Consequences

Welcome to Views from the North, a Canadian Rates and Macro podcast. This week, I'm joined by Jeff Oland, one of our government of Canada traders. This episode is titled Consequences. I'm Ben Ritesis, and you're listening to Views from the North. Each episode, I will be joined by members of BMO's FIC, Sales and Trading team to bring you perspectives on the Canadian rates market and the macro economy. We strive to keep the show as interactive as possible by responding directly to questions submitted by our listeners and clients. We value your feedback, so please don't hesitate to reach out with any topics you'd like to hear about. I can be found on Bloomberg or via email at [email protected]. That's [email protected]. Your input is valued and greatly appreciated. Jeff, welcome back to the show. Pleasure to have you. I brought you on today because of your fiery attitude this morning, so I picked you. I expect you to bring that same fire to the podcast today. Well, there's lots to be fiery about. It's good to be back. Thanks for having me. The only downside is now that it's 4.15 on Wednesday. We've had the Fed. It's been a long day. Seemingly every day feels like a long day because we're just waiting for the next ridiculous headline. So maybe some of that fire is a little bit gone, but maybe I'll try and review up. So why don't we start with inflation? It's your favorite topic. When inflation was out yesterday, there was also a lot of fire. We got the February numbers for Canada yesterday. They were wickedly hot, far higher than almost everybody thought they would be, much higher than I had in my model for sure. And it reflects underlying strength and prices, I think. And maybe we've underestimated the momentum in inflation. Six months ago, everybody was all about, "Oh, inflation's really, really low if you take out shelter." Well, guess what, people? Shelter's now the low point, and everything else is on fire. So how's the Bank of Canada made a mistake here, Jeff? Have the markets made a mistake? Are we still underestimating the staying power of inflation? Man, there's a lot there. It's an exciting topic. I'm sure we could talk about that for the next hour. We won't. We won't. We won't, I promise. The first point being, maybe all of us who are in the rates market, but in financial markets in general, need to have another think about what causes inflation. To the extent there is a, let's call it, a basis between what inflation is being printed by the statistical agencies and what it actually is in the real economy and how volatile that may be, how inflation interacts with the business cycle. I think the inflation has tended to be kind of a lagging indicator and tends to peak toward the end of the business cycle, maybe even during the recession. But with all that said, core inflation by the measures that the Bank of Canada states has been now way over a target for like four years. I remember in the fall of '22, people saying, "Yeah, it's just about, they're going to be way through the target now. Everything's going to come down. It's just rent. Nothing else." Now, I feel like we're at the point where this is starting to hurt the credibility of the Bank of Canada, because they were wrong initially in terms of the transitory, which they're in good company there and it's understandable. But now they've loosened the policy rate so much in a period where inflation has not only never really gone through their target, but actually looks to be kind of increasing to the upside. I don't understand how if you're an inflation targeting central bank, you can justify that under the framework in which you've been working. To some extent, I feel the Bank of Canada is changing the rules of the game in the middle of the game. I have a small amount of sympathy because I know it's a difficult period and I know a lot of people will say, "But don't you know there's a trade war?" Yeah, we know there's a trade war. That doesn't change the mandate of the Bank of Canada and in the end, they can always do an emergency cut if they need to or whatever else. I think just back to the original point about what it is that causes inflation. My inflation and overnight rates 12% in Brazil and 0% in the DM, I think we're probably transitioning back to a period where maybe inflation ends up being higher for whatever the reasons are that cause inflation and I think people have their own opinions as to what that might be. But I feel it is a very real possibility here that the Bank of Canada has made a policy error. And the last point I would make, there's not a lot of people that seem to agree with me on that and so I don't have no problem having that opinion but I think it's setting up an opportunity here in markets generally because everybody still seems to be operating under the old rules from 2010 to 2020 which is rates are going back to zero, there is no inflation, the Bank of Canada pays no price for cutting rates, essentially there's no trade off. There's no trade off. The only thing that matters is getting rates lower and I feel like that's a real consensus. To some extent, I almost think it's debatable in a trade war if you even want lower rates, I mean, yeah, of course there's going to be some demand destruction but if you read anything out of the currency market, what's worse? Your currency getting hit 20, 30% or you having whatever, much higher inflation. There is something to be said for what the currency markets are telling you which is that the trade war isn't going to escalate a lot which is, you know, furthers my opinion that this might end up being a mistake. So, it's a long-winded answer but the short answer is maybe all of us need to rethink what kind of regime we're in and whether or not inflation is in the same regime we were in 2010 to 2020. Okay, three things, one, you use the word transitory and I had to bring this up and I was shocked today when Fed Chair Powell used the word transitory again and I was like, how can you possibly