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.

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.

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.

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.

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.

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.

Ian and Royce discuss what calls they got right and what surprised them in this week’s Federal Budget and Bank of Canada announcement. They give their views on which central bank’s outlook is more likely to be realized between the Bank of Canada and the US Federal Reserve. Ian discusses how the expected supply in the Government of Canada bond market this year will interact with the central bank’s tapering plans. Royce talks about why market pricing for the terminal rate in Canada might not actually be that aggressive.

Royce and Ian discuss whether something is ‘off’ in the recent jobs data, questioning whether the seasonal adjustment process has broken-down. Royce provides his view on what to expect in Budget ’21 next week, while Ian looks ahead to the BoC rate-decision and the likelihood that a taper is announced.

Royce and Ian discuss the latest Fed announcement and how some of the accompanying projections seemed inconsistent with others. They talk about why the new forecasts could be subject to more change than usual, and how that fits in with the Fed’s new reaction function. They conclude that this leaves more room for markets to ‘fight the Fed’ dot-plot than in the previous cycle. The conversation then moves on to an analysis of the relative timing and magnitude of Bank of Canada and Fed rate hikes priced into markets. Royce asks Ian whether he expects any hints about BoC tapering from Deputy Governor Gravelle in next week’s speech. Ian closes the show with a final question about Canada’s housing market, seemingly unrelated to the rest of the episode.

Ian and Royce discuss the recent bond market selloff from their own perspectives, and conclude that a ‘high pressure’ economic outcome isn’t the driving force. Royce surprises us with his love of farms, while Ian talks about his expectations for the BoC meeting next week and when we can expect a taper.