22 Jan 2015
BoC rate surprise sends 10yr Canadian bonds to all time lows – DB
FXStreet (Barcelona) - The Research Team at Deutsche Bank comments on yesterday’s surprise rate cut move by the Bank of Canada and shares how it affected the Canadian financial markets, and fuelled rate-hike expectations from other central banks.
Key Quotes
“Speaking of the rates rally one of the key outperformers yesterday was Canada. Indeed, the 25bps cut by the BoC to 0.75% (its first move in four years) caught the market by surprise which drove the 10yr Canadian government bond yields 5.4bps lower to an all-time low of 1.433%. Canadian equities also closed some 1.8% firmer on the back of the dovish stance.”
“The BoC pointed towards the downside risks to inflation and financial stability as a result of the oil price shocks whilst the Canadian Association of Petroleum Producers yesterday also noted that capex in Western Canada could drop by as much as a third this year.”
“What's more interesting for us though is the BoC move comes shortly after the recent surprise moves by the SNB, Danish and Indian Central Bank. These easing biases have also placed other DM central banks (eg RBA) somewhat under the spotlight. More importantly can the Fed still look to raise rates in a world where several central banks have already eased in 2015?”
Key Quotes
“Speaking of the rates rally one of the key outperformers yesterday was Canada. Indeed, the 25bps cut by the BoC to 0.75% (its first move in four years) caught the market by surprise which drove the 10yr Canadian government bond yields 5.4bps lower to an all-time low of 1.433%. Canadian equities also closed some 1.8% firmer on the back of the dovish stance.”
“The BoC pointed towards the downside risks to inflation and financial stability as a result of the oil price shocks whilst the Canadian Association of Petroleum Producers yesterday also noted that capex in Western Canada could drop by as much as a third this year.”
“What's more interesting for us though is the BoC move comes shortly after the recent surprise moves by the SNB, Danish and Indian Central Bank. These easing biases have also placed other DM central banks (eg RBA) somewhat under the spotlight. More importantly can the Fed still look to raise rates in a world where several central banks have already eased in 2015?”