National Bank Sees Scope for Government of Canada Bond Outperformance Down The Curve Vs. U.S. Treasuries

Since the start of the Middle East conflict, five-year Government of Canada (GoC) bonds and United States Treasuries have moved largely in tandem -- selling off about 35 bps, including early Wednesday's rally, said National Bank of Canada.That's directionally consistent with year-end policy repricing -- where around 50bps of tighter policy is now baked in the U.S. and Canada, relative to the pre-war period, noted the bank.While that move can be justified, National Bank questioned the magnitude of such a move, especially from a cross-border perspective, where the Bank of Canada may have more capacity to remain patient with the overnight rate.As such, the bank sees scope for near-term GoC outperformance down the curve, which should extend into the intermediate, or roughly five-year period, terms as well.

-- Since the start of the Middle East conflict, five-year Government of Canada (GoC) bonds and United States Treasuries have moved largely in tandem -- selling off about 35 bps, including early Wednesday's rally, said National Bank of Canada.

That's directionally consistent with year-end policy repricing -- where around 50bps of tighter policy is now baked in the U.S. and Canada, relative to the pre-war period, noted the bank.

While that move can be justified, National Bank questioned the magnitude of such a move, especially from a cross-border perspective, where the Bank of Canada may have more capacity to remain patient with the overnight rate.

As such, the bank sees scope for near-term GoC outperformance down the curve, which should extend into the intermediate, or roughly five-year period, terms as well.