In this episode of Curve Your Enthusiasm, Ian is joined by Brendan Donaher, Executive Director STIRT trading. The show begins by discussing the recent U.S. jobs report, and the implications to the perception of economic data going forward and how that should affect the bond market. Brenden discusses how FOMC pricing has evolved, and his favorite trades. The duo begin to discuss what Fed pricing means for BoC pricing, rightly noting how cheap CAD front-end valuations are. Brenden provides his view on what pension hedging means for Canadian cross-currency basis swaps, while also highlighting key themes in global funding markets. The show ends with a discussion on the BoC’s balance sheet, and which trades Ian and Brenden think offer the most attractive opportunities at present.
Intro: Very high level, know, the idea of pension shifting is a very slow moving type of trade. It's glacial. It's glacial and anecdotally, you know, in our flow data and things like that, we haven't seen a ton of pickup on it. But at its core, the correlation between dollars and SPUs and risk overall is kind of reverted back to a non scary place for pensions.
Ian Pollick: Welcome back to another episode of Curve Your Enthusiasm. I had this big speech ready to go, why we haven't been on the air that much recently. But, you're busy, I'm busy, life is busy. But there's a lot of things to talk about. The point is that we've been gone too long – which is a great Allman Brothers song, by the way – and I think a lot of the themes that we were talking about the last time the show was on, which was really about this idea of a stable disequilibrium. And none of those conditions have really changed. I'm joined today by Brenden Donaher, Executive Director on our STIR Trading Desk. Brendan, how you doing?
Brenden Donaher: Good man, good. Glad we were already doing this this week, not last week.
Ian Pollick: We had originally decided to record this last week for release last Friday, and I'm glad we didn't because obviously we got a lot of information. And I guess that's as good as any a place to start talking today. The jobs numbers, they weren't good in the US. When I look at the jobs report, what I see is private payrolls that are now averaging around 35,000 a month. That's the lowest since 2010. Private payrolls, excluding healthcare workers, is now negative around 20,000. And, the thing that strikes me is that, obviously the market had a big reaction, rightly so. But what the Fed cares about is labour market slack, not necessarily the pace of payroll growth. And so the question is, you've had this really strange environment where after the revisions, payrolls seem to be trending lower, but that unemployment rate's been relatively stable. Now you went from 4.1 to 4.2. And so I think the question is what's going on. A cursory look at the data, what it shows me is that you have a lot of marginally detached workers in the U.S. It's largely led by younger students or younger workers. And so the stock of people in the United States that want to work, that can't find a job is growing. And I think that's something the Fed's obviously going to tee up on that obviously increases the odds for September. So I guess as a starting point, how were you thinking about, number one, the move that we saw on Friday, i.e. what would you characterize it as? Was it just positioning? Was it something more intuitive than that? And let's just talk about some opportunities you see on the curve.
Brenden Donaher: Sure. I mean, I think the starting point is the narrative is shifting, right? That was kind of the first time you've seen this weakness really come in in the last while for the US side of things, and it was obviously a large scale reaction. And I think it was a mix of A) positioning. You had, earlier in the week, Powell kind of downplay the whole characterization of the economy from a negative standpoint, and kind of talk up the hawkishness, which I think caught people offside earlier in the week. And then you had this reversal now the other way, where a lot of people who have been, looking for these cuts and talking about that weakness coming through got that kind of first satisfaction. Now, the interesting part, if you actually look at the price action, I think positioning was a little wrong footed in the sense that it was not just the scope of the rally, but the velocity of it as well. And it was interesting at one point in time, you actually had intermeeting cuts priced all while September wasn't even pricing a full cut. And we still don't have the September cut fully priced. The interesting part for pricing now is that you're at a point where, 22-ish in September, it could be a 50, you could get stronger jobs, it could go back to zero. So it's really hard to trade that at rate meeting now, which I know we'll get to some trades in a bit. But given the allocation of cuts now kind of further out the curve and a little more evenly distributed, it does tell me that people are just putting that dovish bias really back in the whole curve. And reds did lead the rally, so I think, people want twos, they want that kind of belly performance, so to speak and that still makes a lot of sense to me. Adding cuts versus more so kind of changing the allocation.
