target, right, at least in the setup we have right now with foresight.

Ian Pollick: Welcome to another edition of Curve Your Enthusiasm. I’m joined this week by Brenden Donaher, who runs our store trading desk. Brenden, how are you?

Brenden Donaher: Good, man, good. So it should be a fun week.

Ian Pollick: It is a very, very busy week. Obviously we have a ton to talk about. Let’s just take a step back and look at what the Bank of Canada said. And let’s start the show today just discussing about some of the distributional impacts of what we heard last week. I’ll frame it from my perspective for you. Obviously, it was a dovish characterization of the economy. I took three key elements from the MPR, the press conference and the statement. The first one is the bank is now flipped on their assessment of the labor market. They are saying that the labor market is in excess supply. You know, we’ve been saying that for a while. The bank has now kind of marked to market with that. That’s important for two reasons. I think number one is just given to the degree that the Bank of Canada is having a hard time gauging excess supply in the system. They’ve been looking at the unemployment rate as their proxy. Unemployment rates gone up 7, 10 since the start of the year. So clearly they’re kind of saying, look, this is confirmation that we are seeing indeed excess supply in the system. But number two is in the MPR, there is a technical box talking about the sources of inflation and what was driving them, and they were talking about one of the concerns about ex-shelter service inflation was high wages. But if the bank now believes that the labor markets and excess supply, then all of a sudden that should start to, over time, reduce wages as well. The second thing that I take out of it was that they removed all reference to the word gradual. You know, there’s no gradualism. And that was very prominent in the prior few meetings. And that to me suggests that there’s a green light now for a more traditional looking cycle. That’s a bit of a new information that we hadn’t expected before. On the back of that, we have revised our own forecast. Originally we were looking for a September pause, i.e. this was the reassessment period to see what the data is doing, what prior rate cuts have done. But now we have changed that. We see the pause coming in December. Potentially, maybe we even get a fifth cut this year. But I think finally and this is the most important okay, is that the bank now said that they’re so concerned about growth being weak, that forward looking inflation needs to be prevented from going too low. Now, this is a very marked change from how the central bank has been talking, particularly over the past couple of years, about the outright level of inflation. And so to introduce a concern that inflation may be running too low, I think that is consistent with this idea that as you get closer to the 2% target, downside risks play more prominently. And that’s what the bank had said. And so with that framing of the meeting, talk to us about how you see the distribution of where cuts are living right now.

Brenden Donaher: Quite a good run down, I think overall, I’d say when you look at the BoC’s communications, not just within the meeting itself, but everything leading up to it, they’ve just continued to trend more dovishly and dovishly and the markets price it in. So we’re at a point now where you do have basically a cut every meeting. September’s more or less kind of approaching the fully price point now. And I agree with the December skip. I think in general, there’s something nice about this 4% level. You kind of have just around 50 for now to the end of the year, and I think that allows them to go to that point in a fairly clean sequence. And the other thing, too, is we don’t get a lot of data because now it’s ten steps, kind of a bit of a lock. You have another 18 or so to October, which is probably the fair. And then for choice. I think, you know, the last in December is probably the right way to frame it. And we kind of agree with that trade. I think overall they’ve had some chances to push back. They’ve had the ability to talk about gradual pacing and be more moderate, kind of in that sense. And they haven’t done that. If anything, they’ve continued to show us a much more dovish tilt on things, right?

Ian Pollick: For sure. Let’s just get a little bit more micro here for a second. Okay. So you have roughly 19, 20 basis points priced at a time we’re doing this podcast for September, October. December trades somewhat cheaper. And that’s for all the reasons we just talked about. You have four cuts priced for 2025 until you kind of get this like almost 3% end point. Let’s compare this to Fed pricing. One of the things that we’ve been talking about is how cheap U5 looks on a relative basis. But maybe walk us through how you’re thinking about some of these cross market calendars.

