BOC: Data Dependence In Focus Amid Trade Uncertainty (2/2)
Mar-13 11:54
- JPMorgan: Pervasive Uncertainty: "For now, our expectation is that the BoC’s need to accommodate greater weakness in activity will outweigh its need to protect against upside inflationary pressures, at least at the next couple of meetings. The BoC's previously published scenario analysis of 25% US tariffs (and Canadian retaliation) suggested that the growth impact is large and immediate, while the inflation impact grows in later years. That said, today’s communications stress that future decisions will be guided by incoming data."
- National: Proceeding Carefully On The Trade War Tightrope: "we expect economic damage to rack up over coming months and against that backdrop, it could be difficult for the BoC to stand on the sidelines. That’s especially true if you believe their earlier analysis that shows the near-term negative growth impacts of a trade war are disproportionally larger than near-term inflation pressures. We’d therefore brace for another cut in April, although incoming data will be key. If inflation surprises higher and GDP/job growth holds up okay, we’d likely see the Bank leave rates steady for the first time in a year.”
- Rabobank: One More Cut: We are forecasting one more 25bp cut after this week’s decision, and see the terminal rate at 2.50%. However, we still see the risk as being firmly skewed to more over less cuts, with a significant chance of the Bank continuing to cut after the April meeting."
- RBC: No Race To The Bottom For Rates (note they had expected a hold at this meeting but terminal 2.25% view unchanged): “Moving forward, data releases will be watched monitored closely for 1) signs that weaker sentiment is reflected in actual economic data (spending, GDP, labour markets, etc.), 2) signs the uptick in inflation in recent months is persisting and pushing up expectations, and 3) any fiscal response, which we have argued before allows a more targeted approach to addressing trade disruptions than the blunt tool of interest rate policy...Our own base-case has assumed further BoC interest rates cuts to a 2.25% around mid-year – we continue to expect (and consistent with BoC communications today) that there won’t be a race to the bottom for interest rates beyond those previously expected cuts this year.”
- Scotia: Hawkish Cut: “What mattered…was the way in which they conveyed a neutral-hawkish policy bias going forward that leans a little more toward the hawkish side of things which was my expectation...They are saying their principal focus will be upon ensuring that inflation and inflation expectations are well anchored. The view on other parts of the street that the BoC would be unambiguously dovish in response to tariff wars was struck a blow.”
- TD Securities: Don’t Call It A Comeback For Data Dependence: “Given the difficulty in predicting both the impacts and length of trade disruptions, it is entirely sensible that the Bank would want to stress that it is looking at both sides of the inflation equation. Further cuts will require tangible signs of economic weakness (particularly beyond April), and our view is that the downward pressures on economic activity will ultimately dominate. Don't call it a comeback for data dependence - it never left. We continue to look for the BoC to cut rates by 25bps at each of the next three BoC meetings.”
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EGB SYNDICATION: Italy 15-year BTP: Final terms
Feb-11 11:47
- Size: E13bln (another large syndication after MNI expected)
- Spread set: 4.15% Oct-39 BTP +7bps (guidance was +9bps area)
- Books in excess of E133bln (inc JLM interest)
- Maturity: 1 October 2040
- ISIN: IT0005635583
- Settlement: 18 February, 2025 (T+5)
- Bookrunners: Barclays, Deutsche Bank, Intesa Sanpaolo, Morgan Stanley and Nomura
- Timing: Books open, pricing later today
From market source / Bloomberg
STIR: Powell Senate Testimony To Headline Docket – 1000ET
Feb-11 11:40
- Fed Funds implied rates have been little changed by Trump’s overnight upping of steel and aluminum tariffs to 25% from the previously touted 10%.
- Cumulative cuts from 4.33% effective: 1.5bp Mar, 7bp May, 15.5bp Jun, 21bp Jul and 37.5bp Dec.
- Today’s Fedspeak is firmly headlined by Fed Chair Powell at 1000ET where he’s expected to reiterate that there’s no rush to cut rates. See our previous preview bullet here and some analyst expectations on it here.
- As for other speakers, Hammack is watched for a hawkish take after her surprise dissent to the December cut and then saying Jan 17 that the Fed can be very patient on further cuts with mon pol “only moderately restrictive”. Williams meanwhile last spoke Jan 15, saying the Fed can take its time analyzing incoming data with the US economy once again proving resilient whilst the disinflation process remains “in train”. He saw signs of stabilization in the labor market, a view that was likely bolstered after last Friday’s payrolls report.
- 0850ET – Hammack (non-voter) on economic outlook (text + Q&A)
- 1000ET – Powell (voter) testimony to Senate Banking Committee (text + Q&A - no official confirmation but expecting text release at 1000ET)
- 1530ET – Williams (voter) keynote remarks (text + Q&A)
- 1530ET – Bowman (voter) on bank regulation (just text)
EURIBOR OPTIONS: Latest Condors
Feb-11 11:33
- ERK5 97.68/62/56/43 broken p condor bought for half in 3k.
- ERU5 97.87/98.00/98.12/98.25c condor, sold at 3.5 in 3k.
