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Summertime and the Trading Ain't Easy - Views from the North

FICC Podcasts July 22, 2021
FICC Podcasts July 22, 2021

 

This week, Adam Whitlam, part of the Toronto-based fixed income sales team, and Jordan Sugar, one of our provincial & CANHOU bond traders, join me to discuss the recent rally in rates, provincial & CANHOU markets, and thoughts on last week’s Bank of Canada policy announcement.

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 Adam Whitlam, part of the Toronto based fixed income sales team and Jordan Sugar, one of our provincial and CMB traders. This week's episode is titled Summertime and the trading ain't easy. I'm Ben Reitzes and welcome to Views from the North. Each episode, I will be joined by members of BMO's FICC sales and trading desk to bring you perspectives on the Canadian rates market and the macro economy. We strive to keep the 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 Bloomberg or via email at benjamin.reitzes@bmo.com. That's benjamin.reitzes@bmo.com. Your input is valued and greatly appreciated.

Speaker 3:

The views expressed here are those of the participants and not those of BMO capital markets, its affiliates, or subsidiaries.

Ben Reitzes:

I'm back Adam and Jordan. Pleasure to have you back on the show. Once again, the markets have been particularly challenging again. I mean, I feel like I say that every couple of weeks here, but that's still been the case of late. We've seen a continued rally in the market, at least until yesterday. I called Tuesday today's Wednesday, July 21st. And then we've seen the rates market or yields back off the lows yesterday and we've got a further sell off today and risk on again for after a pretty sizeable risk off move on Monday. It seems as though those types of events are very short-lived. Stocks only go down for a day or two it seems before moving back up to new highs, making things interesting. And then that has an impact on the provincial and CMB spread market as well. So that's something we'll definitely talk about, but welcome back to the show both of you. Thanks for coming on.

Jordan Sugar:

Always good to be here Ben.

Adam Whitlam:

Thank you Ben for having us here. It's exciting to be here in the summertime when things get nice and choppy like this. And I don't know if you heard, but there are a lot of stimi checks got mailed out last week to the people with kids in the states. So stocks can only go up from here.

Ben Reitzes:

Of course, free money works. Works well that way.

Jordan Sugar:

Dogecoin is at the low zone, no?

Ben Reitzes:

I'm not a dogecoin connoisseur. I do like the dog money video, but that's where it ends for me. So let's get onto something actually serious here. Let's talk about provincial spreads just quickly. CMB spreads as well. And I think like the most interesting aspect of the spread market right now is you've seen a 50 plus basis point move in 10 year and 30 year rates and spreads have been pretty much unchanged. We're not quite at the tight. We're maybe slightly off, but we're not far from the kind of post global financial crisis tights. And we're not far from the post COVID tights. How are spreads hanging in here so nicely? Like is there still that good demand for spread product at these levels or something else going on?

Jordan Sugar:

Well actually the other element I'd add in addition to the 50 basis points or more lower end rates would also be the continued supply that continues to come down the pipeline. And as you mentioned, nonetheless, spreads are where they are. So yeah, we do continue to see good buying much like in any type of equity sell off that's short-lived and spreads seem to snap right back. Perhaps not one for one with the US-based IG, but pretty close to it. So yeah, we're not at the tights, we're not through the tights, but we're hanging in there and I don't know if it's maybe has to do with the summer months, but I think it's more than that. I think there's just good demand for provincial credit. Credit in general, but definitely provincial credit. And they don't think with the amount of money that's out there, spreads are going to back up too far from here right now. And if they were going to, I think the past few days or the past two weeks would have been a good opportunity for that to happen.

Ben Reitzes:

That's a good point I think, especially with the supply that's come and still poised to come and really no material spread move on the back of that. It's kind of been more of a rate move honestly. You've seen some Canada cross-market under-performance on days where there's been expected and actual sizeable issuance, rather than any movement on the spread front. Adam, what are you hearing from clients on this? Like there's still good interest in provis here.