Brenden Donaher: The Fed is really interesting. I think the two things with the Fed that are a bit different in Canada is you have a central bank that is much more direct on forward guidance. So some of the times we maybe see these low hanging fruit pieces in Canada, you be a little more active to go into them. And that is something we did see actually going into this meeting. A lot of people were looking at it as a relatively cheap option on the no cut. There were some more kind of micro news with that, but the Fed is a bit different. And with the Fed right now you have this kind of step function where you have September more or less fully priced with the small risk of a 50. July is not really priced. And I just, I don’t think there’s a risk they go in July. This stage in the game they’d have to give you something. But then you have this kind of kink in November for the election and then fully priced December. So you have a much less smooth sequencing. So I think there’s some opportunity there in the very front end with November. But outside of that, you’ve allocated all your cuts in Canada much more forward in the curve. That cross market point, one of the things we really like is using that December endpoint and using that kind of skip December around that 4% level as your short leg and kind of having duration longer further in the curve like middle of the reds. And using terminals that way and against that kind of steepen the US and more specifically, I really like using that November point, which is underpriced to me, given that election kink, given that there’s not a ton of value in the Sep long or the Sep and long.

Ian Pollick: I mean, it gets back to something you and I’ve talked about it for a while, which is Canadian rate cuts live in white, U.S rate cuts live in red. You’re getting really finite in terms of how many meetings are left in the US this year. And so that distribution, you know, there’s nowhere for this to go other than back into reds really. Because no one is trading greens, no one is trading blues just given all the election risks. But when you think about FOMC pricing okay. And you think about kind of the end point. When I look at like CORRA, SOFR something like M586, you’re basically flat. And so something like U4 U5 you’re still Canada’s 28 basis points steeper. Are these the best trades for the redistribution or are we going to start realistically talking about 50s in the US? Because other than that, which I don’t think is realistic, I don’t know how you maintain this cross market footprint.

Brenden Donaher: Yes. Like largely focused. I do think that’s the right way to approach a trade. And I do think that’s the right way to look at the risk. To the point of 50s in the US, like right now, especially at this stage in the cycle, the talk of 50 is going to send a different messaging. That’s a different trade, right? Like if there’s any real risk of a 50 something has to happen I think. 

Ian Pollick: Yeah. It’s not your steady state.

Brenden Donaher: Yeah. So the I think the thing with the US is I still very much like that trade now like being long kind of in the whites. But I think you need to be more focused. And that’s why I like that November point is that December maybe like is that for U4 but the September meeting and that U4 equivalent of that doesn’t really do a lot for you from long base. So that trade is going to trade relatively short. And I don’t actually mind that at this point. Having that USD front is a bit of a short, I think, cross market, that’s why I like this kind of small kink where you’re isolating the two meetings, December in Canada and November in the US that are probably the most prone to reprice.

Ian Pollick: Let’s talk about cross market for a second, because we do spend a lot of time talking about Canada versus the US. But I think something really interesting, if you look at select other small open economies in the system, you look at Canada versus the UK, for example. You know, we have the UK rate decision in two days. We as a firm think they are going to cut interest rates. We do think they skip the September meeting. But the point here is that you have the Bank of Canada, which is further ahead and will be much further had than the Bank of England. And yet when you look at market pricing, they almost look identical. So maybe walk us through what you’re seeing in the pricing and where you see some opportunities.

Brenden Donaher: An extremely interesting distribution as well. And if you look at that U4, U5 as your proxy, you end up with around 100 beeps between Canada and the UK. So very similar curves. But the meeting distributions completely different. The thing you have in the BOE is let’s say they do go this week, which you know it’s kind of 50/50 priced. They have a similar approach to the ECB where the meetings are somewhat staggered. So you don’t have the same amount of kind of gradual inversion in the curve. It’s much more kinked I would say in that sense. So what I would argue to me is that you should actually have a bit of a flatter curve even in the UK, and that if you’re going to go less now, it’s going to push more of that later down the curve. So to have that same whites, reds overall shape doesn’t make a ton of sense to me when you end up with a very different monetary policy curve on the very front end.