Ian Pollick: So let's just talk about that. So would you characterize the move in SOFRS on Friday, it didn't look like we actually net added any cuts just looked like we shifted some out of 26 into 25. And so would your expectation be that we are now basically flat to the dots over the balance of the year, i.e. just two cuts is now the minimum?
Brenden Donaher: I think so, right? And I mean, as I said, you know you could get another week, you could get that 50 in September, but outright having kind of 60 for the year in 25 is not crazy, and I think that makes some sense. So you're kind of floored at two with the risk of one more. And then, additional weakness, I think, will just shape more cuts further in the future in 26.
Ian Pollick: So let's just talk about what this means more generally, right? Obviously, this is a narrative changer. Powell talked about one of the vulnerabilities being the labour market and the risk is that that got breached and that would obviously force them to cut rates. But if you're talking about a world where the labor market is a proxy for the supply side of the economy and it looks like there's more slack in the labour market, which effectively means that your output gap is potentially getting bigger. Do you think the race market is less sensitive to inflation and fiscal dynamics than it was on Thursday, i.e. very similar Canadian problem, right? Like huge amount of slack, somewhat accelerating inflation, not really evident in the level of yields and the sensitivity to that inflation is much more limited. Do you think that happens in the US right now?
Brenden Donaher: I think it has to. I think in a large part, the Fed is kind of giving you the playbook for a while now. Employment's been their piece. And the other side of it is, we talked a little bit this morning at the desk, but the way in which inflation filters through from tariffs and whatnot and all the kind of changing rhetoric of that stuff and the changing policy on that. You don't have a clear shot of inflation right now, right? So I think from a employment standpoint, that's still going be the Fed's stickier or more important of the two goals. And that's the first part you're seeing the weakness in. So as that develops and comes through, I think that's going to take much more precedent over the inflation commentary that we've had. That's been the reason not to cut and you've had good jobs, but now, as jobs weaken, that's going to be the material part to me.
Ian Pollick: So I'll just say it to you, I don't want to spend time talking about the removal of the BLS chief. I'll just say that, the sanctity of these economic institutions, they're sacrosanct, right? And so I wonder what happens when you get over the threshold where the data starts to turn better. There's a new person there. I wonder what that sensitivity looks like. The other thing I'll say on this is, to finish this thought and conclude it, is that the response rate of the NFP that we just had was very low. It was like 58%. And that compares to average run rate of, let's call it, 75%. So I think there's a very, very big probability that we do get a material revision next month as well. Directionally, I don't know. I think there's a lot of noise here. And usually when we have this, it's small businesses that are very slow to respond. And so I have to assume that the smaller businesses are the ones being more hurt right now. Anyways, let's just move away from this for a second and let's bring it back to Canada. Obviously we had the bank last week as well. They reinserted this language talking about the potential to ease based on a certain set of conditions, which hasn't been in the statement for the past two cycles. And that was on purpose. And it was by design. And so while I tend to think of less rather than more for the Bank of Canada, I can't help but look at what they said and take it seriously that they are considering another cut. And so let's just start off talking about what is your expectation for the bank?
Brenden Donaher: So I'll say, price action aside, I think with the BOC I'm still in the camp that we're closer to done than not. I will say we have had some weakening of the statement overall in the press conference was more on the dover side, I think, than the company would have priced. But I think the important thing to separate is the price action in Canada from the risk reward and where we're kind of aligned for things right now is very much was a positioning story. So while I think the BOC is likely, kind of more or less done. Maybe you get one more, maybe not, like we're kind of playing for small margins here. The reality is, everyone was already kind of long on Canada and that's why we haven't seen that performance. And I think expectation aside from a risk work perspective, we're still very cheap, right? Which, we'll talk about some more specific trades later on I think, but they did tee up the openness to go again. And I think you have to respect that.
