Global Macro Commentary: June 10: Markets Reprice Risk

Research evidence excerpt

Global Macro Commentary: June 10: Markets Reprice Risk

UpdateMCAD unable to sustain support from oil as the central bank emphasized weak

domestic activity.

• Canadian markets outperformed in rates after the BoC held policy steady

and delivered a dovish-leaning message. The 10y Canada yield rose only

0.8bp, lagging the broader US sell-off, while two-year Canadian yields fell

intraday after Governor Macklem described the economy as weak. The BoC

kept the overnight rate at 2.25% for a fifth consecutive meeting and

emphasized that the economy remained in excess supply. The statement

framed the policy outlook as a two-sided dilemma, with weak activity

pushing against energy-related inflation pressure from the Middle East

conflict. CAD briefly gained after the softer US core CPI print but pared gains

as the broader USD recovered. Options markets showed rising demand to

hedge against CAD weakness, consistent with concern that BoC policy would

remain more constrained than the Fed.

• JGBs opened cheaper up to the 10y sector in the Tokyo morning session,

as renewed US–Iran tensions drove risk-off sentiment and May PPI came

in above economist consensus. Meanwhile, super-long JGBs remained

relatively supported even ahead of the 30y auction, resulting in a flattening

move. The auction came in weaker than expected, with a cut-off price of

97.40 (C: 97.65) and the lowest bid-to-cover ratio since June 2025 at 2.94x,

reflecting cautious demand following the pre-auction flattening move.

Ultimately, JGB curve twist flattened; 5y JGB sold off by 1.0bp to 1.935%, 10y

JGB sold off by 1.5bp to 2.68%, 30y JGB rallied by 1.5bp to 3.85% on a simple

yield basis.

• Rates in the euro area closed the day at higher, with the move

concentrated in the second half of the session following President