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Is it Time to Worry? - Views from the North

FICC Podcasts November 18, 2021
FICC Podcasts November 18, 2021

 

This week, Jean-Michel Beaulieu, part of the Montreal-based fixed income sales team, and Francois Leclerc, one of our provincial bond traders, join me to share their insights on their insights on the state of the Canadian rates market, provincial spreads, some broader macro themes, and their favourite trade ideas.

As always, all feedback welcome.


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About Views from the North

BMO’s Canadian Rates Strategist, Ben Reitzes hosts roundtable discussions offering perspectives from strategy, sales and trading on the Canadian rates market and the macroeconomy. 

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Ben Reitzes:

Welcome to views from the north, a Canadian rates and macro podcast. This week, I'm joined by Jean-Michel Beaulieu, part of the Montreal based fixed income sales team and Francois Leclerc one of our provincial bond traders. This week's episode is titled, 'Is it time to worry?' I'm Ben Reitzes and welcome to views from the north. Each episode, I will be by members of BMO's thick sales and trading desk to bring you perspectives on the Canadian rates market and the macro economy. We strive to keep this show as interactive as possible by responding directly to questions submitted by our listeners and clients. We value your feedback. So, please don't hesitate to reach out with any topics you'd like to hear about. I can be found on bloom or via email at Benjamin.reitzes@bmo.com. That's Benjamin. R-E-I-T-Z-E-S@B-M-O.com. Your input is valued and greatly appreciated.

Speaker 2:

The views expressed here are those of the participants and not those of BMO capital markets, it's affiliates or subsidiary.

Ben Reitzes:

Welcome back to the podcast. Both of you, gentlemen, it's a pleasure to have you on again. I think we're going to have an excellent conversation here. JM put out an email on his macro thoughts recently. So, I'm going to touch on that and any listeners out there who want it, you should reach out to JM and he'll hopefully add you to his list, if he's kind enough. It's definitely been an interesting time in the bond market generally. And Francois will give us some good insights on the provincial market. So gentlemen, welcome back.

Jean-Michel Beaulieu:

Thanks a lot. Happy to be here.

Francois Leclerc:

Yeah. Likewise, Ben, nice to be back.

Ben Reitzes:

Why don't we start on the macro side cause I mean that's what it's all about right now and inflation and bond market chaos and so on and so forth. JM you have historically been not particularly bullish on inflation, let's put it that way and now I seem to sense a change of heart, at least a little bit an inkling of it.

Jean-Michel Beaulieu:

Yeah.

Ben Reitzes:

What's changed your mind? Why the shift?

Jean-Michel Beaulieu:

I mean, that's definitely a huge debate right now. A debate that I believe is still, I think we're in the early innings of figuring out if we're moving into a structurally iron inflation or not. There's going to be quite a few months of data and information to gather in terms of getting to know where we're headed. But I mean, for sure the Fiscal policy has been changing. We've been having huge, huge Fiscal stimulus over last year and a half, which we never had over the last 10 or 12 past year, except maybe for Trump is packaged. He signed, I believe in 2018, otherwise it's just gigantic amount of money that is reaching consumer.

Jean-Michel Beaulieu:

And there's definitely a transit or inflation that we're living right now and that I believe should fade, but should fade into what kind of inflation? That's the huge question. I mean, I could argue on both sides that inflation will be back to more normal levels. I could also argue on the other side. I think that demography will surprise us as an inflation structural shift. This is contrarian to most people's view, but I hundred percent believe that once people retire, it becomes inflationary. You stop supplying products, you stop supplying your work capacity and you basically live on your stack of money that you've piled over the last few years.

Ben Reitzes:

Did you read the book that I recommended a while ago? Is that where this is coming from?

Jean-Michel Beaulieu:

I didn't read it. I read the resume of it.

Ben Reitzes:

Okay. The synopsis.

Jean-Michel Beaulieu:

And it's totally true. I mean, this is what we're seeing. And I believe that, that might be an actually an impact, adverse impact of the Fed's inflating the asset base. So, we've been saying that for the last 12 years, Fed has been inflating assets and not anything in the real economy. So, they've been printing and thinking that there were no adverse consequences, but now we might see the very first signs of the adverse consequences of printing money and inflating assets because what you saw recently is that about 2% of the labor force, 55 years and over left. So, participation rate went from 40.3% to 38.4. So, about 2%, which on up about the population of a hundred million represent, basically, two million people that left the workforce.