Ian Pollick: So, you know, we’re thinking about this idea that you have these divergence trades, Canada looks cheaper relative to the Fed. But for those who actually think Canada may be expensive, there is an opportunity here against another market like the UK. But even when I look at, you know, RBA pricing and I look at M5, M6, Canada has, you know, 50 basis points negative. RBA’s you know 35. And yes RBA is in a little bit of a different part of the cycle. But small dollar block economy, very similar linkages to a weakening economy i.e China. And so like that’s another opportunity I think as well for those looking at want to actually trade Canada from the short side, is there anything else that you think we missed? Like when I look at like Z5, Z6, Canada SOFR, you know, you’re a -19.5 in Canada and then your -19 a half in the US, but then -27. So you got this weird period where, you know, Canada outperforms in the whites, the US outperformed in the reds. You get to kind of late 25 all of a sudden Canada is now re accelerating its cuts again? Like that to me doesn’t make a ton of sense.

Brenden Donaher: It doesn’t. And I would say you know that part of the curve you tend to get fairly mechanical in the sense that, you know we can talk a little longer. But you look at some of these four gaps like, you know, two year, one year, 3 or 1 year and everything goes back to this kind of like, you know, they look relatively expensive. And that’s just all come from fives right? So that part of the curve where you want to get micro in terms of the late 25 or early 26, 3 month gaps, at that point, you’re really just trading these forward gaps to coming off fives, which I do think are relatively rich. and I think you have made a point about that in the past, but we really don’t have that much to go for kind of peak five year yields.

Ian Pollick: Yeah. And just to reiterate on that, you know, one of the things we did last week is we took a look at if the Bank of Canada were to cut at every single meeting starting in September to the end of 2025, what would your five year break even yield be? I.e, like what is your forward implied yield based on that core path. And it’s only like 35 or 40 basis points lower than where you are today. Just given what’s priced. And so you take a step back and say, well, what is the Bank of Canada really nervous about from a consumption perspective? Well, they’re nervous that this mortgage refinancing wave is going just distort consumption patterns because more cash is being redirected to mortgages. How much relief are you getting on a five year mortgage given that type of path? And I think if anything, it raises the probability, you know, that the bank may have to go below neutral. Now, that’s a bit premature to trade this today, but these are the types of questions we need to start asking ourselves. Even in a world where you’re not trying to provide stimulus, given what’s priced, if you’re hitting a wall and translating that back into financial conditions, I would be putting a higher probability on some of these small, open economies to go a bit further. And that just exaggerates some of these trades that we’ve just been talking about. We’ll switch gears a little bit. Let’s say in the short end I know you’re comfortable there. Let’s talk about cross currency. And so when I look at the cross currency curve, I guess the first question I have for you is, you have this situation where ones, twos is, you know, 175 positive, ones, sixes is three and a half positive. Then you get to that kind of six month, three month part and you have this weird inversion. And so I guess the question is why do you have, you know, your mid-gaps from ones to one year looks so deviated relative to the wings.

Brenden Donaher: There’s two kind of large, I call more macro themes have transpired over the last couple. It 3 or 4 weeks that have put some kind of shape again to the CAD cross currency curve. It’s been a bit global, but one of the things that happened, if you go back three weeks, I think there was a Reuters article, it came out, it was talking about US G-SIBs. Ever since then, all your kind of 25 gaps have been relatively bad. You’ve seen a lot of interest to pay those just from the function that everyone’s okay. Well, you’re not going to have turns anymore in the event that this G-SIB stuff goes through. We’re generally sellers of that idea. I think a lot of that more structural bank regulation is going to take longer to influence that the markets pricing in right now. So generally speaking, when we have these forward gaps, if you look at like one year, three month, one year, six months, that kind of stuff, like anything between now and kind of the 18 month part of the curve. I think a lot of those four gaps that exist in kind of high single digits are huge sales. The role looks good on them. I think in general, that the regulation picture to play out is a much slower fuse. And generally speaking, at these levels we’re kind of coming off cycle types in cross currency.