like find a new word? You made a mistake in the pandemic, you used the word transitory, you were proven dead wrong and then you whipped it out again and it's like, dude, you just need a better word and I just had to save my piece there because I still, I can't help but to shake my head like what are you doing? Find a different word, temporary, anything, just, it doesn't even matter, anything different. Okay, I set my piece on that. You mentioned the bank of Canada changing the rules of the game, they have. I mean, they started with three core inflation measures in 2016 and then they cut the common measure in whatever 20 or 21 whenever it was dead wrong and it continued to be dead wrong for a while and now they've also dumped trim saying, well, it doesn't really reflect the basket appropriately and so we're left with one core inflation metric from three and even then there's a little bit more focus on like, oh, well, why don't we look at the breadth of inflation and the number of items that are higher or lower. I mean, I guess at the end of the day, that's kind of what you want to look at, like kind of look at everything more broadly, but the rules have kind of changed over time and I'm with you. I try my best not to be overly critical of the bank just because like it's a hard environment and they're doing the best with what they have, which is very incomplete information and having to look forward is really hard. I mean, I forecast all sorts of things, everyone's bad at it and that's just the way it goes because you are going to be wrong because there are shocks that are going to come that you cannot predict. And the last thing, one of the last things you mentioned was people thinking there's no trade off for lower rates or like moving rates to zero and I think that's probably just an unfortunate consequence of the past 10 years. Consequences are a big part of my, it's a word that I use a lot personally with my children. I explain to them that actions have consequences. If you do something stupid, there will be a consequence that you may not like and so rates going down to zero for 10 years probably wasn't the greatest idea in the history of finance and now we're dealing with the consequences. I think the part that we're probably missing and you're starting to see seeds of it planted elsewhere and we're going to go here because this is a perfect segue, I love this. Two weeks ago, two weeks ago I was in London and Germany announced their massive fiscal package that was going to come and it passed this week 500 billion euros, 100 of that I think is going to green stuff, but still, I mean, you're looking at 500 billion euros and spending over, I don't remember the time period of five or 10 years, whatever it is, I think it's five years, but it's like two plus percent of GDP per year in fiscal stimulus. How long until we get that here? I mean, that's the part that was missing in 2010, there was no fiscal, it was just rates and then in the pandemic, it was all fiscal and all rates and we knew what happened then and now I think the bank has kind of learned a lesson and you have to give them a little bit of credit at least in sounding as cautious as they are because I think they know that something is going to come on the fiscal side and if they blow their brains out on rates also and you have fiscal, we're going to be in a world of hurt. I mean, it's interesting and I think we've been saying on the desk this week or I've been saying to myself and maybe nobody's listening, but it feels like COVID 2.0, X the QE part at least for now, where we're going to get maybe easier monetary policy than it's currently required and a big fiscal and the fiscal in Canada, it's just like the easiest political thing you could ever do if you're a Premier right now or you're the federal government, that's another story, but it's such an easy thing to sell to the population, everybody sees the headlines, everybody's concerned about whatever, they don't even know necessarily what they're concerned about, but the government's here to help and I feel like there's no doubt in my mind we're going to get big, big fiscal announcements and so yeah, put that together with the Bank of Canada to the extent and it goes back to the first point that you think that causes inflation, there are people maybe that disagree with that notion, I think for sure when the central bank is undertaking QE and the government's doing a big fiscal, that's inflationary, especially like in COVID when there were direct transfers to the households, so none of this is for sure and yes, there's no question, everybody deserves a little bit of grace for how difficult a policy environment it is, however, it appears to me to be shaping up to another wave of inflation and I think there are a lot of people that are saying historically you get two waves of inflation, well, I can see why and the big reason for me is that we didn't have a substantive conversation in the public about what caused the first round of inflation and what the trade-offs were, fine, in some circumstances, COVID was a very difficult policy period, in some circumstances it might be worth the trade-off to do all the things I just mentioned in order to avoid whatever you think the negative shock is, in the current environment I think it's as yet debatable, we'll have to see in the next six months, maybe in the end I'm totally wrong about this and the Bank of Canada hasn't done enough, we'll see and on that point there are two things I'd like to say, the first being we're not running and I think we talk about this every time I come on but the US deficit, it just cannot be overlooked, I think it's a very important, maybe the central most important aspect in financial markets right now that people don't talk very much about, I think it's very important, we're not running the same deficits they are in the US and maybe to that extent then monetary policy is required to be a little easier. So I think there's some interplay there