Jean-Michel Beaulieu:

Something that we did not see in 2009, 2010 recovery because obviously people were kind of broke. Their stock portfolio was worth less, their household was worth less, housing, sorry. Nowadays is everybody's rich. Your house is worth, maybe a million, your stocks, your bond portfolio, everything is super high, super rich. And so, what you see is that people are saying, "You know what, why am I working anymore? It's just not worth it." And people are leaving the workforce before their anticipated age of retirement. So, that's a huge, I believe, huge shift that that should fuel definitely somewhat of a higher inflation down the way down the road.

Ben Reitzes:

So, I'm going to play devil's advocate even though I actually... I think I agree with you, I'm not a hundred percent sold on that yet, but I'm certainly leaning that way. But the other side would say, look at Japan. Japan had a shrinking labor force, shrinking population for 30 years, 40, 30 plus years give or take. And they have absolutely no inflation, not even a hint of inflation from any perspective, neither domestically driven inflation nor internationally driven. I think the focus should be on the domestic side, but like services prices are not particularly firm in Japan. And so, that's what others on the kind of... The folks who don't necessarily believe in the narrative you just laid out, would ask, "Why do you say to that?"

Jean-Michel Beaulieu:

Yeah. That's a classic, right? Comparing any kind of theory to Japan makes that theory worth less. I'd say the... I'd go, first of all, I could go the other way and say, why didn't we see any inflation out of China over the last 10, 15 years? Where they had the biggest boom ever in terms of leverage, in terms of growth, in terms of population. What have you put it on and you just simply didn't see any inflation. So, they add the complete reverse of what we saw in Japan and still had no inflation.

Jean-Michel Beaulieu:

And so, as for Japan, basically there's... I mean, it's a complex system. There is much more than one variable and I think that's the big issue in finance and an economy. And the economics, is that people tend to focus on just one or two variables to explain something, but there's plenty of other ones. In terms of Japan, they've still been surrounded by a huge deflation re-force by technology and China actually. So, they bring... It could supply... China could supply a lot of cheap product at a cheaper level year after year, basically. And so, they could access that supply and they could buy it with their huge current accounts or plus. So, I believe that might be a reason why we haven't seen inflation come out of Japan.

Jean-Michel Beaulieu:

In a situation where the whole system is getting older, you might have a more direct impact of getting older. And basically we need to know as well that as you get close to retirement, it's extremely deflationary because when you're near 40, 45 until 60, you actually produce a lot, but consume a lot less because you put aside some savings. And so your supply demand curve shift dramatically. And so, this is the deflationary period we were in, but it's kind of a binary thing. It's the moment you get retired, the moment you switch, it's the binary thing. You want... You go from highly deflationary to an inflation scenario. And so, this is a tricky part with the whole population getting older. It is deflationary up to a certain point and we're getting into that point, particularly when all the assets are so rich that it's easy for everybody to retire and live on their savings.

Ben Reitzes:

Okay. So, what does this mean for bonds then? So now you're in the camp that yields are poised to push notably higher and I mean, 2% long bonds.

Jean-Michel Beaulieu:

So, there's two parts. The first part is inflation as again, first of all, I think we're having some short term eye inflation that will subside in the coming months. I mean, and as a whole, it's a big debate right now. I mean, Bridgewater sent a piece, a few days ago, on how inflation will persist. I think the paper was kind of wrong in a few points, so I'm not agreeing really with it, but it makes a lot of people talk. But so, I still think inflation will fade to a lower level, although it might be higher than previously. But the other thing is that I do think growth will just go back too much more normal level, which should be, kind of, depressed level.

Jean-Michel Beaulieu:

And to explain this point of view, I can go to Lacy Hunt. As we know that he's a uber bull on bonds and he's been right actually for 40 years, so he's not bad, but basically he's been saying, and he's referring to quite a few papers that says that, "As a country gets more indebted growth naturally goes lower because you can't attack the future growth of your economy." And that at a certain point, has much less meaningful impact, the multiplier of government that is might be actually negative, right now.

Jean-Michel Beaulieu:

So, he's been referring to Reinhart and Rogoff, I think they printed a pretty epic book, I guess, back in 2010 or 12. They've been criticized because I think two countries had their data not entered properly, but it was insignificant countries. So, it didn't change the results of the research. But basically we've been adding a ton of debt all across the world, we'd like people to believe we just created growth and wealth out of nothing, it's just not the case. We're still living on that pile of money that we've printed and we added into the economy this year, and this will quickly turn into a headwind somewhere next year. Actually the Fiscal impact will turn into like a minus 3% kind of thing per quarter, analyze somewhere in the second half, 2022.

