Macro Minutes Return of the Living Spread
Feb 26, 2025
In this discussion, Blake Gwinn, Head of US Rates Strategy at RBC Capital Markets, and Peter Schaffrik, Head of UK/European Rates & Economics at RBC Capital Markets, dive into pressing economic shifts. They tackle the lingering uncertainties of tariffs and their influence on markets in the U.S., Canada, and Europe. The duo also examines the implications of the recent German elections on fiscal policy and coalition dynamics. With bond market weakness under scrutiny, they ponder the future of asset swaps and the regulatory landscape.
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Declining US Economic Optimism
- US economic optimism is declining due to tariff uncertainty.
- Businesses are hesitant to invest due to daily tariff headlines, impacting sentiment surveys.
Impact of Uncertainty
- Uncertainty, not tariff implementation, is freezing business activity.
- A decrease in tariff headlines and strong CPI data could bolster the economic outlook.
Canadian Macro Backdrop and Tariffs
- Tariff uncertainty negatively impacts the Canadian macro backdrop, affecting growth and inflation.
- The Bank of Canada may ease policy if universal tariffs are implemented and inflationary impact is manageable.