INSIDE CANADA: CAD Drops to Weakest Level in 4 Years; Bonds Rise

This is an overview of Canada’s currency and debt markets:

FX:

  • CAD fell as much as 1.1% vs USD to 1.1092, weakest level since Sept. 2, 2009, before trading at 1.1087 at 5 p.m. Toronto time
  • CAD has dropped 4.2% this year against USD
  • CAD slid after Bank of Canada lowered inflation forecast, said currency still strong enough to be competitive challenge for exports
  • BOC Governor Stephen Poloz kept key rate at 1%, where it’s been since September 2010; said next move depends on economy
  • CAD fell versus all of its 16 major peers
  • CAD 14-day relative strength index vs USD was below 30 level that signals it may be due to rise for seventh day

GOVT DEBT:

  • Yield on 10-year government bond fell two bps to 2.49%
  • 1.5% security due in June 2023 rose 13 cents to 91.79
  • Yield spread of provincial bonds over federal debt were unchanged at 65 bps, according to Bank of America Merrill Lynch Canadian Provincial & Municipal Index
  • Effective yield on provincial debt rises to 2.88%, from 2.87% yday

CORP DEBT:

  • Yield spread on corporate bonds over federal was unchanged yday at 114 bps, according to Bank of America Merrill Lynch Canada Corporate Index
  • Effective yield on corporate debt rises to 2.91%, from 2.90% yday

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