which we need to consider but if they come with a big fiscal, certainly I think there's reason to believe there will end up being inflation from that. So all in all in my mind that is the risk and on the second point, look, of course, if it ends up being that this trade war isn't as substantial as people expect and it's required then the bank kind of should trade out of it and maybe consider hiking rates which I would say virtually nobody thinks is a possibility which on the final point would say, do I think in a steady state environment, this level of rates is a problem for the Canadian economy? Probably but our biggest trading partner is running a 7% deficit which is mostly consumption, social security, Medicare, Medicaid, those are consumption items and we're I think quote unquote the beneficiary of that or it's at least supporting our growth and inflation. So nothing's in a vacuum and maybe that's what's causing our inflation to be higher than it would be otherwise in isolation. So it's important. This is important that the Bank of Canada gets this right because there's nothing more destabilizing to society and you're already seeing it in terms of some of the split on opinion between young and old then above target inflation. We have it, in fact, some people say 2% is too high, the target should be zero but regardless there was a target, there were rules of the game that were established and they're not playing by them right now. So maybe we have to have a recession, maybe we have to have some pain, maybe you won't be able to get inflation down without somebody having to forego some consumption or forego something so it's very interesting time but also it's very important that they get this right. There's a couple things I've been thinking about. So one, the character of the fiscal side, the fiscal reaction is as important as the size of it, I think. So you mentioned the transfers during COVID and how those were inflationary and I don't think there's any debating that handing out money to people without any recourse is going to cause them to spend money and probably more than they should and that is inflationary without question. There were other factors also supply chain stuff, yes, yes, yes, which compounded things but if you were to literally go out tomorrow and print a whole bunch of money and hand it down on the street, you're going to cause inflation because there will be more demand for the same amount of stuff. I don't know how that's in any way debatable at all but what if the fiscal impulse is instead on the supply side and right now the polls are pretty much tied but what if whoever the next government is and I think the conservatives lean more this way but honestly we haven't seen anyone's platform yet so I could be dead run. Maybe the liberals under Kearney look a little bit more supply side friendly but maybe what if it's more tax cuts rather than spending and they just kind of keep the government spending side more or less in check and you still have relatively sizable deficits, maybe even bigger than now but you have a better supply side of things, productivity improves, all that kind of positive stuff happens, that's probably not inflationary, well I know it's not inflationary. So that's one side of fiscal that can go right. I agree. There is probably some efficient frontier on tax policy and productivity and I think most of us would agree there's probably a deadweight loss where you can reclaim so yes for sure. Okay so that's one thing. The other, you talked about the bank potentially hiking and that being a thing that no one is speaking of, I mean obviously I do think that like Z5, Z6 should be steeper, I've been on that for a long time as much because like you could see more this year or they're not cutting next year that's for sure so the risk is that they heighten next year more than that they keep cutting probably. But beyond that I think so like I was having a conversation with one of my colleagues in economics and he was asking like what are your thoughts on the neutral rate here given the population numbers out this morning which showed materially weaker population growth and historically the neutral rates kind of like some add up of productivity growth and population growth and the US rate gets lumped in there in some way shape or form and it would move up and down with that and the strong population growth we've had probably pushed it somewhat higher in the bank of Canada's mind and now the population growth is coming off maybe it comes down a bit and I don't know. I'm not sure that it's that simple I mean I just kind of try and look at the real world instead of just the theoretical world and look at the economy and okay well the bank cut 225 basis points and let's take out the last cut earlier this month so they cut 200 bbs to January and even you could even take out the Jenton and take out say 175 to the end of the year. How did the economy react to that? The economy came out pretty strong in the back half of the year and you had growth that was in pretty good shape you had all the interest rate sensitive sectors come back you had housing come back you had auto sales come back spending was relatively strong consumer spending was in pretty good shape and like things appeared to be moving in the right direction and inflation are also seemingly bottoming now as that is a somewhat of a lagging indicator. Maybe neutral is a little bit higher than people think like maybe maybe three percent actually like an okay place to be and it's the higher end of the bank's neutral range but it's in their range which is kind of saying something and like you know you don't really necessarily need to be that low and so that I mean it's something to consider when people call for and I was talking to a client today and he was like super bearish on the Canadian macro he's like how does Canada survive these tariffs? Is this country not going to completely implode and I was like well he's like how are people not getting