Coming up on Wednesday 21 April the Bank of Canada monetary policy announcement, due at 1400 GMT
Goldman Sachs are looking for a likely taper announcement and an upgraded economic outlook:
We expect the Bank of Canada s Governing Council to announce tapering of its sovereign bond purchase program
- Recent firm data and the Bank's growing share of the sovereign market have raised our conviction in this view, though we expect the taper to be gradual, starting with an initial $1 bn reduction in the weekly pace of buying (to $3bn/week). We have highlighted previously that much of the BoC's ownership of government bonds is concentrated in shorter maturity sectors (in particular the 1-5y part of the curve; see here), and we still anticipate any market reaction will be most visible in these sectors.
The bank will also incorporate significant positive economic developments into its MPR projections, which we expect could sustain pricing in the front-belly of the curve.
- Even though the magnitude of hikes priced through end 2023 looks somewhat excessive in our view, the recent outperformance in vaccination timeline, our anticipation of continued strength in economic data, as well relatively hawkish developments at the BoC meeting ... could sustain front-end pricing at least in the near-term.