Adam Whitlam:

Yeah. So, there is good interest in provis, but what I would kind of pre-phase that with is a lot of the interests that I've been seeing and that I've talked to clients about is the credit upgrade trade. So, it's not necessarily that provis look cheap and I have lots of money and I want to spend them on provis. It's that I'd much rather own a provi than I would some corporate bond in the long end, because I think that that spread compression has come too far. So on that metric, provis makes sense. Also, you look at where some of the less lookable lines are, I mean, my preference is to roll into higher liquidity things. So if there is a backup, if there is an opportunity, you can roll it back out into something that's higher beta and out of liquid provis.

Adam Whitlam:

Where if you start acquiring some of the less liquid lines, it can be difficult to move that if and when you want to. So I think part of the bid to provincial spreads is it's just a better credit quality than a lot of the other stuff out there. I mean, you read these articles in the wall street journal about in the US, the IG versus high yield index is at the tightest level it's been in years. So, maybe it's time to take some of the higher beta off the table and go something that historically is a little better protected.

Ben Reitzes:

On that note. Something I've kind of been on about a little bit lately is just how Ontario has underperformed of late. I mean, effectively what we've seen is peripheral provinces have been tightening pretty consistently. And then as the risk on environment has continued, they've consistently tightened. And I guess part of that is... I mean, again, oil prices moving higher certainly helps Alberta, helps Saskatchewan, helps Newfoundland, but Ontario has been I guess, the common theme in all those kind of lagging, more or less. I think maybe Ontario is getting a bit of a bad rap from a fundamental perspective. I suspect... And I mean, the numbers suggest that all the provinces are going to be materially better than their forecast for their budgets, for the current fiscal year. Ontario's fiscal watchdog just came out and said, they're going to be about nine to 10 billion better than expected for the last fiscal year.

Ben Reitzes:

So that's a better starting point. And then they were very conservative on their budgeting for this year. And so, I mean, just like... And I mean, you can say that about all the provinces, but it was a little bit more so for Ontario. So I think there might be good value here. And if what you said is true Adam and people are looking to kind of upgrade on the liquidity side, on the credit side, and I'd say this is probably more on the liquidity side, of course. But Ontario might be a better or a good option to maybe increase weightings on that front. And even if you give up a bit of yield, depending on which province you're moving away from that might be worth that improved liquidity in case things do back up a little bit. And either of you guys, any thoughts on that? Do you think Ontario has some room to go here on a relative basis? Or maybe if we get spreads under performing, then Ontario hangs in a bit better?

Adam Whitlam:

Yeah, I'd say Ontario looks like a decent hold, especially relative to how far some of the other peripheral names have come. Where I might note an alternative to Ontario would be kind of Quebec in the long end and that role which was neg five, neg five and a half has kind of come back to negative three and a half on the back of maybe this Hydro-Quebec issue. And Quebec from a funding perspective is miles ahead. Maybe BC's now caught up with that big US dollar deal, but otherwise Quebec is in very strong shape and fiscally remains pretty strong. So, at negative five I didn't really like Quebec. At negative three and a half it's kind of a different story. And then maybe BC, particularly in 10 years where trades very close to Quebec, I think BC in our last provincial forecast update, we still have them earmarked for best in class GDP growth this year across all the provinces.

Adam Whitlam:

So if you can get BC at a level that is flat versus the curve to Quebec, and you have to be careful because what happens in those the June Canada rolls with Quebec being a September maturity, you have to lie your curve up carefully. But when you line it up, you can see that Quebec, BC is actually on top of each other versus the curve. And so from that perspective, I'd say BC in a ten-year versus say Quebec makes sense, but maybe Quebec in the long end is looking kind of reasonable. And then outside of that, yeah, I think everything has really outperformed a lot. The Prairie provinces have come a long way. Alberta's had a good run, a little bit of pressure recently with what's been going on in oil, but otherwise if the thesis is going to be liquidity is king, then Ontario should perform fairly well here in the next little bit.

