Cross-Border Quarters - Views from the North

Ben Reitzes:

Welcome to Views from the North, a Canadian rates and macro podcast. This week I'm joined by Matt Baird, one of our Canadian fixed income salespeople who's in town visiting from Vancouver. This week's episode is titled Cross-Border Quarters. I'm Ben Reitzes and you're listening to Views from the North. Each episode I will be joined by members of BMO's FICC sales and trading team to bring you perspectives on the Canadian rates market and the macroeconomy. 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.R-E-I-T-Z-E-S@bmo.com. Your input is valued and greatly appreciated. Matt, thank you for flying all the way in just to do this podcast. I know I'm the only reason you got on the plane for five hours and will fly back for five hours.

Matthew Baird:

Yeah, no, I am, I do like being in the presence of local celebrities.

Ben Reitzes:

So he went around and easy not here now.

Matthew Baird:

Yeah, yeah, no, I was happy that our friends at Air Canada gave me a seven-hour journey from Vancouver to get here.

Ben Reitzes:

Seven?

Matthew Baird:

Yeah.

Ben Reitzes:

That's unfortunate.

Matthew Baird:

Yeah.

Ben Reitzes:

Sorry.

Matthew Baird:

It's okay.

Ben Reitzes:

No comment. They're much nicer to me, but all right. Thank you for coming on. Next week is the Bank of Canada and the market is split effectively, pricing is oscillating around 50/50 for 50 or 25.

Matthew Baird:

Yep.

Ben Reitzes:

I have been, I would say pretty outspoken on my view for 25 basis points in writing and otherwise for those who talk to me. The street seems to be lined up and the street, I mean the other talking heads like me, seem to be lined up more on the 50 basis point side. The view on our desk is somewhat split. I think I've made it compelling enough case that people are kind of coming my way. We'll see what jobs do on Friday because I will fully admit if they stink badly enough then anything's possible that that could change the view. But what do you think? Where are you in this debate and why are you where you are?

Matthew Baird:

Yeah, I guess it won't make a very good podcast if I just say because I listen to smart people like you and you're in the 25 camp, so I know we probably want a bit more friction, but I am in the 25 camp and I think the premise of that is they've moved to neutral quite quickly for good reason based on weakening data. I mean you and the team here have done a great job of pointing out some of the structural problems like the continuing productivity issues, the output gap, and then obviously inflation coming down to target, the GDP per capita argument. These have all been things that have played nicely into a central bank that had kind of a predisposition to cut anyway, but they have moved quickly to get closer to what is neutral. I mean the market has their terminal rate as defined by two year, one year, whatever, pick your poison on that one, 90 basis points through the US, right? Which you could argue, I think it's sort of in the 265 areas as I left my desk, maybe a bit higher.

Ben Reitzes:

We rallied a bit of the mass market, sure.

Matthew Baird:

Wall, but right in that area. So the market's pricing them to get there, it's kind of their option to take it. Obviously we don't get paid to say where the market is priced. We get paid to say whether that's right or not. I think it's a little bit aggressive and we can talk a little bit about why that is. I think a lot of that's to do with the US economy. And you and Doug have done a good job of mentioning how that's changing the BoC's neutral rate and has actually from the lows has brought it a bit higher.

But I also just think that at this point they've done enough and there's probably not a reason to rush here. I know there's a lot of people talking about their comments around not being concerned about the divergence from the overnight rate in the US and that being a reason why they can continue to go quickly. I think that just means that they can continue to go, but they don't need to continue at the pace that they were on before. So it's more of a slowing of the pace. Path of least resistance is to continue cutting.

Ben Reitzes:

So the only thing that you said that I'll take the other side of there is that I get paid to prognosticate these things. I thought it was just to speak on this podcast. I'm confused. I need to write my giant thoughts on pieces of paper, but no, I think I'm with you mostly. And I guess where I differ from the 50 crowd is in October the way they got to going 50, the way that they arrived at going 50 instead of 25 was entirely driven by the data. So you had inflation come in below expected you had growth come in well below expected at a time when they're expecting it to accelerate, and that combination is not friendly for an inflation targeting central bank.