Jean-Michel Beaulieu:

So, growth will be, I think people will be shocked about at how much growth will be at the much lower level. And so, that's the point, how can the government, how can central banks raise their interest rates, even in an inflationary world where there's just too much debt and the growth isn't there? I mean, I look at the Canada front end right now yielding, 1%, 105, I don't know where it is right now, but we're basically pricing six hikes for next year. I just don't think that the king and people can handle six hikes. People literally... When most of them are an owner or on flooding rate for their mortgages. They've been buying a second house this year, they've been taking home equity loans to buy a boat, renovation, et cetera. And so, they're much more indebted and in on floating rates. So, I don't think rates will go much higher than it is right now, across the board from twos to longs.

Ben Reitzes:

Okay. So, despite higher inflation, you think growth wins out at the end of the day, and that keeps the rate market relatively in check around where we are now? Fair...

Jean-Michel Beaulieu:

I mean, the most dominant trade for all year has been real rates. I still think real rates are a bargain. In the U.S. if you believe inflation is not coming back, let's say, it's going back to one and a half percent, the Fed won't raise, they just won't raise next year, even two years in the future. So, the front end will be zero minus 1% and half or 2% inflation. You get 2% real yields negative. And if they go... If inflation goes to three, three and a half percent, the Fed will raise rates, but to what? One, one and a half? What's the maximum rates they could go in this cycle, given the amount of leverage? I'm guessing not more than one and a half percent. So, you still end up with minus 2% real yields. So, that's why tips has been such a pop over investment.

Ben Reitzes:

Yeah. Real tenure yields in the U.S. are minus 1.1, 2% right now, so...

Jean-Michel Beaulieu:

Yeah. And people have been fading this move, but it was a dominant trait, still is and there's been a lot of people I think, coming in this, into this market and over the previous few months.

Ben Reitzes:

Let's bring us Francois here. So, JM thinks that growth is going to be on the soft side really as the Fiscal stimulus wears off next year, and you get a bit of a hangover on that front. Inflation near term is going to be solid if somewhat, I mean, it will fall over time, but still stay relatively elevated than what we've had over the past decade. In that environment you've had, as you mentioned at the beginning, central banks and full assets for 12 years, we are currently at the tights in a number of credit spreads, provincial spreads are at post COVID tights and look pretty rich generally. Is it maybe time to worry about risk assets and provincial spreads? Are spreads too tight here?

Francois Leclerc:

Yeah. I share your opinions on inflation. I think you've both noted some interesting facts and also, you wrote about it earlier this week and our new guy Lee also wrote about it earlier on, that we thought it would be effect... The most of the goods demand would shift to services as we open back our economies, but we've seen that demand for good has remained very elevated. And it's not only supply side driven inflation, but it's also demand driven. So, I think we persist in that type of environment and that this will force the hand. It seems that the bank of Canada anyways, seems more worried about that than the Fed at the moment. But I do think this will force the hand of them to hike sooner rather than later cause I think prints are going to remain elevated still for the foreseeable future.

Francois Leclerc:

That being said, we've seen that numerous times over the years, where when we start to put in some more strict bank of Canada policies where risky assets tend to sell off. We're not seeing that at all at the moment, that we're just really, really seeing some strong amount across the board just showing the amount of cash that's in the system and that's been put to work. That being said, I do think there are some opportunities to fade some defensive traits to put on, considering maybe buying CMB's versus Ontario in certain terms or going into provinces that have better Fiscal outlooks. We've had a numerous amount of fiscal update revisions, and there's still others to come. We have Quebec next week, we have Alberta set two table Fiscal revisions by the end of the month. I think those names should do very well with the higher level in oil that we've seen compared to their assumptions in their budget.

Francois Leclerc:

So, I do think there's some strategic things to do on the provincial curve, some tactical allocations into different names as well. But I do think that overall, like you've saying, we're back to post COVID tights. We're also back to pre COVID tights in certain tenures. You look at the 10 year sector, Quebec tens call it for example, low 50s versus Canada's. We didn't trade through 50 pre COVID either in 10 year Quebec. So, we're right there, I think the long end has been very intriguing. I continue to favor long end spreads versus tens to credit box adds steep and significantly on the back of much larger issuance. And that's been revised down significantly. So, I continue to favor that, but we can keep on discussing about that a little later on if you want.