Jordan Sugar:

And I'll just add in that, if you want it to fade even the strength in provis and then more specifically a BC or Quebec versus Ontario, one thing to look at would be a BC and Quebec in the five-year sector versus CMB's. So selling Quebec and/or BC enrolling into the five-year CMB benchmark, right now BC is about two basis points or so back of CMB's, which is definitely the tight end of the range. And BC will only continue to roll flat if not cheapened slightly versus Ontario, as it rolls to a two and three-year bond. Similarly for Quebec, although they can get quite technical depending on the issue size, but everything else held equal. The roll-down would have been nice from tens and to fives. And I think fading that, enrolling it to CMB's for added protection here is not a bad trade right now. And it's something we've been promoting the past week or so.

Ben Reitzes:

Excellent. You took the words right out of my mouth, Jordan. I was going to ask you about CMB's, but you covered that nicely. So I think we'll move right along here. We'll get to the race market in general and what we've seen again, I think all of our listeners know pretty sizable rally here and big time curve flattening. Is there room to run here? Can rates continue to go? Are we going to see 1% intent? Are we going to breakthrough 1% intents?

Ben Reitzes:

There's a gap, not on my machine right now, but I think there's an opening gap kind of in the low eighties from back in February. And then Canada, 10 years that, I mean, history says those gaps get closed eventually, is now going to be that time or has the rally gone too far? Is the move intents inconsistent with front end pricing? Like if we have the bank Canada still going price to go a couple of times in 2022 with tenure rates at 1.15, 1.20 maybe today. There seems to be an inconsistency there. Which one's wrong, I guess. Is the long end getting a little bit too bared up or is it just the positioning driven move or is the front end poise to join in this big rally?

Jordan Sugar:

I'll jump in here. On my end, what I've seen in the CMB market, I've seen a lot of international selling of the front-end CMBs, the one to two year space, a lot of selling there. And then as well with twos fives at the flats, and at the lows end rate. We did see a lot of cash selling of the three to four year CMBs, not so much the five-year, but three to four year. And from my conversations with clients, a few clients are leaving some skin in the game there that they do think we do revisit these levels, but definitely taking some sales and not waiting for lower levels and flatter curves, but definitely keeping some skin in the game there.

Adam Whitlam:

Yeah. I mean, I think the tenure sector in Canada just looks absolutely egregious. And I don't want to say that just out of context and that in terms of an outright level. I know we approach the 200 MDA when we got to 112 earlier this week during the Delta variant rally. And clearly there are gaps below that. I mean, the next gap, I think we were highlighting down to 103 and tens if we were to break that 200 MDA. Certainly that's possible, but I think you got to look at it in the context of the entire market. And I've been on this for a while now. A lot of my clients know I've been honest about how cheap the front end, how cheap the backs market is and where we're at now is a positioning based squeeze.

Adam Whitlam:

You have summertime markets, which are historically very positive for rates. They regularly perform very well through the summer, as you get into a hot potato market. And so you have a situation where now maybe the senior traders and there really aren't that many of those left in the Canadian market. But maybe the more senior traders they're on vacation. And so you have somebody else watching the book or watching two books at the same time, or this macro client is taking their summer holidays. So risk becomes a hot potato. And so when somebody lists you and you get short, that be it bank goes out to scramble that short position in the market. And it just creates this feedback loop, which causes these huge moves in rates and causes things that look expensive to get egregiously expensive, especially in light of say where stuff is in the front end.

Adam Whitlam:

So, have a look at the back's contract. Like if you look at say the Canada twos fives curve, and this is something that our trader Joel Prussky has been highlighting for a while now, too. If you look at say the twos fives curve, and you compare it to say the second versus... Let's call it the sixth, seventh, eighth backs contract, you'll notice that in Canada versus the rest of the world, our backs curve is extremely steep relative to where our twos fives curve is. So what does that say? It says that back's positioning was quite bad going into the Bank of Canada. It was very long. A lot of the longs got washed out and it's forced the front end of the curve to remain very cheap. But conversely further out the curve, and it started mainly, as it's a US driven affair.