fired left right and center already like no one can survive 25 percent tariffs on top of whatever their prices like that will just send everyone to bankruptcy and I was like well first of all one month is not the end of the world everyone can manage for a month most can manage for a month I shouldn't say everybody there already are some that are impacted but it's not broad swaths of the economy and if it stays 25 percent yes people will get hurt and that will be the case but it's just not that simple that rates need to immediately go to zero like there are enough other considerations in fiscal being a big one that can really change things substantially and just make it not as clear that rates should need or will go to zero and that doesn't speak to QE and the other other wonderful stupidities that we've done over the past kind of normalized over the past 20 years which I don't agree with and and I'm hopeful that policy makers have understood that mistake that they made. Well that's part of what's making me a little concerned is that I don't feel like anybody's ever taken much heat for for having accountability at nine or nine percent inflation right you know whatever it got to in Canada seven percent. It's my other favorite word yeah that's a good word and and so I think and this is where I think the bank again and maybe it hasn't been transparent enough and where I don't give them a lot of leeway which is okay so based on everything I hear about output gaps there's some correlation between the overnight interest rate your own policy rate and the level of inflation that's why they use it as a tool to manage inflation and so if we take the overnight policy rate from five percent to two and three quarters percent I'm assuming their own model says that's going to increase inflation and so if the spot inflation is already way above target what did their model say inflation was going to be outside of those actions negative I mean zero you know would it have been zero so let's say the if you think the long and variable lead times are six to twelve months what was the six months six months forward in their model on inflation and it had to have been like zero so if it turns out that was two and they just miscalibrated it we could be looking at like four or five percent inflation again and so you know that would be an enormous enormous policy error if we end up having higher inflation than what is already the target and I don't know what I would do in that situation like I don't want to make it seem like this is just an obvious easy thing right yeah exactly it's a difficult job but I don't feel like we've had outside of like the odd and ascendance here there really much explanation as to why all this cutting was necessary relative to spot inflation some insight into what their modeling would have been really helpful I mean they have a theoretical yeah the neutral rates here but what's the variation on the potential neutral rate it's got to be a hundred basis points so anyway to make a practical point in terms of the trades that we're seeing and and how we're positioned for it even if we start to talk about hikes which were I think we're a really long way really really long way away from that I think everybody expects are gonna cut two more times this year probably I think most people think they'll cut an April and so couple that with what we expect to get on the fiscal side we like steepening we have kind of like steepening we don't think people are that crowded into it and the example of the inflation print yesterday when you print nearly three percent of core inflation and the curve steepens tells us yeah this isn't all that crowded people aren't worried about it so I think that trade has room to run I feel like where on the curve which which I think being long twos makes a lot of sense like I just twos versus everything else because what you may end up just getting a cgbs getting annihilated but people feeling comfortable that the bank of Canada isn't going to do anything to hurt them which they have very good reason to think that and so as a way to kind of absorb some of the supply you know you long twos in your short cgbs your short tens or 30s you know where that might go wrong is yeah if the bank of Canada doesn't about face and and then you'll have to you'll have to get out of that and that that will be painful I don't think there's many people that think that's a possibility and you know of course those could set up for for good trades but I feel like we're still not in the early innings of the steepening but I think it's got further to run the last point I make the conference board in the US tracks has a question I ask associated with the consumer confidence report that says what are your expectations for rates in the coming year higher or lower and up until I haven't checked it in a month or two but up until let's say Jan at such a high amount of people were expecting lower rates in that that it was consistent with bottoms the kind of respondents you would see at major bottoms in interest rates not major tops so I just feel like most people here are expecting rates to go back to zero so if that ends up being wrong it'll start further out the curve you know I think people are going to be comfortable to hang out in in the front end and there's no there's no reason as yet to think the banking is going to have to change and turn around and high crates because they haven't told you they're worried about the fact that the core inflation has been above their target for two four years but do you think they cut an April no I don't I mean again I wouldn't have cut I wouldn't have cut at the last meeting never do yeah so you know so I have my own bias do you think they will not what they should do what they will I think if we get you know again we're one bad headline we've just had so many of these headlines it's it's crazy one bad headline about double retaliatory tariffs and they'll probably cut that is yes I mean early April is