Spreads one factor look at

Canada sold nearly $4 billion of 5-year notes today at 1.486% so it's a good time to look at how US-Canada spreads have developed.

They've narrowed dramatically in the past month as the Bank of Canada surprised markets with strong hints at rate hikes. The spread is now just under 50 bps compared to almost 90 bps in early May.

Still, the gap puts it back at about the same levels as Q3 2016. In that period, USD/CAD traded in a 1.2750 to 1.3250 range. With USD/CAD at 1.3000 today, it's right in the middle of that range.

Two-year and 10-year spreads tell a similar story.