Curve Your Enthusiasm

Ian is joined this week by Craig Bell, and the duo cover a lot of ground heading into the Bank of Canada interest rate decision next week. The episode begins with an in-depth discussion on why the Bank can credibly delay rate hikes in January. Craig goes on to discusses the path ahead for swap spreads, while Ian spends some time walking through what balance-sheet rolloff will look like in Canada, and why it isn’t as big a deal for the bond market as in the United States. The co-hosts spend some time discussing the misalignment in the front-end of the CAD curve, and Craig provides his favorite trading expressions over the next week. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Ian is on the hunt for a new co-host, and is joined this week by Nick Exarhos to discuss a host of themes that matter right now for the bond market. The duo begin their discussion on what quantitative tightening (QT) would look like from the Bank of Canada, and the key differences we should expect relative to the Fed. Nick discusses the impact of fiscal drag in the United States on the growth outlook, and questions whether excess savings is enough offset the slowdown. Ian spends some time talking about the upcoming BoC MPR and why he doesn’t believe the Bank will hike rates this month. The pair discuss the evolution of the curve and have a friendly disagreement on the level of provincial spreads. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

In the final episode of 2021, Ian & Royce discuss the widened uncertainty related to new COVID variants. Royce discusses his view on the recent Canadian data, both GDP & jobs, while Ian opines on the potential for the Bank of Canada to deliver earlier-than-expected rate hikes. The two hosts go back-and-forth about the most optimal policy sequencing, specifically whether or not central bankers should shrink balance sheets before delivering rate hikes. The potential for yield-curve inversion is growing, and that may ultimately harm the recovery. Royce finishes the show by discussing how falling energy prices will matter going forward for U.S. inflation. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Ian & Royce begin the episode this week discussing the most recent Labour Force Survey. They conclude that while the economy has reached a milestone in recovering all of the jobs lost during the pandemic, that’s not a sign of “mission accomplished”. Ian then takes a deep breath and speaks about the recent move in Canadian short rates, and why the profile for the Bank of Canada has been so aggressively repriced in the past week. Royce agrees, and walks us through his view on the upcoming Bank of Canada announcement, while Ian throws in a surprise by noting that he doesn’t believe the Bank will enter the reinvestment phase this month. The duo finish off the episode by touching on inflation and what the positive terms-of-trade shock does and doesn’t mean for Canada. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

The recent increase in COVID-19 cases is showing up in the data in different ways, in different regions. Royce describes why inflation surprises shouldn’t be taken at face value, while growth surprises aren’t as concerning as the bond market is suggesting. Ian walks through his expectation for the FOMC meeting next week, and provides a framework for thinking about how the Fed’s taper will impact bond yields. Both Ian and Royce do a deeper dive on the recent communications from the Bank of Canada, and discuss why quantitative-tightening (QT) is an elegant solution for the BoC in the coming hiking cycle. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Royce and Ian take stock of the recent FOMC meeting, and discuss what new information they heard from the Fed.  Royce explains the key drivers of inflation differentials between Canada and the United States, while Ian vents his frustration over the lack of response in the bond market.  The new repo facilities are discussed within the context of how the sequencing of QE impacts the timing of U.S. rate hikes, and both Ian and Royce opine on what that means for the Bank of Canada. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Royce and Ian take the pulse of the reflation trade. Ian discusses the reasons that some investors are calling the trade dead. Royce talks about why the base case economic outlook remains bright for North America, despite some downside risks that are on the rise. They close the podcast by discussing the expected path for the Bank of Canada’s balance sheet. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Royce and Ian dissect the recent US Federal Reserve meeting, calling it a reality check for the central bank. Royce talks about why the hawkish move makes Bank of Canada Governor Tiff Macklem’s life a lot easier. Ian then analyses the market reaction and how trading reflation has changed post-meeting. Royce and Ian debate transitory versus persistent inflationary pressures and talk about how that will affect fixed income pricing. Ian also convinces Royce to roll over their friendly wager on economic data. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Ian and Royce take stock of the divergence between strong inflationary signals and a bond market that just won’t stop rallying. And keeping with the theme of divergence, Royce discusses why the compositional differences of the Fed and Bank of Canada’s policy framework is contributing to perceived BoC hawkishness, noting too that AIT is creating too much uncertainty. The co-hosts also dissect the contents of the BoC meeting this week, and the Economic Update speech from Deputy Governor Tim Lane. As well, Royce and Ian decide to roll over their Canadian CPI bet. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Royce and Ian are back together after a few weeks off to dissect all of the conflicting economic data releases in the US. Royce talks about how some of the growing pains south of the border might be a precursor to future developments in Canada. Ian gives a rundown of how investors are digesting all of this new information, and flags some potential catalysts for market volatility in the coming months. The episode closes with Royce discussing new research on the neutral rate in Canada, which suggests that the economy might need rates to eventually rise higher than the Bank of Canada thinks and at a faster pace than the market is now pricing in. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.