Ian Pollick: But why is your six month point so negative?

Brenden Donaher: It’s just turns at that point. It’s just you still have a 24 turn, so what we’re still left with is we’re still pricing in, I want to say around 250 to 300 beeps for this year, end of year calendar turn. But then the 25 turn is kind of being framed the other way. So it forces these gaps to be quite-

Ian Pollick: Is that a function of the G-SIB?

Brenden Donaher: I think it was a large part of it. Yeah. I mean, it generally has had that shape in Canada anyway. We’ve definitely exaggerated a bit. And the other thing you have to is now you’re at a period where if and I would suspect does issuance slows down a bit in the summer and you see less of that issuance driven kind of demand for cross currency, things should normalize left again.

Ian Pollick: So let’s just take a step back, because one of the big themes as we headed into CDOR cessation was this idea that BAs go away, there’s a shortage of assets, people have to go abroad, buy assets that would push very short term cost currency more negative. That doesn’t seem to be happening. Do you agree with that?

Brenden Donaher: I would say it’s been, I think we went to that BA cessation, we kind of went in saying, okay, not all of the demand for BAs is going to be replicated. That was a point that I think you and I talked about a lot. And it seems like even less than that has been replicated. And you’re seeing it everywhere, not just cross currency. There seems to be a large excess of CAD balances. You can even look at the LBTS, which is continuing to climb. Obviously, the BoC has been and doing some kind of injections for repo. That’s obviously help, but I’m sure we’ll touch on that later. But overall, you’re really not seeing a demand for assets domestically replicate. And I think the function of that is a internationalization does not flow down. Anywhere in the world. There’s, you know, your amount of issuance to have. You’ve seen it and swap spreads globally. It’s kind of lived everywhere. And at the same point in time, there’s still, you know, a decent amount of CAD assets around. So if you look at real asset swaps for instance, we’re not really any tighter than we were previous cessation. So you’re not seeing people come in and rush into buy bills and replacement BAs. So I think there’s just a general abundance of assets globally that have led to that. And cross currency, as tight as it is, doesn’t make it attractive for internationals to come in and buy product.

Ian Pollick: For sure, because, I mean, this was a big story and a lot of people are focusing on this, and we kind of thought maybe that was the way that you would trade the cessation argument. But it doesn’t seem to be materializing, and I would not expect it to kind of, let’s say, over the next six months either.

Brenden Donaher: No, I don’t think so. So all that’s to be said, it just supports the theory that you have an excess of CAD in the system. You’re seeing some small picking away of some kind of front end funding at a little wider levels, but largely speaking, I think all of the bias for these flows is going to be moving basis more left into next here.

Ian Pollick: Yeah, I would agree with that. So let’s just talk about CORRA for a second because you brought it up. Obviously it’s something you know the nine people that love this want to hear about it again this week. And so we’ve seen this very consistent twice daily OR operations from the bank that seems to have done a relatively good job at offsetting some of this T+1 impact, which it’s very clear to me now, if you were to decompose, what is the deviation from target? Where is it coming from? Let’s call it, you know, the concentration of reserve balances were three, T+1 seems to have been were two. They’re doing this every day, let’s say around 12 yards. That’s almost remove that two basis points that we saw. Is this steady state now? Like, can we expect this plus two plus three deviation to just be the go forward in a QT autopilot world? What are your thoughts?

