Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
Chief Investment Strategist
Summary: Canada’s economic backdrop was weakened as hinted by PMI and jobs data, while headline inflation is back in the Bank of Canada’s 1-3% target range. Market expectations underestimate the likelihood of a rate cut, with less than a 20% chance this week and just over 70% for June. If BOC was to flag an early rate cut, decoupling from the Fed, CAD is likely to weaken not just against the USD but also against other commodity currencies such as NOK or AUD.
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