Oil prices have risen, and Canadian bond yields have advanced further above their US counterparts, leaving the bias with the bears for the sessions ahead. The gap between Canadian and US 10-year yields widened by 4.5 basis points to 20 basis points in favor of the Canadian bond, the widest spread since August 2012.
The attention will stay with this theme for the end of the week with the BoC’s Financial Stability Report which is expected to shine light on risks and vulnerabilities to the financial system. Analysts at TD Securities said that they ”do not expect any implications for the near-term policy outlook.”
In latest data, ”Canada’s trade surplus narrowed unexpectedly to C$1.5 billion in April as both imports and exports slowed, but economists said the lull was likely temporary, with supply chain disruptions easing and oil exports set to rebound,” Reuters reported.
In the meantime, traders will also look to Friday’s employment report. ”We look for the Canadian labor market to rebound with 35k jobs created in May following the muted performance in April,” analysts at TD Securities said. ”This reflects a solid increase for mobility trends, record job vacancies, and the sharp drop for COVID infections after the post-Omicron wave. A 35k print would leave UE unchanged at 5.2% (after rounding), but we should see wage growth firm into the high 3s.”
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