Brenden Donaher: I think it’s return to steady state is actually what I would call it. If you look back over the last month, you had this kind of quarter plus five like plus five was your normal range. But prior to that, 2 or 3 was the willingness the BoC had to tolerate before they stepped in, right? So I think all we’re doing is going back to a system where 2 or 3 both are comfortable. And you saw obviously huge take off for the OR. It’s been basically full take up for the first two operations per day. The BoC has made them a little more schedule the more routine. So I think there’s now a better semblance of timing and how they’re approaching consistency. Exactly, exactly. So to me, 2 to 3 is like I see no reason for that to really change tack. It goes back to the distribution of reserves is the big issue. And it’s very hard to get off that in the system. So until something happens mechanically to that or to QT, it’s kind of the sweet equilibrium spot where the BoC is happy, people still get funding. And at the end of the day, in a QT environment, it does make sense to have funding trading higher than your target, at least in the setup we have right now with the floor system. So I don’t see any broad concerns for it shifting.

Ian Pollick: And so from a rundown perspective, are we going to just trade everything off plus two plus three?

Brenden Donaher: I think so. I think I sort of think about it. But one thing I do want to bring up on that note is as we go into month end here, last month end was very interesting, not just from a fixing perspective. SOFR had a couple days of elevation, but cross currency was really a big driver funding.

Ian Pollick: Why?

Brenden Donaher: So it was interesting in Canada and I think it was almost the perfect storm where you had calendar quarter end, you had Canada Day holiday, July 4th holiday right after. So liquidity was strained. But the day of event you saw a massive move across currencies to the left. And it was just there was so much excess CAD in the system that couldn’t be placed. And cross currency went like -150 at one point for the day’s funding. So I think when you look at these fixings, you look at all these setups going into most month ends now, I am expecting a little more volatility.

Ian Pollick: Because we have month end this week, quarter in this week, are we starting to see any activity?

Brenden Donaher: We are. Well, a little bit. Basis is starting to widen out a bit going into it. We’re seeing a couple beeps of widening in one month. SOFR started to trade a bit high again. So I expect that to sustain itself kind of you know 2 to 5 beeps above target rates there. But CORRA I think will actually be somewhat well behaved given how active the BoC is now.

Ian Pollick: So the bank is proactively suppressing the, let’s call it that excess premium that exists in CORRA. If they step away, does it come back right away, like if you go for 2 or 3 days with no OR operations, do you think we would go back to a plus five?

Brenden Donaher: Not immediately. One thing that’s kind of specific and niche about CORRA is it’s kind of the self-fulfilling market, in the sense that a lot of trades tend to get done at where do you see is being struck and where CORRA is being struck. So it takes a while to actually see this thing to be true. You might get a couple days of month end stress, so to speak, if they do step away, which I wouldn’t imagine doing. But ultimately, what happens in CORRA is it kind of sustained itself for a slow period of time. So even before we actually set at 480 or 5 above, GC was trading well above there, but it took two weeks to actually have that setting manifest that information. And that comes down to a lot of the large trades that get done, just get struck at prevailing CORRA levels, and that kind of keeps it a slow fuse, more than an immediate reaction.

Ian Pollick: So it’s like a living memory in this sense, right. Because these trades get struck of where they were the day before that. It takes a while to work through the system. Okay. Well, let’s just talk about some of the central bank meetings this week. Let’s start with the Bank of England. We’ll get to the good stuff at the very end. There’s only 15 basis points priced for the Bank of England this week, ten basis points going into a meeting that is very live seems like a big number, right? So you know what are your thoughts here? Is this, do you go with this, do you fade this?

Brenden Donaher: So I’m going to counteract the house call a bit. I honestly think it’s down the middle. I think fifteen’s probably about right. But that being said from the trading view, that’s why I don’t really like trading the meeting itself. I’m not as convinced they go as I think our kind of house view on things. They’ve been a little more spotty. And if you look at the data cycle, like you have had a couple sticky prints come in, you have had like, I see more of a case for the BoE to hold than the BoC. Two have held back when they started their cuts. But from a trading view, I actually like playing the currency more than the actual meeting itself given that distribution.