Ian Pollick: Well, that's the thing. We went through a period of like three weeks where we just could not rally because everyone was very long. And then we got – I don’t remember what data point it was – I think it was the CPI report. Was it the CPI report?
Brenden Donaher: It was CPI and jobs, it was the back to back.
Ian Pollick: CPI and JIBs. And all of a sudden, you couldn't sustain a rally. And now I think positioning is a bit cleaner. I look at our own indicators and, you've had this reversal of shorts and reds and longs and whites. And so the thing that I'm torn with, the official call here at CIBC is that the bank is not done, that there's two more cuts. I believe economics has one in September, one in December. September feels a bit early, to be honest with you. The latest GDP data is tracking considerably better, but there is some slippage between the monthlies and the quarterlies. Fine. We got the export data yesterday and it shows the bank was absolutely right. Exports are now, let's call it, 20 % weaker than they were in Q1. And so there's evidence that there's a lot of tariff front running here. And then I think overall what this shows is that their estimated output gap got wider and therefore their concern about inflation is less. But the bank can and will not stop out of its pause for one interest rate cut. Even in their models, whether it's totem or lens, I don't even think a 25 basis point hike or cut moves anything in these models. And so, for them to deliver something, we have to believe that it's not just one. And so this is where I struggle with – does the Canadian economy need two, three, four more interest rate cuts? I'm not convinced that it does. And so when I look at market pricing, what I see is exactly to your point. There's an inexpensive area of the curve. Let's call it Z-5, H-6. And I think those are going to be very sensitive to Fed pricing. And so it's like, do you really need even the bank to deliver a cut for these trades to work?
Brenden Donaher: No, you don't. And that's the whole thing, right? Like when you actually think about the BOC's path, I don't think the data set changes any of the path that we've already kind of laid out from their side of things. What it comes down to is it's a cheap option on, to your point, A, they're probably going to go more than once if they go again, and B, from a cross market perspective, we're starting to get quite cheap again, right? A lot of that kind of global slowdown narrative could come back into Canada. And if you think about why the BOC did their last two cuts, a lot of it was coming from the global rhetoric, right? And I remember right before the first, the pause, I think when you're still kind of priced for a cut, a lot of the commentary from the street as well was that, BOC is going to go one more time because of that global uncertainty, right? Now, the thing that makes it a little harder is we don't have an idea of fiscal yet. We don't have the strong timelines on when that actually will come to fruition and what that will look like. So there's still lot of uncertainty on both sides of the border. And it does make the BOC's path more complicated, but for where we are right now in terms of pricing, for 20 in the year –
Ian Pollick: It's skinny.
Brenden Donaher: It's very, it's still very asymmetric, I think, right? Now, I will preface it with, I was probably one of the biggest CAD duration bearers, you know, for a long time and I've kind of been in the no cut camp for a while. But just, absent my view trading the risk reward, I think it's a, it's a very asymmetric outcome still.
Ian Pollick: I love seeing you walk across the floor. It makes me so happy. But on something you've said, you know, it does seem like given when the debt management strategy consultations are now scheduled for, that we are likely getting a budget much later than people thought. So it sounds like it's late October, early November. And that's just around the time a normal fall economic statement would be released. Okay, so let me ask you this. US curve, SOFR curve, in a Fed cutting led rally, what does that curve do? Is it flatteners or is it steep in white threads?
Brenden Donaher: I still think you can flatten white threads. I think there's still a lot of potential for deeper cuts and lower terminals. While it's not my base case of outcome, I still think from a directional standpoint, that's how the market's going to trade it. I think, especially once you get through early 26 and Powell's done his term, you do see premium for that kind of, we call it the Powell premium or the post Powell premium, but you still have a lot of capacity to cut post Powell. So I think I am biased to be basically long reds, short fives, in that kind of a steepener. But I think for me, any expression of long duration in the U.S, reds still scream a little cheap to me.