Since October, we had inflation come in higher than expected and above what the MPR is forecasting. And growth on the soft side, admittedly, that is one thing where maybe you could make a bit of an argument, but it only missed by 0.5 percentage points annualized, so not annualized, that's about a 10th. And the level of GDP was revised up 1.5%, so 10 times the % revision on the miss. Some of that revision will mean higher productive capacity because it was business investment. Definitely. Nonetheless, there's no debating that the revision probably wipes away that GDP miss at least I don't think there is. We won't really know that until the bank puts out their next MPR in January, but for me, it's not the type of miss to drive a 50 basis point move, especially if you consider that inflation was higher.

And then on top of that you have the federal government adding fiscal stimulus to the picture and they were already expecting growth. The bank was already expecting growth to pick up in 2025, and so I think this pretty much locks in some seriously better numbers for the first quarter at least. We'll see if the handouts come or not from the federal government at least, if those checks get mailed or passed in parliament. But you have this new kind of upside to growth, even if it's short term, I think the bank's view would be that, "Okay, that is short term definitely, it'll last a quarter. I mean we lifted our call for Q1." But their view, if you look a little further out and that just buys you some time for the rate cuts to have an impact.

Matthew Baird:

Totally. And a couple other things just on that point around, I don't want to describe it as resilience in the Canadian economy.

Ben Reitzes:

Stubbornness is what I would call it.

Matthew Baird:

Yeah, stubbornness is probably the best way to characterize it. I mean I was thinking about a couple things on that front, right? You still have wages running at 5% plus, right?

Ben Reitzes:

Maybe, I would say three and a half to four and a half depending on the metric you want to use only because the bank put out that paper on the labor force survey wages that said they were too high, but even if you cut them down a percent, it's still like three and a half ish. It's still pretty high.

Matthew Baird:

So wages are still running relatively high and it might be a whole another topic for another podcast, but interesting to me that the last couple of years, at least in the province where I live in, I think this is more of a national story. There isn't a union out there that has not asked for a wage increase.

Ben Reitzes:

I don't think there's a person out there that hasn't asked for a wage increase.

Matthew Baird:

Absolutely, and I'm going to go ask right now. Yes, good time of year to make that ask, but I mean in BC, I'm just thinking off the top of my head. We had the nurses union, the teachers union and the ferry workers union. I'm not going to comment on which of those-

Ben Reitzes:

Dock workers.

Matthew Baird:

The dock workers, also.

Ben Reitzes:

The poor people. Yes.

Matthew Baird:

I'm not going to comment on whether those are deserved or not. I'm not an expert on whether they are, but those were the major ones and obviously that creates a certain amount of inertia as in my best friend just got a new shiny car and a pay raise, I want the same thing. And so that I think creates some underlying stickiness, some structural stickiness to wages.

Ben Reitzes:

It also drives prices higher.

Matthew Baird:

Absolutely.

Ben Reitzes:

Yeah. Someone needs to pay for those wages. That usually means higher prices or taxes or something.

Matthew Baird:

Totally.

Ben Reitzes:

Prices equal inflation.

Matthew Baird:

Totally.

Ben Reitzes:

That's not what we want.

Matthew Baird:

I recently was in conversation with your colleague Robert Kavcic, about the BMO proprietary financial conditions model that you have or financial conditions index, that's shown some signs of loosening up. Obviously rate cuts are a big part of that. Credit spreads are a big part of that. Dollar Canada is a big part of... there's a few things that go into it that are kind of cyclical, but it's shown some loosening and not an insignificant amount. So I've been spending a little bit of time looking at surprise indexes across the board, and we should talk about this with the US data. But Canadian surprise Index has not had much of a pop as of yet, but I think it's early days to watch that. I think just the last thing to talk about, Ben, is just the benefit, and I alluded to this when I was talking about terminal rate before.

But the benefit that Canada gets because there's a lot of focus right now on tariffs and how much that's going to hurt our economy, but there's not a lot of focus on what the impulse from US fiscal is going to do into our economy. And I think that's obviously a bigger topic for the US and a huge differentiator between Canada and the US and we should spend some time on that if we have time. But I do think US fiscal is one of these things, we still have a massive trading relationship with them and if US fiscal stimulus, even if you say it's going to be all by USA, if the new administration especially is going to say, "Right, everything is going to be made in the US," we are still going to get some impulse from that. I don't think it adds half a percentage point of growth. It's probably a bit lower than that, but when I've looked at this in the past, it was not insignificant and it definitely isn't going to be a subtractor from GDP.

