BOC: MNI BoC Preview-Jun 2026: Analysts Lean To 2026 Hold, 50bp Hikes In 2027

The lack of revision to Treasury's guidance on future nominal coupon size increases ("Based on current projected borrowing needs, Treasury anticipates maintaining nominal coupon and FRN auction sizes for at least the next several quarters") is likely to further push back expectations for the timing of the next size increase to well into 2027 if not beyond.

• This was probably the most closely-eyed portion of the refunding announcement, with some expectations that it would be revised to indicate a nearer-term upping of auction sizes, perhaps by removing the words "at least". Coming into the week, most analysts saw February 2027 as the base case for the next coupon upsizing with some having pushed back their expectations from November 2026 in recent months; with some seeing bigger coupon sizes as soon as November 2026 (Danske) with others only seeing changes much further out (Mizuho: FY 2029).
• The TBAC minutes for May's refunding also noted "Dealers generally anticipate that nominal coupon auction sizes might next increase in early CY2027, and expect Treasury to modify its forward guidance several quarters ahead of such a change".
• A revision in the guidance at this meeting is probably inconsistent with an upsizing in early 2027 (ie February), which is only 3 quarters away, so the base case probably shifts to May 2027.
• Since the announcement and its unchanged guidance, we've seen one analyst push back expectations (TD Securities now sees May 2027 having previously expected February 2027).
• MNI's central expectation had been either February or May 2027 and the latter is obviously looking more likely, particularly since we had (in a close call) expected a softening of guidance at this refunding.

• RES 4: 1.4015 High Dec 2 ‘25
• RES 3: 1.3985 76.4% retracement of the Nov 5 ‘25 - Jan 30 bear leg
• RES 2: 1.3878/3967 High Apr 13 / High Mar 31 and the bull trigger
• RES 1: 1.3720 50-day EMA 
• PRICE: 1.3622 @ 16:49 BST May 6
• SUP 1: 1.3550 Low May 1
• SUP 2: 1.3513 1.0% 10-dma envelope
• SUP 3: 1.3482 Low Jan 30 and key support
• SUP 4: 1.3420 Low Sep 25 

A short-term bear cycle in USDCAD remains in play with the pair trading closer to its recent lows. Scope is seen for a move towards 1.3526 next, the Mar 9 low and the next key support. Clearance of this level would open 1.3482, the Jan 30 low. Initial resistance is seen at 1.3720, the 50-day EMA. A clear break of this average is required to signal a possible short-term reversal.

• Underlying futures well bid but scaling off highs as markets continue to digest US/Iran headlines - sifting rhetoric for facts. Overnight risk sentiment gained after Axios wrote the "U.S. and Iran closing in on one-page memo to end war," citing officials.
• Iranian spokesperson for the National Security and Foreign Policy Commission tweets “The Axios text is more of an American wish list than a reality, The Americans will not gain anything in a losing war that they did not gain in face-to-face negotiations, Iran is on the trigger and ready, if they do not surrender and do not make the necessary concessions or if they themselves or their dogs try to misbehave, we will give a harsh and regrettable response.”
• Not much of a reaction to lower than expected ADP jobs gain, focus remains on US/Iran headlines - latest: Trump telling NY Post that it's "too soon" to prepare for a peace signing, followed soon after by Trump threatens bombing if Iran doesn’t reopen strait amid report of deal.
• ADP private sector employment disappointed as it increased 109k (sa, cons 120k) in April after a barely revised 61k (initial 62k) in March and 66k in February. The weekly updates had seen a particularly impressive acceleration recently, with three weeks running at circa 160k on a monthly equivalent for the four-week moving average.
• TYM6 trades +16 at 110-27 vs. 110-31 high - briefly through initial resistance of 110-28+, the 20-day EMA (a level pierced on Wednesday’s intraday rally), and 111-09, the 50-day EMA. A clear break of both averages would highlight a possible reversal.
• WTI crude dipped below $90/bbl earlier trades $94.90/bbl now. Bbg US$ index -6.63 at 1188.79. Stocks plowed higher: SPX eminis rose to a new high of 7380.75, Nasdaq to a new high of 25776.39, while the DJIA gained over 1.1% to 49923.00 - still off the Feb 10 high of 50500.71.