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Delayed Bank of Canada Tightening Could Support Two-Year Canada Government Bonds, National Bank Says

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The Bank of Canada could see markets push back expectations for rate hikes, which could give two-year Government of Canada (GoC) bonds room to outperform in the near term, according to National Bank of Canada Capital Markets note Wednesday.

Ahead of Wednesday's two-year GoC bond auction, two-year GoCs are trading 12 basis points cheaper than at the last auction, said the bank.

Canada will auction C$5.50 billion two-year GoC bonds at 12 p.m. ET Wednesday. The next two-year auction is on Sept. 3, said the bank in the note.

The spread between two- and five-year GoC yields is broadly unchanged at 33 bps, still above the roughly 30 bps level seen several times between April and July, added National Bank.

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