Ben Reitzes:

No, it could definitely be meaningful I'd say. I mean that's the knock on effect of better US growth to Canada is real. My concern is it's not what it used to be and that's one of my worries about the Canadian dollar move and the dollar is moving because productivity in Canada has been horrendous forever and there's no effort here to fix that. And the government is not sufficiently occupied by this problem to really put a real effort in to create a lasting solution. And so the currency has been hit by that. On top of that, you have rate spreads, which is part of that productivity problem, and on top of that you have the trade tariff threats from Trump also weighing on the currency.

But my question would be more like, or my concern I guess more than a question is like, "Well, if Canadian manufacturing was hollowed out by the currency moving through parity 12, 14 years ago, how much of a bounce are we going to get this time when the currency really weakens off the way that it has? How much of a growth booster is that really going to be compared to 25 or 30 years ago when Canada had a larger manufacturing base than it does now?" So that concerns me in that the financial conditions index would have the currency in it, but maybe it's not quite as stimulative as you think, which would not be good because it would mean you need weaker currency, which I don't want to see because I like going on vacation.

Matthew Baird:

Yeah, absolutely. Yeah, there's a lot to unpack there. So I think this might be a good segue into things. So US fiscal at our conference last year, there was a great panel with David Jacobson and Brian Tobin and they made a great point that we like to, or our current leadership in Ottawa likes to say, "We're running a 1.92% budget deficit. In the US they're running a 6% budget deficit." Now we like to look down and shake the dirty end of the stick and say, "Look how much more fiscally responsible we are." The point on that panel at our excellent global reserve and asset managers conference was that the 6% is actually a more productive spend because a lot of that's the CHIPS Act, the IRA. These are effectively fancy words for tech subsidies and tech investment. And you and I can argue whether NVIDIA making a super chip is going to actually prove productivity across the board or not, or whether it's just going to make someone's video game run faster and graphics cards work better.

Ben Reitzes:

I'm just waiting until I can plug it into my head and then I move faster and am smarter.

Matthew Baird:

Yeah, absolutely, I think I could use some of that on the West Coast as well, especially with our hours out there. But the Canada portion of the deficit, and you touched on this, is being used for consumption. So we hand out checks and you and I both know that whether those checks are put with someone in the bottom quartile or the upper quartile, it's not going to be put into a productive assets generally. So yes, they're running a bigger deficit structurally, but you could argue that that will pay off longer term for them.

Ben Reitzes:

Yeah, no, I totally agree.

Matthew Baird:

And you could argue that the market's giving them rope to do it, right? There's no-

Ben Reitzes:

Not yet, not yet. There's no real issue yet.

Matthew Baird:

There hasn't been a pushback. You could say maybe the one area where it's starting to become a little bit apparent, that the market is taking a small concern about the fiscal situation in the US is 30 year swap spreads in the US. That would be one area where you could say this is an area that it's worth watching, but it certainly hasn't affected business confidence. It certainly hasn't affected productivity. It certainly hasn't affected the dollar. I mean I think everyone in the world knows the story about that. So you touched on productivity. I just thought that was an interesting point and kind of speaks to the differences but across border, right?

Ben Reitzes:

I agree. I mean I recently and for the first time in my life, and I can't remember if I did it on air last time or said it on air last time, had said publicly that I actually wouldn't mind more fiscal spending, wouldn't mind a slightly wider deficit, that is entirely contingent on the money being properly spent to improve Canadian productivity. So whether it is, I don't like subsidies, so I do not want that, but I think better tax policy, lower taxes on the business personal side at the high end of things to incent people to work harder, that is what drives productivity, incentives. Shocking, I know, but that's what we need. 6% is a lot. I don't think we should run a 6% deficit. If it was an extra percentage point, I wouldn't care all that much. I would say while the US might benefit in the medium long-term from some of those investments, I still worry about them running this deficit and having exactly zero appetite to trim things down.

And there's not a lot of room to do it either. Their discretionary spending is pretty light as total, it's normal, 1.2 trillion I believe. So let's say you cut that 20%, great, 250 billion. That's barely a drop in the bucket and you still got a trillion and a half ish to go, where's that rest of the money going to come from? That's the hard part for me. And maybe the market one day says, "No, you're not allowed to do this anymore." And then you have this massive US fiscal drag. And that's one of my issues with Canada US spreads is that I understand why the US is cheap as it is because all those bonds, that's fine, but you do have this big fiscal overhang at some point that is coming. And so over the next 30 years you're going to tell me it's not coming at all or is the reckoning going to come and they're going to have to tighten up a ton and then growth will look way worse in the US and Canada might smell like relative roses. I don't know.