Ian Pollick: OK, so let's say you get whites, reds flat in the US on a policy induced move. What's the equivalent in Canada? Is it whites, reds steepening?
Brenden Donaher: I think, you know, given where the early cutters are from a location standpoint and, Canada and Europe have very similar curves right now, it's the same story. I think from a Canadian perspective, as we're approaching the end of it, you're likely to see most of that come into Z-5, H-6 as we've talked about. And your last couple of cuts are going to live inside of early 26th the latest, I think. I find it very hard for the BOC to go down halfway through 26, not doing anything and then start cutting once again. Obviously things could change, but if the BOC's likely to cut again, I think it's going to be much more front-loaded than the Fed.
Ian Pollick: Well, it's super interesting. And you know I've talked about this a lot, but we are now in a world where you have your early cutters, i.e. Europe and Canada, your curves are effectively almost exactly the same, right? Like Z-5, Z-6, H-6, H-7, like you can do almost any serial and you're within three, four basis points of each other. Against that, you have the late cutters. So you have the UK and you have the US. And so is there any trade between the early cutters leading the hiking cycle that you think needs to be faded? Because I don't mind the cheapness that I see in late data reds like H-7. I think that steepness persists, but I'm curious to hear your thoughts.
Brenden Donaher: I think the reality is that, looking at Canada and Europe as examples and I'll focus more on Canada, but we can live with hikes in the curve. And that's something that we've seen on both sides of the cycle where you've had cuts priced for still hiking and now you've had hikes priced for still cutting or potentially cutting. And I don't think that shape is wrong. I know we talked about last week and you put a piece out talking about kind of trading the hikes in Canada. This data does obviously soften some of that rhetoric a bit, but from a directional standpoint, I just think that whites and early reds in Canada at least can absorb a lot more of the easing and you could get a steepener in both directions. I think given that we only have 20 some odd price in the whites in Canada, any good data is going to have to be allocated somewhere else. That's a duration.
Ian Pollick: And it's not coming into whites.
Brenden Donaher: No. It's like you may be priced at another 10 bps, but at that point, the rest of that duration move has to absorb further down the curve in my mind. And then you just talk about higher terminals and hikes eventually.
Ian Pollick: Okay. So let's, let's go even shorter than short. Let's talk about cross currency for a second. And so what we have seen recently is like, look at yen basis, it is just tightened very aggressively. Three month course over hasn't really done anything actually. It's been very static, but at the margin it's tightened as well. Thematically, what's going on?
Brenden Donaher: So there's been I think – high level, you go back a few weeks – a lot of the world was in the kind of US dollar funding premium trades and talking about there's been a lot of discussion of a CAD cross currency widening just on the back of dollar stress over year end and specific to December things like that. We've never been a big buyer of that view overall. Overall, I think dollar premiums as a whole continue to be faded. And I think we've gone through a month end with really no fanfare whatsoever. So positioning wise, a lot of receives in Canadian cross currency. That's been the one thing where it's historically been a good carry trade, it’s a theoretical kind of risk off trade. So you're kind of paid to have that protection. But at these levels, it's kind of very meh, is the short answer. What I would say is from a directional standpoint, I still like buying backups. I still rather pay front end basis into month end. You get month end rolls, people coming through selling cross currency and that's a good opportunity to pay it I think. At these levels, three months out like 14, it's very mid-rangey.
Ian Pollick: I mean, I would say though that you are in a time now where you're within this kind TGA rebuild. Historically, a very large supply of US bills in net terms has actually widened the basis quite a bit because the pickup in CAD front end product looks very attractive.
Brenden Donaher: It has, but there's also mechanical nature to it. When you actually look at SOFR Fed funds, it's absorbed a lot of that move. So if you actually look at your cross currency OAS on a Fed funds basis, we're at relatively wide levels already.