going to be beaky for this I think if if we're status quo with where we are right now I can't I don't think they probably want to cut I think they'll do their best to not and hopefully they don't get their their hand forced I don't they kind of didn't really want to in January they talked about not doing it at this meeting so they didn't really want to do again either and so you already have 50 basis points in your pocket that you maybe didn't want to put in and so there already is some cushion to all this tariff stuff and quite frankly as he said a great many times there is a limit to what monetary policy can do to fight tariffs and that is the truth and so there's only so much they're going to do and I think they've made it pretty clear I'm not quite as downbeat on the Bank of Canada as Jeff is I give them a little bit more credit well moment at the moment I don't like 2020 whatever that whole inflation period in 2020-21-22 most of 23 they did hike first they did cut a little bit first I will say their model there's six months six months four would have been quite at 5% inflation would have been quite weak by now and you would have seen that come through but I think now is the point where they're going to kind of earn their money I guess the easy cuts are in and now it's much harder to make that policy choice to not cut from here because it's always easier to lower rates and make everybody happy it's much harder to kind of stand firm and say hi you need to take your medicine because inflation is a risk here a real risk and until we know that it's not you're gonna keep taking your medicine that's just the way it goes sorry I know this hurts it doesn't taste very good have a nice day one of the reasons I think I might be onto something is I don't know of anyone that's critical the Bank of Canada I feel like I'm the only person that has anything and it's not it's like a caveated somewhat prickly ill will because I feel like they're getting too much of a free pass here in my mind interest rates are just the equilibrium between savers and borrowers and we fork favorite borrowers too long in this in this society so maybe I'm the last the last saver who cares about you know the rate of interest I earn but I guess I always have questions for you my question would be what do you think the bank of Canada has gotten right what's right here you know have they assessed the risks facing them adequately you know is there a case that they haven't gone far enough what am I missing I they have been aggressive among central banks like they they are they tend to be first out of the gate they were first out of the gate to hike I think initially they probably underestimated the the momentum in inflation and to some extent I it's it's hard to blame them in that period coming out of ten years of no inflation you've been trained to believe that inflation has been dead and will be dead forever and so I mean to some extent you're kind of a victim of your own success and so dynamics were pretty challenging in the pandemic so I give them give them a pass per se but I understand that it was challenging so they I mean they've gotten the direction right maybe they tend to be a bit late in moving but they're before everybody else so for whatever that's worth relative game instead of absolute and the rate the rate cuts that they put in in the back half of last year were appropriate up to a point and now the question is like well where's the economy going from here and I can't answer that better anybody else despite the fact that that's literally what I do for a living because I don't know what will happen in early April I I suspect this kind of doesn't get to the the heights of pain for Canada and we get completely destroyed that's just my bias because I don't see how that's in anybody's interest including the US's interest but that doesn't mean I'm gonna be right and if things are bad enough then they probably cut a bit more but I would I I mean I turn very bullish on the Canadian economy at the turn of the year seeing the data it was clear to me that things were going the right way and they like you didn't need to cut down to 2% which people were talking about before the terrace that was not at all my view I know we as an institution were a little more dovish than my view which was fine but like I turned very bullish for a reason because rates matter a lot when you cut them 200 basis points it should make a difference and it did but now we have this problem so the bank I think they've done a good job I think now is again now is the test for them from my perspective like I think April if there are no tariffs and they cut I would say that's a mistake like if they if there's no escalation in April and they cut that's a mistake I but I don't think they will cut I think they will stand firm assuming there's things don't get a lot worse if there's way more terrorists then I think they don't really have a choice and then maybe you get a little bit of a quicker response for them and then like they maybe they come down for a little bit and get down to like two or something in that ballpark or two and a quarter or one seventy five somewhere around there but then they bring them back up a little bit quicker once it's once they see that like you get fiscal coming in and things are stabilizing maybe they bring rates back up to neutral a little bit quicker knowing that you have this fiscal coming and it's going to be a wave and it's going to push things I don't know if they have the the will to do that because again it's going to be it's not going to be very popular are they willing to take away its classic central bank line are they willing to take the punch away just as the party's getting started one final point the only thing data wise that's keeping me up a little bit in Canada is the condo market in Toronto I think actually the housing market in Canada is fine single detached homes are fine you know they're they're balanced like we went from a very very tight inventory