CAD: Sell in June (not May) – RBC CM

Research Team at RBC Capital Markets, notes that the foreign investors have been strong buyers of Canadian bonds in 2016 so far, reducing Canada’s reliance on short-term inflows and supporting CAD.

Key Quotes

“History suggests a strong reversal in June. A large cash flow due to the concentration of redemptions is unlikely to be fully reinvested, and a bout of CAD weakness on key crosses is a phenomenon frequently seen in June.

A strong correction higher in AUD/CAD would be an opportunity to put on core shorts.

Shorter-term, one-month CAD puts against AUD or EUR would be vehicles to play, or hedge against, a short-term reversal of CAD’s outperformance in 2016.”