Ian Pollick: That wasn't the case like two months ago.
Brenden Donaher: Exactly. And I think that's the thing is a lot of that pricing has been absorbed on the SOFR side of things. CAD cross currency looks kind of tight on all has been equal, the overall move in the funding premiums has really been kind of distributed more on the dollar side, which I think is kind of right way to think about it and frame it. So at these levels, I don't think it's a massive receive by any stretch.
Ian Pollick: Okay. Okay, And let's just talk about one more thing. I mean, obviously this idea that it has been reduced, but de-dollarization, hedge ratios are very, low, asset managers generally have very low hedge ratios. And there was this idea that whether you repatriated assets or you just wanted to hedge out your effects risk, it would move cross-currency left. You were never a big believer of this. Walk me through this.
Brenden Donaher: Very high level, the idea of pension shifting is a very slow moving type of trade.
Ian Pollick: It's glacial
Brenden Donaher: It's glacial and anecdotally, you know, in our flow data and things like that, we haven't seen a ton of pickup on it. But at its core, the correlation between dollars and SPUs and risk overall is kind of reverted back to a non scary place for pensions.
Ian Pollick: You're not where you were on April 3rd.
Brenden Donaher: Yes. Now, the de-dollarization story is a bit of a different theme overall in terms of if assets come back to Canada and become re-domesticated, but that's an even slower fuse and in reality, there's nothing to invest in Canada. So that won't happen anytime soon. From a purely–
Ian Pollick: You mean private markets? Because public markets, is a growing bucket of supply. But private is what you're actually talking about.
Brenden Donaher: And I think that you're just going see more global asset investing still on that side of things from the pensions. But the reality is that these are A) slow moving decisions and B) BOT is really the core risk you're trying to hedge. So in terms of any thematic flows, you'd have to actually look at that market more than the forwards market and move basis. So I think you have seen some selling, you've seen some downside structures and things of that nature, but with correlations now reverting and the velocity of which these things happen, I just, I don't think anything's materially coming to the market and I'm not expecting it to, in the near future.
Ian Pollick: Yeah, risk reversals, cat risk reversals were pricing in this crazy scenario that doesn't actually seem to be the case from a full perspective. Okay, let's move on. I just wanted to bring that up very quickly. I think the other thing I'm getting a lot of questions on is we have a big September 1st maturity in Canada. When you look at the level of link settlement balances, we're getting to the point where we're in headline terms about to breach the top end of the range of the bank had cited as the lowest comfortable level of reserves. Remember that was 50 billion to 70 billion. Are you concerned at all with September 1st?
Brenden Donaher: The short answer is no. I think the pathway of reserves is somewhat laid out now and you've kind of seen, we had the August 1 maturity, so you had the LVTS come up by 12 billion-ish or so. I think we're at 85ish right now. That'll come out bill supply for the month in Canada is fairly stable between maturities and net new supply. So you're not going to see a big draw that way. And I think one thing that people have kind of got a little wrong with the Sept 1 is the BLC's forecast has a sharp drop on Sept 1, right? But as we've talked about before, it's a much different mechanical move where you end up with cash goes into the private side or into the public sector today, and then you end up with $25 billion that goes into the LVTS. And then over the course of the month, maturities will take that out.
Ian Pollick: Yeah. So let's just repeat that, because this is very important. The fact that our view is that reserves go up on September 1st, it's not an opinion. Ok, this is an identity. When a bond matures, reserves go up because coupons in principle paid to the private sector flow into the LVTS. It is only after the Bank of Canada on behalf of the Department of Finance issues bonds that it sucks that cash back out. Now, that's not going to happen until about the third week of September, but it is going to happen. And so, you can make the case that the Bank of in their kind of January speech, Gravelle laid out this world where they had to start doing something well ahead of September, while we're the start of August, nothing's been done other than these term RPOs that have very little demand. And so the obvious question is, do they start buying bills earlier than they had projected, which was the start of Q4? I'm a no, I don't think that they do because I think you can get to the start of October, you may be getting an announcement in the next few weeks, but I don't think they actually have to do anything until October.
