And so, as yields and the dollar predictably bounce back from tepid U.S. econ data that can be spun as either “evidence that the economic recovery remains resilient” or “between the ECI miss and the PCE putting up the weakest showing since 2010, the outlook is deteriorating” (depending on your penchant for optimism), it’s worth noting the divergence between the U.S. and Canada.
Consider the following data out north of the border this morning:
- Canada GDP rose 0.6% m/m in May, according to Statistics Canada; 0.2% in previous month.
- Bloomberg survey estimate for m/m change in May GDP was 0.2%
Some context: Y/Y, Canada’s economy grew by 4.6% in the 12 months through the end of May. That’s the highest growth rate since the millennium!
Needless to say, that’s got the loonie on the move – and “bigly“:
This has got 2Y yields in Canada up to 1.355%. That would be the highest since April 2012.
In turn, U.S.-CAD swap spreads are now negative. As Bloomberg notes, “OIS puts odds of a 25bp rate hike by BOC in September around 33% with odds of hike by October near 70%.”
So maybe that rate hike wasn’t so “misguided” after all…