Ben Reitzes:

Well, what we've seen in the provincial space in the long end is, you've seen some inversion, accredit inversion in the long end, despite some steepening in Canada. Can you explain what's behind that and if it's going to last.

Francois Leclerc:

Yeah. So, at the beginning when Canada 53s got introduced that had the instant effect of steepening long Provie roles. So Ontario 52s, 53s cheapened up significantly versus 51s, that were at the time benchmarks. And that persisted for a month or two, got to cheap levels north of two, two and a half basis points for that simple extension. Even in Ontario, you look at a bond like Ontario, 52s that has a shorter duration than the 51s. Nevertheless, you were extent... You were moving out the curve and making a pick while you're retracting in duration terms. So, that was kind of weird scenario we don't see very often. And everybody was saying, "Oh, well, the Canada role is steep. So, this one should be steep too."

Francois Leclerc:

Fair enough when both roles are significantly positive, now the thing is the long end is inverted. We've seen significant selling September, early October of the back dates, 43s, 45s, sixes, sevens, eights and all that. And the dealers were stuck with that, that balance sheet were not able to move it and then cheapened it and the inversion into the long end appeared. Now we've seen that numerous time in the provincial space over the years, but it was always accompanied by an inverted Canada curve as well, and now we're looking at a Canada curve that's very positive in the long end. You see Canada, 53, 51 role north of three at the moment, while both 45, 48s, 51s, 48s around one beep, you can say the bank of Canada owns a lot of the back date, back dated long bonds in Canada, which is true. But you look at 51 specifically, there are $51 billion issue size and only 17 billion owned by the bank.

Francois Leclerc:

So, it's a very large issue, very large. It's standing, yet it continues to outperform 53s significantly. Now I think that's an opportunity for any accounts that do own the provincial benchmark, the 52s, 53s to retract and box it up. So, retract and credit terms and buy Canada 53, 51 on the other side, sell Quebec 53 versus Quebec 51, for example, and put that credit box on. I think it's more of a real money trade than a fast money trades because it takes balance sheet if you do not own the pieces, but I definitely think that's a strategic thing you should be doing right now because I think the Canada role is going to flatten to compensate for... The Ontario and the Quebec role can keep inverting if the Canada role stays as much positive as it is right now, in my mind.

Ben Reitzes:

That sounds like an excellent idea. I think, hopefully we can get some investors on board on that one. You talked about being a little bit defensive earlier and maybe finding some opportunities there. Just, I guess kind of broader question about the provincial market, We've seen significant market dislocations on the Canada front, especially in the swap market. Have you seen similar type of illiquidity and a similar type of difficult trading environment on the provincial front? Or has it been a bit more orderly?

Francois Leclerc:

Yeah, it has created some big and quick moves in the front end. For those who I've been talking to on a daily basis, most of you knew I was expecting some bank Treasuries to unwind, assets swap in the front end to extend further out the curve. Most bank Treasuries had been loading on in asset swaps at the peak of the crisis, March 2020, or April, and buying very, very cheap assets on asset swap and all these things were into money. So, I was expecting as the new bank Fiscal year to start to crystallize some of those gains to start the year with a bit of a cushion. Now, that being said with the bank of Canada at the end of October, we've seen that materialized very, very quickly as swap spreads exploded wider. We did see very good interest for assets swap unwinds in the two, three, four-year term and that really blew out front end spreads in Provie.

Francois Leclerc:

So, we had a five year, 10-year credit box trading around 30, 29 beeps going into that and now we're mid-20s. So, call it 25 and a half 25 area. So, the front end has really been affected cause we see saw a significant amount of selling from that community as they were unwinding asset swaps. Now there's still opportunities, I think anybody who owns paper in 2023, 2024 on asset swap, you basically roll up the curve either way you go. So, if you extend, you make a pickup and if you retract into 22s, you also make a pickup. So, anybody still sitting on 2023, 2024 paper on assets swap should look to move out of these, regardless really of what's the outright level they're at. That's just, there's no juice to extract out of these balls anymore. So, that's what I think we should continue to see. And we've seen this week and last week some of these types of extension happen still, yes.