Adam Whitlam:

But in the US, we saw through the JP Morgan survey, the commitment traders that there were a lot of shorts in the US market. And as those shorts persisted, and we had that rally start weeks and weeks back, it caused a massive flattening of the curve. There's been a lot of short covering. Now we're seeing like the JP Morgan surveys coming through, and it looks quite a bit cleaner than it did I think on the total accounts. The real shorts was the smallest it's been since April. And even the commitment traders data shows, TYs are pretty clean now, some of the other contracts, not so much, but some of that short squeeze positioning has been cleaned up. And so, you're left with a situation where the front end still looks like great value. If the Bank of Canada is going to hike as aggressively as we have forecasted into our backs curve, then tens have no place being at 123 outside of full blown policy error..

Adam Whitlam:

And Ben, you've talked about this before, where inflation can sometimes feed on itself. Like it may be transitory, but when you get four quarters of high inflation, it starts to feed on itself. It becomes a self perpetuating cycle. So yeah. Is our belly too expensive? Absolutely. I've seen clients fading it. I've seen paying a 5 cents thirties in Canada versus the US. I've seen paying a twos fives tens in Canada versus the US. Our bond market, our SWAT market looks rich and the front end looks like much better value here.

Ben Reitzes:

Yeah. 5 cents 30 cents on SWAT Canada, US. Canada looks extremely expensive on that metric at around nine and minus 20 or so. I mean, you're looking at kind of over the past decade that it hasn't been there many times and when it gets there, it's not there for very long. So certainly an opportunity on that front. Let me ask both of you guys this, and then... I mean, you don't really have to give me a firm answer because mine is kind of like, where do you think the market goes over the next month or so through the end of the summer? Like, I'm still a believer in the seasonal factors. I've been on it about for awhile and you just get those supportive factors in the market. I'm not sure what fundamental drivers they're going to be through the summer months.

Ben Reitzes:

Like you get your acts on hold in August. Other than that, I mean, there's a couple of CPI. There's Canada, US CPI. Print some job numbers. I don't think those will be enough to really move the needle in any direction. So for me, it's just kind of probably sideways for awhile, maybe revisit the lows. But range-bound for now. And then again, as I wrote last week, my macro thesis still holds, I still think better growth is ahead, or at least good growth is ahead. Maybe not better. Sorry, I should rephrase that. And strong growth is ahead still, even if it's not quite as strong as it was last year, like four or five, 6% growth is still pretty darn good. So that should mean 10 year yields higher than the low ones for sure. Adam where do you think, let's go for the next call it four weeks through the rest of the summer and then we'll move to Jordan.

Adam Whitlam:

Yeah. I was afraid you were going to pick a month because that's actually probably the most difficult timeframe to pick what's going to happen. Because like you said, the seasonals are pretty strong and that's why we're having some of these choppy markets. I mean, if growth is going to moderate to only 4%, then I wouldn't buy a 10 year with your money at 123. So I'm going to say yields are going higher for me here, but I'm also tempted to say higher slash sideways. So, our ten's going to climb to 135. Yeah. I could absolutely see that, but I don't think we're going... And if I had to pick between lets say 135 and 115 as the next move, I'm calling 135, but sideways is probably right for the next month. There's too much hot potato with the risk.

Jordan Sugar:

Yeah. I don't have anything more enlightening really to say here, because I tend to agree with both of you. I would definitely be very cautious and err on the side of lower rates and revisiting the gaps in the charts. But I don't think that's going to be negative for credit. Clearly it hasn't been, so I don't expect that to change. But yeah, I think lower sideways, but I think everything looking on the up and up towards the latter half of the year, and I think we'll continue in the short term to be plagued with negative headlines and indicating that we're not quite out of the woods. I hate to say it with COVID, but those headlines will persist and it will definitely weigh on our market for sure.

Ben Reitzes:

Thank you, gentlemen. Last topic for the day. Last topic for this week. Bank of Canada was last week. They did. I mean, almost exactly what I think most everybody expected. The market was seemingly set up for a more hawkish bank. I'm not entirely sure why they'd get even more hawkish than they have been, but that was the setup definitely in FX markets, backs markets as well, to some extent. And so you got that market reaction on the back of it and we hear Canadian dollar and so on and so forth. But I think the main takeaway from the bank is that things are kind of progressing as they expected. So they're on a quarterly tapering pace. They tapered in April. They tapered again last week, July. The next monetary policy report meeting is in October.