Matthew Baird:

The cleanest dirty shirt argument.

Ben Reitzes:

Yes.

Matthew Baird:

I think it might be worth just, I wanted to circle back to your point around whether the currency this time around helps cushion some of the blow. It's supposed to be, I guess you're the macro expert here, but currencies are generally a stabilizer mechanism for the economy in your macro one-on-one textbook.

Ben Reitzes:

Correct.

Matthew Baird:

And the thing is I think, and you and Doug have written a couple of great pieces on this with our tax policy and our lack of competitiveness generally here, it's not clear to me that companies just all of a sudden say, "Oh wow, look at dollar Canada's at 140 or 145 or 150, let's go put a bunch of factories back in Canada." It could be that you have the weakening currency, which obviously has long-term effects on your business investment because we buy a lot of machinery and equipment from the US, we get a lot of intellectual property from the US and even Europe. There's still some we buy, but let's just focus on our biggest trading partner. And so the stabilizer mechanism is supposed to work, that's supposed to bring more, make it cheaper to produce goods in your country. And this time around I worry that actually doesn't come back. And so we have the worst of both worlds in that case and obviously that's a major concern about the Canadian economy.

Ben Reitzes:

So one thing that I can't remember who mentioned it to me very recently, man, I forget a lot of things, this is not good. They highlighted that where we might benefit more from a weaker currency is on the services trade side. I mean would've been a few years ago if you looked at the pay for, I think the FT had an article, the pay for tech workers in Canada versus the US. And Canada was much, much cheaper. And so if you were to push the currency that much further, you'd get more impetus from those companies to hire in Canada just on the back of a cheap Canadian dollar. The issue there is you don't really get any lasting impact and unless you create some kind of tech cluster or some intellectual property that comes out of that, some of those people start companies in Canada, you don't get anything out of it.

So you don't get the same longer-term benefit on the productivity side, lasting investment, you don't get that. And so I echo your concern there pretty meaningfully unfortunately. Another challenge for Canada, I mean Canada should rise to the occasion. Policymakers need to put their big boy pants on and understand that in order to compete with the US and other global economies, you need to be better than they are, not just the same. So that means better tax policy, that means more efficient tax policy, that means more efficient government spending. Do your best to make your cities more efficient, improve traffic, improve standard of living, make people want to work here, make good people want to come to Canada, make smart people want to come and live and work in Canada. And that's not the way we run policy at the moment. I'm not really sure how we do things.

Matthew Baird:

As a proud Canadian, I'll just say this is a fantastic country to live in, but our policy from the top of the house is extremely reactive. Everything you just said, we seem to react even as recently as this trip to Mar-a-Lago, which is getting way too much press time. We are reactive. We don't take things seriously until they're at the forefront. And then we come up with reactive policies like the recent tax holiday buy vote package that's been floated out there.

Ben Reitzes:

You said it, I didn't, but I mean I wouldn't even necessarily blame it entirely on this government. You can go back to prior governments, and tax policies generally not driven by what is most productive. There's been subsidies for decades on all sorts of different industries, it doesn't matter what they are. That is not the right type of policy. That's not how you advance productivity. That's not how you let the market choose what industries should succeed and what shouldn't. And this is, I mean you can blame the current government, sure, but this is a long-standing problem and that's one of the reasons why I've consistently said you want to revamp the entire tax code.

I mean it's not a one-day project. This is a multi-month, multi-year, more likely than not project that they should push forward. And let's touch on the Fed a bit, change topics just for a second here because I think it has a big impact on the Bank of Canada. When the bank went 50 in October, the Fed had just gone 50 in September, since then the Fed's gone 25 and the December meeting is looking somewhat of a... I mean its price is kind of a toss-up. A little more skewed to 25. It looks like the blue 25.

Matthew Baird:

I had 17, for what it's worth, I glanced that before I came in here, it was 17.

Ben Reitzes:

Sixty-plus percent.

Matthew Baird:

Yeah.