Ian Pollick: Okay, walk me through that.

Brenden Donaher: So if you look at sterling positioning and I know it’s kind of been out there for the last couple weeks, the market’s still incredibly long. So I think if you’re looking for a dovish outcome, the better way to manifest or play the dovish outcome is through the currency in that if you go and kind of short the currency, I would suggest that there’s more risk asymmetry to a sell off in the currency, more so then taking kind of a flier on 50/50 rates. Just given that that positioning.

Ian Pollick: Like you went from like sterling at 130 to 128 with 15 basis points price. But I think a lot of that was the dollar yen move, right? So you know that brings us up to the next point, which is the Bank of Japan this week. our house view is that they don’t do anything and that they surprised dovishly, as they always do. I don’t know if I agree with that. Like, I think there’s a bigger risk that they could actually do something. You know, I think you could actually get a hike in conjunction with their QT tapering discussion. And so in that type of environment you get this movement in dollar yen higher. And so what’s the risk to a short sterling trade in that world?

Brenden Donaher: I actually agree with you on the BoJ. I think you have 4 or 5 beeps priced, I want to say right now, and I think that’s probably about fair. And for the first time, you’re actually seeing the signs of the data in Japan supporting you.

Ian Pollick: Yeah. Like all the other wage data in the intervening period does support them, like full stop.

Brenden Donaher: I think at this point, especially given what they’ve tried to do to their currency and what they’ve been active in doing, having an overly dovish outcome does a massive disservice to it, right? So, you know, that being said, I think that’s always going to be a big driver of dollars and that is a risk for the BoE trade at least. But I think given how I’d say kind of like one side of that sterling trade is I actually think you have a bit of cover that way as well. I don’t know how much, you know, large knock on effect there’s going to be from the end. I think it’s going to be fairly isolated, not isolated to yen. But in general, I think the more hawkish outcome is more priced in that than the dovish.

Ian Pollick: You said it exactly right. You put in an extra 2 or 3 basis points into the front OAS meeting in Japan and the world suddenly deleveraged in a day like, you know, that is a narrative fitting the price action. I don’t know how much I actually believe it, but let’s skip here. Let’s go right to the Fed. So it is a non set meeting. you don’t get any new projections. You just get a statement. The question that matters. The only question that matters is do you think that you get a September signal or not. What your view?

Brenden Donaher: I think you get a lack of a pushback in that sense. I don’t think you get anything firm saying like, because at this point, if you’re the Fed, a hard signal saying we’re about to cut doesn’t really do anything for you. I think in this meeting, I know I said it earlier, but I think cut in July is kind of off the table. You would have heard something else that came out.

Ian Pollick: It is too irregular this close to a meeting to not have moved like probabilities higher than for them to do anything.

Brenden Donaher: It sends the wrong signal, right? Like if they were to do anything now or aggressively single September even, which is why I think they actually don’t give you a firm like lay up. You already have it priced. I would say a hard signal here does mean not quite to the same extent as December. But last year when they had that giant move in December and they kind of repriced the market and I was like, that’s not really the easing we want priced in. That’s why I think you don’t need to do much at the market’s given it.

Ian Pollick: It’s already priced.

Brenden Donaher: The market’s giving it to you. You have more than 25 priced or right around there. I think the risk of a 50 is low.

Ian Pollick: And so there’s a lack of a signal on the price of the market. Like, do you lose seven basis points in September pricing?

Brenden Donaher: I think you get maybe a couple points of repricing back to like the 23 level, which we were kind of comfortable with before. Call it last week.

Ian Pollick: So who cares? That’s nothing.

Brenden Donaher: I think the Fed doing anything to rock the boat does a disservice to what the market’s given them. And from their standpoint, you know, they don’t need to. The data has supported what they’ve talked about. The data start to come in a weaker across the board. You’ve seen you know employment start to kind of look a little jittery. You know it’s kind of funny given the starting point in the US. But you’re left at a point where it’s kind of there for them. Just toe the line.

