• Notes from the Desk | Time To Chill

Notes from the Desk | Time To Chill Sept 01 2023

Notes From the Desk – Time To Chill


Officials at the Bank of Canada (BoC) and Federal Reserve (Fed) will head into the long weekend with less concern that inflation is running away from them as today’s data points to a slowing North American economy.


By the numbers.



  • 2nd quarter GDP came in at  -0.2% (1.2% consensus), lower than the BoC’s 1.5% forecast
  • July’s flash estimate for GDP was flat, suggesting that Q3 is also likely to be weaker than the BoC’s 1.5% forecast




  • 187k jobs created vs 170k expected  (last two months of job growth revised lower by 110k)
  • Unemployment rate 3.8% vs 3.5% expected
  • Participation rate 62.8% vs 62.6% expected
  • Average Hourly Earnings growth 4.3% vs. 4.4% expected



Bank of Canada:  Higher rates continue to do their work in slowing economic activity.  The slight contraction in Q2 coupled with very weak growth in Q3 provides ample ammunition for the Bank of Canada to sit on its hands next week.   The odds are growing that the hiking cycle is finished.  The yield curve has steepened, with 2-year dropping ~8 bps and 10-year yields relatively unchanged.


Federal Reserve:  The US labour market is coming back into balance, providing ample ammunition for the doves to make a case for remaining on hold at the next meeting.  The US curve is steepening, with 2-year yields a couple of bps lower and 10-year rates a couple of bps higher.


Our Take.

Buy bonds, wear diamonds.

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