Canada's population growth fell from 3% to 0% over the past 12 to 18 months, and RBC's head of North America rates strategy says that, not the tariffs, is the biggest shock the economy has absorbed.
The tariffs took the headlines. A 25% duty went on autos last spring, Washington added more last week, and a rise to 50% is on the table for January. Canadian export volumes are still higher than they were before any of it.
"You know Canada definitely has more leverage in these trade discussions maybe than the US thought."
Jason Daw runs North America rates strategy at RBC Capital Markets, Blake Gwinn runs US rates strategy there, and Peter Schaffrik, who hosts, runs UK and European rates and economics. They price the government bonds these decisions move, and each gave the desk's live positioning rather than a view of the news.
I listened to the full episode so you can skip it. 26 minutes of audio, 16 minutes of reading.
Here are the 10 takeaways that matter.
👤 Guests: Blake Gwinn, head of US rates strategy at RBC Capital Markets, and Jason Daw, head of North America rates strategy at the same firm
🎙️ Host: Peter Schaffrik, head of UK and European rates and economics at RBC Capital Markets, who answers the Europe and UK questions himself in the second half
📰 Published: 1 September 2026 on the show's own feed and on YouTube (RBC Capital Markets)
🔴 YouTube | 🔗 Show notes | ⏱️ 26 min | ✅ Time saved: 10 min
Key Takeaways
Waller's Jackson Hole speech read hawkish, and RBC still expects a hold in September Gwinn puts a hike at about 30% if core consumer prices excluding food and energy rise less than 0.20 in the month
The September decision rests on one number, released the Friday before the meeting A monthly core print that rounds up to 0.3 would have him consider a late switch to a hike
The Treasury can hold 30-year yields for a while, but not turn them around Yields have bounced off 5.28 more than once since the buyback announcement
Canada's biggest shock of the past 18 months was population growth, not tariffs It fell from 3% to 0%, while total export volumes stayed above their pre-tariff level
Steel is the one export the tariffs really hit, and the reason is US capacity Steel exports are down about 40%; aluminum, which the US cannot supply itself, is unchanged
A deficit near 2.5% is what lets Canada refuse a bad trade deal Daw says Ottawa could add a percentage point of GDP for one to two years without a debt problem
The Bank of Canada hikes on growth where the Fed hikes on inflation It needs several consecutive quarters of growth above trend, which Daw puts at a minimum of 1% a quarter
Europe's gas problem is a 2027 problem, not a cold-winter one Storage is low, but the bill arrives when it has to be refilled next spring and summer
The ECB's next hike takes it to the top of its own neutral range, and then it stops Its own research says the wage-price spillover it would need to see is not happening
1. Waller's Jackson Hole Turn
Schaffrik opened on the Fed with the September meeting roughly two weeks away, and asked whether Waller's remarks at the Jackson Hole conference meant he would push for a hike there.
Gwinn said no, and spent most of his answer separating a hawkish tone from a hawkish position. He took two things out of the speech: comments on the economy, and a correction of the record from the July press conference.
The economy half leaned hawkish on both inflation and financial conditions. Gwinn said Waller described the softer inflation readings of the summer as telling him nothing about underlying trends meaningfully improving "I think the other thing was he said he was pretty hard-pressed to say the financial conditions were restrictive."
The word Waller picked matters, because financial conditions are not the Fed's own setting. Other hawks on the committee have argued that policy itself is not restrictive; Waller argued that market conditions - yields, spreads, the price of credit - are not "You know, financial conditions are somewhat exogenous to the Fed." Gwinn said the speech would have been considerably more hawkish had Waller made the point about monetary policy instead
The second half of the speech went back over the July press conference, where markets had seized on the idea that the balance sheet and financial conditions could "do some of the work for them" and on a suggestion that the Fed might look at inflation measures other than core PCE, its preferred gauge. Waller took direct aim at both and corrected course
Gwinn said markets put the two halves together and read the speech as hawkish, and that he is not sure there is a framework underneath it "I mean is there a real hawkish framework in there or is everything we're seeing really just kind of about reputation message credibility management."
The precedent cuts the same way: markets read Waller as hawkish after the June meeting too, and the July meeting flipped that on its head
2. The September CPI Test
Gwinn is calling a hold, and says most of the committee has not settled either. "So I'm still tentatively calling for a hold here but honestly I think a lot of the FOMC members outside of maybe the people who dissented in July are probably not feeling a super strong lean yet for the September meeting."
