STIR: Dec'25 SOFR Volatility Seller

• Headline CPI is seen accelerating from 1.9% to 2.2% Y/Y in tomorrow’s February report, owing to a strong non-seasonally adjusted 0.6% M/M (or 0.7% M/M in the below median).
• There’s another wide range to analyst forecasts, ranging from 2.0-2.7% Y/Y in the Bloomberg survey after the 1.9% in January.
• Our review below covers 2.1-2.7%, including CIBC and JPMorgan at 2.1% and RBC at 2.5% (not in Bloomberg survey) and Scotia at 2.7%.
• This uncertainty is likely down to the ending of the GST/HST tax holiday mid-month after its two-month window started mid-Dec.
• GS on the matter: “our forecast assumes 36bp of payback following the removal of the sales tax holiday in mid-February, although we acknowledge some uncertainty around how the cumulative 56bp boost will be distributed across February and March.”
• Core CPI meanwhile (the average of CPI-median and CPI-trim), which will continue to not be directly impacted by the indirect tax changes, is seen accelerating a tenth further to 2.8% Y/Y for what would be its strongest since October.  
• Three- and six-month run rates stood at 3.0% and 3.1% annualized respectively in January.
• The BoC forecast from the January MPR saw headline CPI averaging 2.1% Y/Y in Q1 (and more recently saw it at circa 2.5% specifically in March per last week’s decision statement) and core CPI averaging 2.5% Y/Y in Q1 with those core forecasts having got off to a bad start for the quarter.
• BoC-dated OIS currently has 10-11bp of cuts priced for the April BoC decision, after the Bank cut its overnight rate target by 25bps last week to 2.75% for the middle of its estimated neutral rate range of 2.25-3.25%. 

• 5,400 TYM5 107.5/110 2x1 put spds, 25 net ref 110-22
• 3,700 TYM5 111 calls, 103 ref 110-21 

$11B corporate bonds to price Monday

• Date $MM Issuer (Priced *, Launch #)
• 03/17 $4B #BMW US Capital $650M 2Y +65, $650M 2Y SOFR+78, $750M 3Y +75, $700M 3Y SOFR+92, $750M 5Y +97, $500M 10Y +115
• 03/17 $2B #Santander $850M 4NC3 +145, $400M 4NC3 SOFR+161, $750M 6NC5 +165
• 03/17 $1.8B #Oncor $500M 2Y +45, $650M 10Y +105, $650M 30Y +120
• 03/17 $1.2B #Republic Services $500M 5Y +73, $700M 10Y +93
• 03/17 $1B #Hyatt $500M 3Y +105, $500M 7Y +155
• 03/17 $1B #Public Service Co of Colorado $400M 10Y +108, $600M 30Y +125