Canadian CPI/Multi family starts plunge

Before I get to the housing starts data, I’ll start with the upside surprise in Canadian CPI for August which is leading to an 8 bps rise in its 2 yr yield to 4.86%, the highest since 2001. Their 10 yr yield is up 11 bps to 3.85%. Headline CPI was up 4% y/o/y, 2 tenths more than expected and its core rate (trimmed) was higher by 3.9% y/o/y, also 2 tenths above the forecast and up from 3.6% in July. Higher gasoline prices drove the headline increase and higher rents and mortgage interest payments led the core.

Notwithstanding this, the 5 yr inflation breakeven is up just 1 bp at 2.10% and the 10 yr is up by 1 bp too. The Canadian$ is rallying to the best level vs the US dollar since early August.