Ben Reitzes:

I totally agree. A hundred percent on board there. Swap spreads are not sustainable at these levels. I mean, they're a function of a effectively broken front end market in Canada and just a lack of participation by a lot of global macro investors, that you'd usually see in Canada policing the market that just are absent at the moment. They will come back eventually and that will normalize things, but we're not there quite yet.

Francois Leclerc:

Yeah. You can't really blame that community, everybody's seen the articles that were coming out over the last couple weeks with the blowouts, mostly related to the front end of Canada and other names like Australia, Sterling and all that stuff versus the U.S. So...

Ben Reitzes:

Exactly.

Francois Leclerc:

... It'll take some time, I think. Yeah.

Ben Reitzes:

Exactly. Agreed. JM, any thoughts on the Provie market here? You talked to a lot of investors and I'm sure you have some thoughts of your own as well.

Jean-Michel Beaulieu:

I think Francois... I agree with everything he said. That the extension seems to be the obvious trade. The only problem with this trade is that I believe nobody has it anymore. I think Treasuries have been unwinding as he said, the short end of the curve. And they've been putting that trade at a much worse level than we are right now. And so they don't have ammo in terms of short term product to sell. So, I'd say I still like risk in general. I think... I mean, I know we're entering tapering mode, but there's so much liquidity. And this cell liquidity just went through the ROP program, the reverse repo facility that stands right now at 1.4 trillion, which is about 17% of Soma, which is kind of huge.

Jean-Michel Beaulieu:

So, basically all the money they're printing is just, they're taking it back on the other side. So, it means the system is flush with cash and then in this environment, pretty tough to be bearish on risk and particularly at this time of the year. Well, we all know that the center rally is upon us, there's that coupon trade payment as well. So, basically buying tens and longs Provie, I definitely don't mind, even if the levels are tighter than they were not long ago.

Ben Reitzes:

I'm going to ask both of you question and whoever wants to go first, that's fine. It doesn't concern you at all that there are in more than one market dislocations, and it definitely feels as though there are market jitters throughout the bond market in much of the world. Risk assets are expensive. I mean, as you've said a bunch of times, assets have been rallying for 12 years and stocks are record high, spreads are at record height. That doesn't concern you with the Fed pulling back and that we get some kind of hiccup from, I don't know what, I guess that's kind of the point, you really never know, but things are already so rich, that feels as though the risks right now are asymmetric.

Francois Leclerc:

A hundred percent. I think, as you've mentioned, the fact that you see and observe many dislocations in the market is worrying a lot of people. And then every time I had that conversation, I was like, "Well, what do you do about stocks? Why do stocks keep rallying? Why do assets like households, housing keeps rallying? And just see that immense pile of cash."

Francois Leclerc:

But if you go back to pre COVID, I think a lot of us would've said that they were already starting to be cautious at the time about how the economy was going, about how, if we were going to enter into a recession, yes, the pandemic triggered something. But if we go back to years, I think at that time, a lot of people were worried about how everything was rich already. Now you've injected a bunch of cash, lived on a life support for a year and a half or two, but then reality comes back and you kind of go back to the semantics and everything that's behind it. To me, asset prices here, credit spreads, stocks, everything, and the dislocation, the market is very concerning and we could see some lower risky assets in, in the near term, I think.

Ben Reitzes:

JM quick two cents and then we'll get to your favorite trades.

Francois Leclerc:

Yeah. I mean, I need to agree as well that, that first I'd say the system is definitely more fragile than it was, so. And as Migraine said, "You don't care that you don't have breaks when you go up the hill." And that's what's happening right now. Once you start coming off, go down the hill, that's another issue. The thing is, I still think we're a bit early to be too cautious. As I said, there's ample and ample liquidity. Americans have been generating excess savings in order of two to two and a half trillion dollars kind of thing. So it's huge, huge stock pile of money that they haven't deployed really in the real economy, they could still, and they put that money to work in investment, but they still have a ton of money and deposits that they could invest.

Francois Leclerc:

I think we're a bit too early to be cautious. The thing is that I still believe the Fed has some decent possibility to not hike next year, contrary to what people think. I think people are a bit too optimistic on rate hikes, where I think pricing two hikes for 2022 in terms of the Fed. If I'm wrong and if inflation is definitely stickier and remains at definitely higher levels, I'd really start to be worried because we've been living on a Fed put since 2008.

