BOC: Deputy Gov Rogers: Balance Sheet Plans Remain "On Track"
Deputy Gov Rogers says that the BOC's plan to restart purchases of Treasury bills in Q4 remains "on track": "Our plan hasn't changed, and if it changes, we would provide advance notice. We would be very transparent and upfront about that. But the plan that that Deputy Governor Gravelle laid out some months ago remains on track, and we're getting pretty close to the end of normalizing our balance sheet. So everything remains on track."
- Recall Gravelle said back in January in laying out the BOC's post-QT plans: "T-bill purchases will take place in the primary market. We expect them to resume in the fourth quarter of this year, initially with relatively small amounts through each bi-weekly GoC debt auction. GoC bond purchases will likely not start until toward the end of 2026—at the earliest. But, as we get closer to purchasing bonds, we will announce the timing well in advance."
And responding to the final question of the press conference about whether the BOC still thinks Canada will avoid a recession in 2025, Gov Macklem notes the 1.6% Q/Q SAAR contraction in Q2 and with the MPR's +0.5% projection for Q3,
- "you can't rule out that there could be a small negative, so, yes, we could get two negative quarters. That's not our forecast. We're forecasting modest growth, but we could get a couple of negative quarters, I guess... what we're not forecasting is a sharp downdraft in the Canadian economy with a big rise in the unemployment rate, which is what is typical of recessions."
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US: Jeffries And White House Dig In Ahead Of Trump Govt Shutdown Meeting
House Minority Leader Hakeem Jeffries (D-NY) implied to reporters, ahead of a crucial (15:00ET) White House meeting with Senate Minority Leader Chuck Schumer (D-NY), President Donald Trump and Republican leaders, that Democrats will not support the House-passed 'clean' Continuing Resolution, even if Trump and Republicans offer concessions on Affordable Care Act (Obamacare) subsidies.
- Jeffries: “Our position ... is a permanent extension of the Affordable Care Act tax credits. enough with the games that Republicans have been playing.”
- Jeffries added, “Republicans know they don’t have the high ground. They have a weak position… If the government shuts down, it’s because Republicans want to shut the government down.”
- Jeffries left the door open to negotiations, “We are willing to find a bipartisan path forward. It has to help everyday Americans. Not hurt everyday Americans… What we will not do is support a partisan Republican spending bill.”
- White House Press Secretary Karoline Leavitt told Fox News a short time ago, “The leverage is in the president's hands because the overwhelming majority of the American public wants to keep the government open. I mean, it's not even close.”
- Jeffries's comments are consistent with a hardline position from House Democrats throughout the funding process. Any Democrat concession will ultimately have to come from Schumer, whose votes will determine if the government stays open on October 1. If Trump offers any concessions on Obamacare, we expect Schumer to make a deal both sides can tout as a win.
OPTIONS: Expiries for Sep30 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.1600-05(E2.4bln), $1.1695-00(E1.8bln), $1.1725(E528mln), $1.1775(E715mln), $1.1800(E1.8bln), $1.1825-30(E850mln), $1.1850(E878mln)
- USD/JPY: Y148.00($827mln), Y149.00-15($755mln)
- AUD/USD: $0.6595-00(A$1.3bln)
- NZD/USD: $0.5785(N$1.0bln)
SOFR OPTIONS: Midmorning Option Update
Underlying futures remain higher/near highs as focus turns to US Gov shutdown (Tuesday at midnight if funding deal not reached), curves flatter. Projected rate cut pricing gaining slightly vs. late Friday levels (*): Oct'25 at -22.7bp (-22.4bp), Dec'25 at -41.2bp (-40.5bp), Jan'26 at -50.7bp (-49.9bp), Mar'26 at -60.6bp (-59.9bp).
- +10,000 SFRH6 96.50/96.68/96.87/97.06 call condors, 3.75
- +5,000 SFRZ5 96.56/96.68 call spds 0.75 ref 96.275
- +3,500 SFRZ5 97.50/98.00 call spds .25 ref 96.295
- Update, 26,000 SFRZ5 95.87 puts, cab (huge open interest at 603,823 coming into the session)
