TD Securities strategists Robert Both and Emma Lawrence report that Canadian rates are opening weaker, with domestic yields rising 2-3 basis points across the curve, largely tracking US market movements following Friday's payrolls data [1]. The strategists note that the upcoming week is expected to see larger market moves driven by imported volatility from the US data calendar, rather than domestic factors [1].
The Canadian employment report, scheduled for Friday, is anticipated to show only a modest rebound, which could influence the market. However, TD Securities suggests that geopolitical drivers, particularly developments in the Middle East, may have a greater impact later in the week if no agreement is reached by Tuesday night's deadline [1].
Additionally, the 5-year Canadian government bond auction is highlighted as a factor that will affect duration positioning this week, though it is expected to remain in the backdrop [1]. TD Securities maintains a bias towards long positions in 2-year Canadian bonds, but emphasizes the need to monitor geopolitical risk events closely throughout the week [1].
CONCLUSION
Canadian yields have risen in early trading, influenced by US market movements and ongoing geopolitical tensions. While the upcoming jobs data could affect the market, imported volatility and geopolitical developments are expected to play a larger role. TD Securities remains cautiously optimistic on short-term Canadian bonds, but advises vigilance given the uncertain global backdrop.