Francois Leclerc:

Every time since 2008, that the market cracked, thinking of the 2011, 2012 viewer crisis, the 2015 China blowup and then COVID. Every time, every single time the Fed came and saved the market in terms of printing money or bringing down the rates. The day that inflation sticks, and they cannot cut the rates, or they cannot print because there's too much inflation. There's just no support underlying all the risk assets that are priced to a sky high level. And so, clearly there's some much bigger risk, I think, than people think there is like to nor magnitude higher, but I'm willing to stick a bit in the game as for now. Definitely until maybe spring or summer next year.

Ben Reitzes:

Okay. Interesting. Different. So, not quite unanimous here, but we're all... The concern is growing. So, maybe time to start worrying, but we're not quite of blown concerned just yet. Favorite trades, one each, and then we'll call it a day. What do you think? Why don't we start with Francois then we'll go to JM.

Francois Leclerc:

Yeah. So, maybe regroup a few different themes. I spoke about we're going into D1, D2 coupon payment, usually that supportive for spreads in the New York term, the issuance picture looks pretty light going into it as opposed to some other years we've seen. So, I think the demand's going to outweigh whatever kind of supply we're going to get from the issuers, always tends to favor also the long end, just because of the fact that there's some extensions as well in the index at that time. It's not as large necessarily this year, but favorite long end.

Francois Leclerc:

So, the way I would express that by selling Ontario 10 years to buy the back dates. So, going into 48's, 49's or 50s in terms of credit extension. So, credit boxes, I think that's how you still pick up this sweet spot. Now that has moved this week about a beep from mid-last week, we're still in mid 16s area. But as you know, the long term average on that trade has been much flatter. Yes, the issuance profile in Canada, Govies and Provies is tilted to more longs over the years, but I think we can still flatten from here, and that fair value is closer to 15 to 14 bps at the moment.

Ben Reitzes:

Thank you. JM.

Jean-Michel Beaulieu:

I'll give you mine. My recommendation with little caveat. I like the front end in Canada. Twos, or one year swap, two year swap, one year, one year forward. What have you, but definitely in swap looks better cause as you said, sauce, spread is just crazy eye right now. Caveat is that I suggested a trade like 20 beeps ago at 85 beeps and twos. I thought it was a ripping deal. So I mean, if I like them at 85, I'm just in love with them above a percent, pricing right around six hikes for next year is just complete nonsense to me. I don't believe it will happen. So, we won't realize those hikes. And so, this trades carry really well, and depending on which version you take, but it's you... Just time is with you. And again, as I think inflation will fade a bit and we'll realize the economy is not as strong. I think the pricing of hikes will definitely shift lower, so.

Ben Reitzes:

All right. Thank you. Thanks for that. I kind of half agree. I think there is still some room for the bank to be maybe a little more aggressive at least front loaded than the market thinks. And just if inflation takes off a little more than expected. I put that out there, I'm going to stick with that, but if they are to be more aggressive, it won't be... They won't have as many rate hikes as what's priced. I think the amount of hikes is the problem, not necessarily when they start, that's my real issue.

Ben Reitzes:

It's going to be really hard for the bank to consistently move rates back up to neutral of around kind of 1,75 or 2% in pretty short order without really destroying the housing market, or just really crushing the economy in a way that they don't want to. And that would also put them well ahead of the Fed. So, I don't think they want necessarily that either cause the Canadian dollar would get too strong. On that note, I think we should wrap things up here. Both JM and Francois, both thank you very much for coming on the show and look forward to having you again soon.

Jean-Michel Beaulieu:

Thank you, sir.

Ben Reitzes:

Thanks Ben. It was a pleasure.

Ben Reitzes:

Thanks for listening to views from the north, a Canadian rates and macro podcast. I hope you'll join me again for another episode.

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This podcast has been repaired with the assistance of employees of Bank of Montreal incorporated and BMO Capital Markets corporation together BMO, who are involved in fixed income and foreign exchange sales and marketing efforts. Accordingly, it should be considered to be a product of the fixed income and foreign exchange businesses generally, and not a research report that reflects the views of disinterested research analysts. Notwithstanding the foregoing, this podcast should not be construed as an offer or the solicitation of an offer to sell or to buy or subscribe for any particular product or services, including without limitation, any commodities, securities, or other financial instruments. We are not soliciting any specific action based on this podcast. It is for the general information of our clients. It does not constitute a recommendation or a suggestion that any investment or strategy referenced here in may be suitable for you.

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Benjamin Reitzes Director, Canadian Rates & Macro Strategist

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