Ben Reitzes:

So yeah, so leaning toward a 25 BAP move, which is fine and it looks that way unless you get a monster payroll number again. But if the feds going 25 and considering pausing in the relatively near future, should the bank be looking at going 50? Because once you equal 50, I mean unless you are somehow magically doing a hawkish 50 basis point cut and I don't understand how those words come together, you're pricing at least 25 for the next meeting. And you might even be pricing like 40 or 30, well 50/50 I guess, 30 plus for the January meeting and then the Fed might be pausing and Canada US spreads are, I don't know, yeah, 150.

Matthew Baird:

You're making great points here. We should discuss the Fed and then Canada US spreads, which is a topic near and dear to your heart and my heart, which may speak to our social lives, we spend so much time on that. But the Fed, yeah, look, I going to state the obvious, payrolls on Friday are definitely going to matter. There should be some catch up from previous months. Distortions, distortion, distortions, I think optics and inertia combine to keep them at 25 basis points, they'll take it. I also think there's an element of politics there. You have an incoming administration, you are on a path to cut 25, you probably don't want to rock the boat. You're not bowing down to the new administration, but you're being consistent, which is probably something the Fed wants to show that they are whoever was going to get in the White House for the next four years.

Yeah, look, I absolutely think the three pillars in the US that are keeping that economy strong. We've talked at length about fiscal already, the jobs market there, you've seen a moderation. Unemployment rates take up a little small amount on the participation rate is just sticking around where it has been over the last little while, goes down .1, .2. Wages are staying relatively high. Then you have housing. That's kind of the third one. So you have US fiscal, the job market and housing. And housing is just kind of a technical setup there. They've got similar supply problems to what we have in Canada. Mortgages, most people have mortgages. I think BMO economics put out a grade chart a while ago that most people, 90% of mortgage holders there are under 4% effective on mortgages. So I mean I think if you pull it up on Bloomberg right now or walk into your local bank there, you're probably getting something with a six handle.

So leverage is working, the price of your house is going up. There's a wealth effect there. There's a wealth effect from stocks. So job market hasn't cracked. Your government's spending money and your housing market and stock market are going up. It's kind of a nice cocktail to keep things moving in the right direction and hence tempering where that neutral rate is from the Fed. So the federal cut 25, it's the path of least resistance, but the bank is going 50 in that light now that they know the cadence of the US and they've seen, to use a poker term, the turn of the US economy, the 50 seems out of place. It seems a little tone-deaf, especially with some of the things we described around... Well, the one thing we actually didn't describe around resilience in the Canadian economy is the sort of signs of life or the green shoots and housing. And I know you and the team at BMO economics have probably spent a little bit more time on that, but it's not like animal spirits have totally come back to that market.

Ben Reitzes:

Not quite. It's stabilized, it's perking up. The risk is of a much sharper increase at the turn of the year. When the mortgage insurance rules change, there is the potential for a fair amount of demand to just be unleashed pretty quickly actually. So I don't even think it'll be in the spring necessarily. It could be before that. It kind of depends on what the supply side looks like, but effectively when you allow people to purchase more expensive houses with lower down payments, that generally means more demand and the Bank of Canada is warned about this, so that's another reason for them to be a little bit more cautious for sure. One last point I'm going to make before I'm going to ask you for your favorite trade ideas because we're running up on time here, the neutral rate, you mentioned the US neutral rate being maybe slightly higher.

One of the arguments that the 50 basis point camp likes to make is that they believe the Bank of Canada wants to get to neutral in a hurry. And so cutting 50 basis points will get you there faster. The bank is, I mean they've published their neutral range. It is 225 to 325, 2.25% to 3.25%. That is their long-term neutral range though. And they've noted that a number of times over the past few months. And one of the things that Governor Macklem said about six weeks ago or so is that we will discover the neutral rate as we go. And so cutting aggressively to a rate where you don't know where it is doesn't make a whole lot of sense, at least not to this guy. So why don't I leave it there. And, Matt, what are your favorite trade ideas right now going into 2025? And this might be the last podcast of the year. I'm not sure yet, I haven't decided, but if it is, it effectively is your 2025 ideas. Otherwise, I'll do another one with all of my 2025 preview, but we'll see.

Matthew Baird:

Okay.

Ben Reitzes:

No pressure.