to not so much but the condo market in Toronto looks a little heavy to me and I don't know I don't know what that could end up meaning but that that is if I'm wrong that's the one thing where I look and think like yeah that is not inflationary like there just seems to be supplies nothing's moving a lot you know we know a lot was built five years ago is coming online this year how that reacts will probably be the linchpin I think if if if the buyers end up showing up and again it's difficult to say we had a housing shortage for like 20 years and now we're reached just too low for a large swath of that time which drove excess demand and the demand wasn't really there despite everybody yelling at the top of their lungs that we weren't building enough houses well then that's going to be really interesting because then inflation maybe doesn't come down even though that part of the market needs lower rates yeah as always yeah you know there's one interest rate for the economy but every little sector has its own needs so anyway that's something I'm kind of watching with the biggest that is that is a serious problem for the city I think it's really just a city Toronto problem there will be an excess supply of condos so as I've laid it out a bunch of times I think probably on here that like you had the way I look at it you have prices rates and rents and they all need to line up and they don't rates are too high relative to where prices are to carry the mortgage at the rent simple as that and there's no reason for anyone to buy these places when they get rent them for less because again rates are too high or rent like it's all the same trade at the end of the day is like this is a triangle and something's got to give and it doesn't look like rates are going to give anymore prices are coming down I think that's probably the most likely one the problem is rents are also coming down which is the opposite of what you need for that to balance out so it's probably going to be a tough period I think for condos in Toronto for a while I just given the population trends and slowing population growth like it will be hard and I don't see any easy way out and again all of that yelling about building stuff was just misplaced and the rush to build all of these buildings as quickly as you possibly could oh now that they're finished we have a problem who would have predicted that I mean that's isn't that what always happens that you rush to find a solution to a problem that may or may not be there and and that I mean then you create a different problem and so like it I mean me and Robert Kaffsic and he yells louder than I do about this like it low rates were the driver of this like there was there was a demand push problem it was like supply was not the issue is demand one we let in a zillion people over a very short amount of time and really juice demand and really that pushed up rents and all that kind of stuff and then it's looked like there was a housing shortage but rates were also low for 10 years and all people did was flip houses and bid up houses often as they could without any concern as to whether it was worth it or not all they could think about was whether they could carry the mortgage great I can carry mine oh I'll sell it to you you're like just keep going and like you do one it's bad for productivity but that's a totally different conversation but like this is the reckoning of all of that consequences back to consequences I have a friend I know we're running short of time here who works in wealth management he tells me in Canada you build a small business from nothing you sell it down the road for ten million dollars only the first million dollars is tax exempt you buy a house for a million dollars sell it for six million dollars as many have here the whole five million gain is tax exempt that's to me is a misallocation of resources okay so as we approach maybe we'll agree to sit down and gain in six months and see how the bank did question though I'll leave it with you we're closing 10 year yields in Canada around 3% plus or minus 50 what's the yeah I'll take higher I'll take plus as well I'll take plus as well 3% we have you've had trouble cracking 3% on any consistent basis intense and like that just tells you that there's just not a lot of value there and gets hard to find buyers at these levels on a consistent basis and I do think something will come on the defense spending side on the fiscal side and some it's almost no matter who wins I think we get more defense which means more spending which means more issuance and then we'll see what happens on the stimulus side if it's taxes or spending or whatever else it is so we'll we'll have to wait and see on that I agree with you on the steepening otherwise strategies and we like selling Canada the U.S. intends I know you guys like the same in Canada desk also likes that trade I think it works both on the Canada leg it actually probably works better on the U.S. leg I think tariffs are just so bad for the U.S. at the end of the day like there's nothing's gonna stop the Fed from having to cut sooner than people think and maybe a little bit more and that's gonna rich it up the U.S. and yeah I agree and I think the market will need to see the announcement I think that I think you're really gonna have to wait right now the flows are still just such the way that there just is an underlying bid to CGB's relative to treasuries that I really feel like will fade if we get a big something destruction if we don't get that we'll have to revisit but I still think you can see three percent before two and a half yeah I'm with you Jeff thanks for coming on thanks it was great thanks for listening to views from the north a Canadian rates and macro podcast I hope you'll join me again for another episode the views expressed here are those of the participants and not those of BMO capital markets its affiliates or subsidiaries for full legal disclosure visit BMO CM comm slash macro horizons slash legal