Ben Reitzes:

I expect them to taper again then. That would bring their purchases down to 1 billion per week. That will probably be as low as they get. That leaves them net buying in the fourth quarter with only modest maturities coming in Q4 from their balance sheet. Next year, there's about 50 billion, just under 50 billion in QE maturities coming. So that would be equivalent to about a billion a week in purchases. So if they move from QE to just reinvestment in January, the pace of purchase is actually stays pretty much the same. So don't expect huge changes after October. They'll just change probably the language a little bit in January. And then from there, it's a question when we get rate hikes and the market seems to like the middle of the year July. I think that's pretty reasonable. The house calls for October right now.

Ben Reitzes:

And that's very doable as well, especially if you consider the risks around Delta and then the global risks there. But I think still given housing and everything else, and then just the resiliency and risk sentiment, that suggests that the risks are still toward earlier than October hike at this point. But we'll see on that. As I noted earlier that my macro thoughts are still pretty much intact, and I really haven't changed much of my thinking at all. Canada still going to grow in the 6% range this year. Same with the US, a little bit strong in the US. Next year should be kind of in the four plus percent neighborhood for the US and Canada as well. I mean, again, pretty darn good numbers, hard to reconcile that with what bond yields are.

Ben Reitzes:

And then on top of that, you can layer on inflation, which has been strong year to date in Canada. We're going to get an inflation print next week. You are going to see some slowing in the year over year for the June print, but some poor comparables, or I guess, low price increases in 2020 of the third quarter of 2020. I mean, we'll get actually a re-acceleration and CPI here. Whereas in the US you're going to stay in that kind of probably five to 6% range for maybe the rest of this year. So you have probably a good growth backdrop, high CPI rates again.

Ben Reitzes:

I mean, it really comes back to the same point that I've been making for a long time. And quite frankly, has been wrong for a number of weeks now with the rally and bonds. But it seems like both of you guys are on side at the end of the day with... We're going to call it post labor day with higher yields. Jordan, why don't we start with you? Because I'm 99% sure that Adam agrees with me given what he just said. But anything to add or any thoughts on that? I mean, do you agree? You disagree? Am I totally wrong? Is Delta going to destroy the reopening trade and everything that goes with it?

Jordan Sugar:

Yeah, Ben. I would absolutely agree with you. I do think rates will definitely be trending higher. And I do think that Labor day in and around that time, mid to late fall is definitely the timeline. I think a lot of people have in their mind for their lives to get back to normal for hopefully for kids to go back to school, properly go back to school. And I think that all lines up, and to be in the office once again in some schedule. But I do think that fall in Labor day is the timeline that everyone has in mind. And that does line up with higher rates and the world getting back to normal. And I think everyone kind of has their fingers crossed and that's the expectation. And I think that's the way it will play out.

Ben Reitzes:

I hope we're both right. Adam? Your thoughts here?

Adam Whitlam:

Yeah. So actually, it's funny. I want to talk a little bit about the Bank of Canada for a minute as well. Because, like you said Ben, it was kind of ham on rye. There weren't too many surprises from that statement and we all kind of knew they were going to taper. They own a lot of our own bond market. I think it's still one of the highest percentages in the world. So it was sort of due for more tapering and that's going to keep going. What I found super interesting about that Bank of Canada statement was when they discussed excess demand in 2023, that was going to push up inflation. When I read that I kind of went, wow, excess demand in 2023. Listen, I get it. It's hard to buy goods right now. We have supply shortages, labor shortages, but 2023 is a long time away.

Adam Whitlam:

And that's when it became more apparent that that excess demand was going to be a result of low rates in 2023. So to me that said, it wasn't a dovish Bank of Canada, but it was probably a little more dovish than the market really gave it credit for. I mean, that to me says their intention is to keep rates pretty stimulative all the way through 2023. So that says backs is still look very cheap and still looks like a great buy and still look like good value. The other part to consider is this Delta variant, maybe we get some fear-based reaction there or at least some acknowledgement that it's kind of going through the states. I mean, I think Canada with our higher vaccination rates, hopefully we'll be in a little bit of a better place at the back of the whole Delta variant spread.