Matthew Baird:

No pressure. Yeah, so I think one that you and I have talked about and we've talked about this with clients is fives on the curve. Unfortunately I think it's become a bit more consensus, but if you believe in a combination of things. If you believe that the neutral rate is not as low as what's being priced in the market right now. If you believe that the housing market can pick up into the spring, you and I were discussing those charts recently on mortgage origination and its correlation with fives on the curve with a bit of a lag. Its correlation with five-year swap spreads that argues that if the animal spirits do come back a little bit into the housing market, the neutral rate goes up a little bit. And we didn't chat a lot about Canada US, but if our neutral rate is getting fully priced to be 90 through the US, I looked a chart today and in cutting cycles, we've always ended sort of plus 25 to 50 versus the US when it's all said and done.

There's some technicals in there, they go to zero and they have a range and sometimes we have just an overnight rate, but generally we end in the same spot plus or minus 20 basis points and usually we're higher than them on the overnight rate. So if you take history, some of the technical factors that could come through in housing and some of the resiliency in the data also and just what's priced fives on the curve still have room to cheapen. On a yearly chart, they look like they've had a massive move. On a five-year chart, they look like they have more room to run. I think Buckley mentioned them in one of his latest podcasts with you. So I don't think I'm saying anything too profound there. Canada US is another one and there's a lot of the same logic that I just talked about for fives on the curve.

There's two things on Canada US, we've talked about some of the reasons why it's here in terms of the fundamental data. Obviously, Dec 1, Dec 2 is a well-publicized phenomenon and that a lot of money coupon and maturity money rolled into Canada, the tariffs aren't helping. I think one thing that hasn't been mentioned there is just positioning, and we've done a little bit of work on some of the flows in futures there. And it's fairly obvious to us at least that the market has a short position on Canada US. It's in futures, which implies it's a leverage position and I think that explains a lot of why Canada has had a hard time selling off cross marketing to the US because some of the leverage money has maybe had this on decides they're going to cut out of the trade.

So a five basis point cross market move, like we had five basis points become the norm. Cross market on daily moves have covered those positions. At the same time when Canada gets stretched and when it has into DEES 1, DEES 2, when it has a big move the other way where it tightens versus the US, I think we got to negative 115. We've flirted in tens, we've flirted with negative 130 in longs. When it does tighten, there's not a lot of ammo to push back against that. And so that's one of the technical factors that's keeping Canada rich. I do think that the divergence trade event does work. A lot of bad news is priced into Canada, but it may have one more technical flush out before we get there. So if you're thinking about doing Canada-US just be a little bit tactical with it.

Ben Reitzes:

I agree on both. So one on the 5s on the curve, one thing I just note for very near term, if we get bank issuance, like Canadian bank issuance in the market tends to be in fives, which is that part of the curve might give you a good opportunity to get short fives on the curve.

Matthew Baird:

Yeah.

Ben Reitzes:

That's one, tactically there's a good opportunity. Two, yes, I like being short Canada US in tens, in particular I wouldn't mind seeing a washout on positioning. I suspect the bigger move doesn't come until the new fiscal year, so April 1 or maybe in the lead up to that when provincial issuance is really going to start to ramp up again because they're in great shape now. Provincial spreads are tight now they're going to stay tight for at least another couple months, but issuance is coming back. Make no mistake, they still need money next year, but it's not going to start till April. That's when it's going to come fast and furious again. And so at that point Canada has probably a meaningful amount of room to cheapen up.

The other thing I'll mention, and I'm sure I'll mention it again if you haven't already heard this from me is tens, thirties in Canada. It steepens almost always in January. Go back 20 years, I think it's steepened every time, but three or four. So I think 16 out of 20 perhaps maybe 17. And it's pretty consistent there. And if you look, consider levels that we're at five-ish, six basis points, today it is Wednesday afternoon nearing five o'clock. Now you don't have a lot of downside and so your risk-reward's got to be two to three to one. I mean it can easily get into the teens. I don't think that's a high hurdle. 20 might be a little more challenging, but still looking at two to one risk-reward, I think that's generally a pretty good trade.

Matthew Baird:

Maybe you get that on if the BOC ends up only doing the 25 and the 12 basis points gets kind of washed out of the front-

Ben Reitzes:

Looking more attractive.

Matthew Baird:

... and the curve flattens a little bit, then you probably have your opportunity to get that on next week.

Ben Reitzes:

I like it. I like it. Matt, thanks for coming on the show.

Matthew Baird:

Thanks for having me.

Ben Reitzes:

Really appreciate it.

Matthew Baird:

I can't wait to be back.

Ben Reitzes:

We'll have to fly you back in for the next time.

Matthew Baird:

Thank you very much.

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:

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