Brenden Donaher: So I'm more or less in that camp as well. The one thing I wanted to ask you this is, we came out of the BSC speech and they were asked very directly of what are your plans for bill purchases? You've laid out the roadmap well before September, and they said no change in plans. So the two camps I've heard are, 1), well there's no change in plans. The plans were before September, but to your point, like it's August. We need some heads up here, right? So I took that to mean later bill purchases, closer towards the end of the year.
Ian Pollick: Uhhh, no, I think, I think you'll probably get them in October. Like you will breach the midpoint of that 50, 70 billion range, basically by the end of the year, by the end of this fiscal year, you're well below it. And I – depends how you look at it. Let's just talk about a very important reality. Receiver general balances are now funding 30 to 35 % of the CAD funding market. And so it's hard to ignore that completely. And when that speech was made, that wasn't a thing. RG balances didn't even start until later in Q1. And so if I look at the level of reserves and I strip out what's been injected by the RG, you're at like 40 yards, 45 yards. And so to risk temporary funding at this level of reserves, which hasn't been tested in this post QE world, I don't know. To me, that's a vulnerability. And funding, to be clear, has been very stable. And so the depo rate reduction, the RG, I guess to a lesser extent, these term RPOs, they seem to be doing their job. But is there convexity in this? Like, are you at all concerned about Quora, whether it's month and quarter end stripped out, that we are in an upward path if we're breaching a certain level of reserves?
Brenden Donaher: I think circling back to the step one point of it being concerned or not, I think the concern is a later problem, like you've laid out, and I think that's why it's not a day one type thing. But yeah, you're getting to a point where reserves are getting quite low and we're well below that lower band of their expectations. And they always kind of said, you know, like, step in and do stuff. The one thing I would kind of make a comment on as well is I think there's been some rhetoric that term RPOs will absorb some of the demand or the slack from the other side of it, but they're not as clean cut as that. I think the actual mechanics of the term RPOs make them less desirable than other sources.
Ian Pollick: Or are they just more like administratively intense?
Brenden Donaher: It's administratively intense. There's a cost to it. Collateral substitutions are difficult. So operationally, all these things are kind of making term RPOs a last resort. So I do think you can see some pressure build before those really get taken up. And one thing I would also say is, you look at cross currency, it's generally been a good barometer of, you know, anytime cross currency was a 10bps pick, it wasn't really interesting, but if you could do cross currency ARD per 15 basis points, you could bring CAD in that way. There was a period of time around the month where a lot of the kind of ARDs didn't make sense and we didn't see any kind of funding from those markets. That's now reverting a bit. So you can see some supply that way as well. So things are kind of circling through. But yeah, once you get to 40 billion, you should see some, I wouldn't say stress, but pressure for sure.
Ian Pollick: Some nonlinearities, right? It has to exert itself somewhere.
Brenden Donaher: And I think that could build more in the cross currency market.
Ian Pollick: Okay. And then we got to be cognizant of that in the rundown for stuff like September. Okay. So we're a bit long on the tooth here, but I want to talk about how to monetize some of these ideas. So what are your favorite trades right now?
Brenden Donaher: So I'd say just off the hop, CAD duration's easy, right. It's not as attractive as it was 10 bps ago, but we're still at a point where Z-5, H-6 just outright, you know, probably the right way to trade. Less convicted on cross market, just given our views on A), dislocation between Canada and the US and how these policies can diverge. So I'd say, long in those parts of the market. US side is like, it's difficult for me right now, because as I said, SEP could go to 50 or it could go to zero. I don't think it goes to zero, I think–
Ian Pollick: But why do you have a tattoo on your forehead that says, pay the rundown? I mean, is that not obvious?