Ian Pollick: Well they’ve been very vocal in the direction of travel, right? This is not like a surprise in the sense of what direction are they going. We know that the next move is going to be lower. Kind of heard it from the Fed presses. And there’s a lot of other platforms for communication. And let’s not forget we’re going to Jackson Hole and in a few weeks, right? And so like to me that could be the fine tuning that they want before the September meeting, if, for example, they signal nothing this week, which is my base case, and you repriced, let’s say even to 20 or 19, right. They can get you back there very quickly. I think what’s going to be very interesting about this meeting, and let’s bring this full circle, is when the minutes come out of this meeting, I think they’ll be spending a disproportionate time talking about QT and what happens after QT is done. What purchases are you conducting? And obviously we have the Treasury funding tomorrow. Really not exciting from the message that we learned yesterday. But I think what you’re going to hear here is a discussion on do you actively buy bills or do you rely on something very similar to the Bank of Canada, where maybe you do term repo operations, which they used to do for frequently before the GFC? And so let me paint you a picture. In a world where they don’t extend purchases the long end, they maintain themselves in the short end, whether it be bills or whether it be repo. Does that reduce year end return? Like does that go back into the cross-currency?

Brenden Donaher: In some ways maybe. But I think the large thing about, I’d say the decaying cycle of turns, and by that I just mean every time we’ve gone through an event, whether it’s a funding event or a global macro event or something that effect, the Fed has been very quick to add liquidity to the system. I think there’s a general understanding and bias in the market that the Fed will support that market and will be that for the liquidity. So I think turns are fairly priced, and I do think in the sense of especially now this year more than ever, we’ve seen that mistiming of between markets manifests itself in some, you know, fairly kind of interesting month end moves. And what you’re seeing is there’s also dislocation between collateral markets, cross currency markets and kind of overall Fed liquidity in the sense that you can have SOFR trading, you know, 5 or 6 above no problem. And cross currency is not reacting. I don’t think that’s actually a problem. I think that’s just you know, in this current system, when you’ve got rid of any form of unsecured rates, the only way to manifest any rate pressure is through these indexes. 

Ian Pollick: Yeah. And listen, I think that this is also premature to trade it. But I think that’s what we’re going to hear when the minutes come out. Okay. So look let’s just recap this a little bit. You don’t think we get a Fed signal this week. You maybe don’t think we get a Bank of England cut this week. We don’t get a dovish BOJ. I tend to be on side with you except for the Bank of England. What are your favorite positions over the next seven days?

Brenden Donaher: So circling back. So I think short sterling go in the meeting I like that trade, the kind of CAD flattening or even the UK flattening this point versus US steepening still like that trade. In general, I actually don’t mind more of an overall duration short. I think we’re at levels where, you know, we’re starting to get kind of punchy once again in terms of overall repricing.

Ian Pollick: We’ve moved a lot, like we’re at my September month end forecast.

Brenden Donaher: Like, you know, we brought up earlier like fives in Canada. But even still like in the US, you have 70 deep spreads, you know, just on the right. And I think the only way you can really add anything in is kind of specific. And that gets very micro. And you can have 3 to 4 beeps for November to get your 75 for the year. But what you ask for this year, we still have a lot of time.

Ian Pollick: Yeah, there’s a lot of time. And I would also say that just given my view on the Bank of Japan this week, i.e. that they’re not as dovish as people think. If you look kind of look at dollar yen and ten year Treasury kind of correlations, you’re back at that floor of around 30%. And so I think that the risk here is that you do get this bear steepening move on a no Fed signal, somewhat hawkish bank in Japan, Bank of England cut that doesn’t really resonate around global markets given that the likely skip in September. Okay, that was a good conversation. Massive week ahead. Good luck to everyone trading. If you anything always give us a call. And remember there are no bonds harmed in the making of this podcast.

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