Adam Whitlam:

But, I think you at least have to give recognition to that and some of the wobble and what's going on in some of the countries around the world where we're seeing a big surge in COVID cases due to Delta variant. And so again, maybe that gives a Bank of Canada a rise to pause a little bit or let inflation run hotter or just not be as aggressive in terms of rate hikes. So it makes the front end look like a great buy, but that being said, if you're going to keep rates simulative and you're going to let inflation run high, then you should see cheaper rates further up the curve.

Ben Reitzes:

So then putting that excess demand in 2023, the way that they explain that is... So they're going about policy differently than they ever have in the past. And that they're not being preemptive at all. They're going to wait to raise rates, at least until the output gap is closed and that's something they've never done in the past. They would anticipate that the output gap is going to close at X date. And we would be tightening to be at a neutral point in policy by that date. And so, because they're running policy a little bit differently at this juncture to recover from the pandemic as fully as possible and waiting as long as they are to raise rates, it takes 12, 18, 24 months to have those rate hikes feed fully through the economy. And if they're only raising rates every six months or even every quarter, if they want to be on the aggressive side, it's going to take well beyond the starting point for their rate hikes for them to get to that neutral point on policy.

Ben Reitzes:

And so that's where you get that excess in 2023. The economy be at capacity and rates will still be really low as in they want to start raising rates until the output gap is closed. And so that's where they're coming from on this one. It doesn't necessarily mean that the rates will be low into 2023. It just means that they're operating policy very differently than they have in the past at this point, just to ensure they get the recovery that to some extent alluded them over the past decade or so. So just a little bit of a wrinkle there. I appreciate where you're coming from them sounding seemingly more dovish, but I'd also note that that excess demand was also in the April MPR. It just didn't get the recognition that it got in the July MPR.

Ben Reitzes:

So, I wouldn't key too much on that just yet. I think the jury's out and we'll have to wait and see, but backs are definitely cheap at this point. I think there's little doubt there. We're going to wrap things up here. I'm going to ask both of you gentlemen, for your favorite trade ideas this week. Mine is, and then I don't always have one to put in here because there aren't always great ideas. But fives tens thirties is something that definitely looks attractive here across market in particular tens in Canada are very expensive on the curve. Outright, pretty much any way you look at them. So that's mine for the week. Jordan, why don't we start with you. What do you got for us?

Jordan Sugar:

In keeping with CMBs, I do like despite the fact that you don't like to tenure Canada's. I do like a CMB tenures on credit heading into a brand new CB 10 year. In about a month or so I do expect to see the credit box flatten and they do expect to see spreads compress or tightened rather into that new issue. But then keeping more with a trade idea. I'm going to go back to the five-year space and selling the rich peripheral bonds of whether it BC or Quebec versus CMBs. I think there's some value there.

Jordan Sugar:

I think selling Ontario versus CMB in the five or 10 year space, typically that trade... Not typically, it hasn't worked out over the past couple of months and every time it tightened into new tights. If you did that trade, you got burned. And now we're... The June 30 CMB versus June 30 Ontario is just slightly inside at 20. And I don't recommend doing that trade, but that's why I'm switching gears to the five-year space where a credit's rolled down nicely already. And the peripherals don't have much room to go flatter versus Ontario as they become a two year bond. So I think that's a good trade right now. And CMB five-years do look cheap on the curve and especially now versus those peripherals.

Ben Reitzes:

Thank you, Jordan. Adam, what's your best idea?

Adam Whitlam:

Well I don't want to beat a dead horse. I've gone on about backs versus the rest of the curve probably about four times on this podcast. The horse has had enough floggings for one day, it's going to go into the glue factory. So at this point, I'll look at a couple other areas. There's actually a couple of like a bunch of different sort of micro curve trades that I like right now. As a nod to Mr. Sugar, kind of pointing out where Dec 23, June 24, Dec25, it's a micro CMB fly. Does make CMB June 24 look pretty cheap. It's kind of a nice carry part of the curve as well. I mean, if you look at that fly and all that basis is kind of about as cheap as it's been.