Brenden Donaher: Well, the rundown is very easy, right? So, and that was the one thing. Any intermediating cuts should be faded. So I'm still a seller of those kind of expressions. And I think in general, you know, that was an easy trade. It's not really as exciting as it was, but fading intermediating cuts is a no brainer to me. And the other side of it is just in general, a lot of these dollar premium trades, I like fading. So you've seen so far Fed funds start to pick up. We've been a large buyer of those around minus seven in year end. If you look at the last few years of funding, we've normalized around minus four. So anything on the TGA rebuild kind of, scary story, that to me is the way to trade it. I still think the Fed will step in and intervene liquidity if needed. So I'm a fader of those liquidity premiums.
Ian Pollick: Do you see anything between the SEP dates and the non-SEP dates that's interesting?
Brenden Donaher: Not as much as it was, but still interesting. So we were talking to this before, going into the meeting or going to the data on Friday, I should say, we had a fairly decent kink between September, October and December. December had around minus 16 in it. September was basically priced out and then October was kind of minus 10 or 11. Those switches have now reverted to linearity, I would say. October still has two or three bps of richness to it relative to September and December. So I don't mind receiving October, either on the fly or kind of September October flattener.
Ian Pollick: So the SCP premiums are largely faded away?
Brenden Donaher: I think they should be because you're at a point where if the data – every meetings live right? So I like fading all those really.
Ian Pollick: I'd say for my part. I cannot help be very confused about reconciling this term premium rebuild in fives tens and dollars in a supply backdrop that looks very benign versus 2s5s, which is trading sub seven basis points as we enter to an easing cycle. And so, yes, these are very expensive trades to hold. I understand that. But I think your overall delta will more than compensate for your holding period costs. So like something like on a cross market basis, I think you have to have on 2s5s, steepening in dollars, flattening in CAD. I think you can to your earlier point, these hikes aren't necessarily going to move away from being priced in the curve. But when I look at like neutral proxies like three or two year, it's priced accurately kind of within 10 basis points above or below 3%. And so like something like H-7, to me still looks somewhat expensive in that world. And I think you get convergence. And so I don't mind 2s5s flattening in Canada versus two's five's steepening in the U.S. If it's just the U.S. trade, 2s5s10s, I think there cannot be a better macro trade to have on in dollars right now. And this last trade is a bit more controversial and I'll ask your opinion, but I cannot think that two year CAD spreads in your single digits are a sale?
Brenden Donaher: You don't think they're a sale?
Ian Pollick: I can't think how they're not a sale.
Brenden Donaher: Oh, they are a sale. So that's actually the one thing we haven't really touched on yet. But we've had a fairly aggressive run up in spreads overall, dollars as well. But yeah, high single digits in Canada, like they're a giant yours to me. And I think the shape of the curve is kind of reverted. So if you go back a couple of weeks, we had an interesting asset swap curve where you had one year bills that, let's call it plus 10. 18-month coupes were like plus 16 and two-year bonds were like 12. So, all while 2s5s are still flat. So you end up in the situation where all that off-the-run paper was very cheap and 2s were a little expensive, but now they're really rich and bright. You look at the two-year roll, you look at the benchmark bond and everything versus 2s is now reverted to a point where a lot of that curve is flattened out. You have one-year bills at plus 10, you have coupes at 12 and you have two-year bonds at 9. So that curve has kind of fixed itself. So now I think you're seeing it, unload your twos, lighten up on sheet and wait for better opportunity, right? We don't know fiscal yet. We don't have the full size of it, but I think people got very excited to buy the cash and you're at a point where I don't know how much value is actually left in those spreads.
Ian Pollick: Yeah. And the carry has obviously gotten worse than it was seven base points ago. Ok. That's it. You've heard from us. I hope everyone has a great shortened week. We're glad to be back. And remember there are no bonds harmed in the making of this podcast.
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