Adam Whitlam:

So, I think that's when everybody should have a look at. Also a little further out the curve switching into provi land, I was kind of highlighting this to a bunch of people today. Ontario 30 fives definitely stand out as cheap, especially when you compare it to say the Ontario 30 threes, which are a March maturity bond. So, if you look at some of the other March maturity bonds that have rolled down the curve, they trade back of the curve. The Ontario 30 threes are actually quite a bit flatter than where the current Ontario June31/Dec30/June30 curve is. So the Ontario... Any Ontario 30 fives conversely, are a June date. So a quote unquote, good date. So the Ontario 30 fives definitely stand out as cheap. That's something, if you're playing kind of north of a tenure sector provis you should have a look at those bonds.

Adam Whitlam:

And then further out the curve, if you look at say, we're getting a lot of talk about Ontario 2052 though it might be this week business. It could still be this week's business. The Quebec 51/53 role, that's been steeping out ahead of HQ doing their 40 year bond. And also the Canada 48 51 role has been steepening out. So I think where there's value is actually some of the old benchmark bonds like Ontario fifties, Alberta fifties. Buying and maybe shortening up, say out of the 51s into the fifties or instead of buying some of that 2052 stuff going a little further down the curve, you bet better role similar carry. So it's a nice part of the curve if it holds up.

Ben Reitzes:

Okay. Thank you both for your ideas this week. And I appreciate you both coming on the show. As a housekeeping note, before we wrap up, this'll be the last episode of View from the North for the summer. I'm going to take August off from podcasting and we'll be back after Labor day when hopefully things are probably a little bit more exciting in Canada. August tends to be pretty quiet. There's exactly nothing on the Bank of Canada's calendar in August. So we're anticipating things will be hopefully relatively quiet. We'll see. But I'd like to thank both of you for coming back on the show. Adam and Jordan pleasure to have you once again and look forward to bringing you back in the future.

Jordan Sugar:

Always a pleasure Ben.

Adam Whitlam:

Thanks for having us Ben.

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.

Speaker 3:

This podcast has been prepared with the assistance of employees of Bank of Montreal, BMO Nesbitt Burns 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 a 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.

Speaker 3:

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 suggestion that any investment or strategy referenced herein maybe suitable for you. It does not take into account the particular investment objectives, financial conditions, or needs of individual clients. Nothing in this podcast constitutes investment, legal accounting, or tax advice, or representation that any investment or strategy is suitable or appropriate to your unique circumstances or otherwise constitutes an opinion or a recommendation to you.

Speaker 3:

BMO is not providing advice regarding the value of advisability of trading in commodity interests, including futures contracts, and commodity options or any other activity, which would cause BMO or any of its affiliates to be considered a commodity trading advisor under the US Commodity Exchange Act. BMO is not undertaking to act as a swap advisor to you or in your best interest in you. To the extent applicable we'll rely solely on advice from your qualified, independent representative making hedging or trading decisions. This podcast is not to be relied upon in substitution for the exercise of independent judgment. You should conduct your own independent analysis of the matters referred to herein, together with your qualified independent representative if applicable. BMO assumes no responsibility for verification of the information in this podcast.

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No representation or warranty is made as to the accuracy or completeness of such information and BMO accepts no liability whatsoever for any loss arising from any use of reliance on this podcast. BMO assumes no obligation to correct or update this podcast. This podcast does not contain all information that may be required to evaluate any transaction or matter and information may be available to BMO and/or its affiliates that is not reflected herein. BMO and its affiliates may have positions, long or short and affect transactions or make markets, in securities mentioned herein, or provide advice on loans to, or participate in the underwriting or restructuring of the obligations of issuers and companies mentioned herein. Moreover, BMO's trading desks may have acted on the basis of the information in this podcast. For further information, please go to bmocm.com/macrohorizons/legal.

Benjamin Reitzes Director, Canadian Rates & Macro Strategist

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