The decision runs through one release: the monthly change in consumer prices excluding food and energy, out the Friday before the meeting. Gwinn gave the ladder in full Below 0.20 and he stays with a hold, putting a hike at about 30% - "You know, I think a hike's probably around 30%." Between 0.20 and 0.24, which does not round up to 0.3, he called "closer to a coin flip" A print that rounds up to 0.3 would mean "a late stage switch to a hike", and he said it could push enough members into the hiking camp
The other input is Waller speaking again later in the week, which Gwinn reads as a proxy for the rest of the committee "And if he is starting to talk about a hike in a bit more urgent terms, I take that as kind of a bellwether for what quite a few of the other voters are probably seeing." Waller was in the cautiously-hold camp in July, so a shift in his urgency would imply the same shift in the members who voted with him
3. Bessent vs 30-Year Yields
Schaffrik changed the subject from the front end of the yield curve to the far end of it, and asked what the Treasury's changes to its buyback operations mean for 30-year yields.
So far the announcement has defended a line rather than moved it. Yields rallied on the news and have since tested the same level repeatedly "We've been kind of bouncing off a couple of times of this 5.28 level in 30-year yields."
Gwinn thinks Bessent has the tools to force a rally into the midterm elections if the administration wants one. "I do think he has enough tools, enough levers to pull at his disposal that he could at least temporarily drive a bit of a rally in the long end."
What has been announced is a floor rather than a size. Operations are to be "at least 4 billion" and the Treasury has not said what that means - "So, that could be 6 billion, it could be 8 billion." Gwinn expects Bessent to keep that card in hand until he sees how the market trades into the first operation in that part of the curve, on September 9
The larger lever is cutting the size of the auctions themselves, and it arrives too late to help. Any cut waits for the next quarterly refunding in early November, after the vote, though Gwinn said announcing one would still push yields down
The forces on the other side are neither American nor policy. Gwinn named the move in oil prices, the repricing of what central banks will do, and the bond issuance tied to the hyperscalers building data centers, and said the Treasury cannot reverse that Departing from the Treasury's "regular and predictable" issuance also risks adding term premium, the extra yield investors demand for lending for longer Near term he allows for some relief; beyond that the desk holds to the idea that "long end yields can continue to grind higher, and that higher long end yield ranges are really, really here to stay."
4. Canada's Tariff Damage
Schaffrik moved to Canada, where the trade deal with the US has broken down, tariffs are back on selected sectors and Canada has retaliated.
Daw's first move was to say the tariffs are not the biggest thing that has happened to the Canadian economy. "So, population growth went from 3% to 0%." The trade frictions, he said, produced temporary weakness and volatility in the data and nothing long-lasting
The evidence he gave, in order: Employment in trade-exposed sectors has been flat and has underperformed the wider labor market, but there have been no layoffs or job losses, which has kept consumer spending resilient The trade balance is higher than it was in 2023 and 2024, helped by energy prices Total export volumes are above where they were before Liberation Day, the tariff round Daw uses as his baseline, and so are auto exports, despite the 25% tariff imposed last spring
Steel is the exception, and the reason is that the US can make its own. Steel exports are down about 40% because US mills can take the share; the value of aluminum exports is back at pre-tariff levels because they cannot "That's not the case for aluminum, where the US imports a lot of its consumption from Canada, and doesn't have the domestic capacity."
On the threatened increase in auto tariffs to 50% on January 1, Daw's answer was that the first 25 points did no visible damage "We went from 0% to 25%. It really hasn't. Maybe 25% to 50% does, but it is a question mark." He said the supply chains are integrated and cannot be pulled apart quickly, and that he is optimistic the economy weathers it
5. Canada's Fiscal Room
Schaffrik asked whether fiscal policy could come to the rescue, and whether having room to spend is why Canada will not take a bad deal.
Daw said the leverage is real, and that the fiscal position is what backs it. "You know Canada definitely has more leverage in these trade discussions maybe than the US thought." He said Canada has the space and the flexibility to manage the tariffs it faces now and an escalation from modest to severe
The federal deficit for the current fiscal year is projected at around 2.5% and could come in better than expected "2 and 1/2% isn't great but it isn't a disaster" He said it could be temporarily widened by a percentage point of GDP, perhaps a little more, for one to two years with no major effect on the sustainability of the debt, at the federal and the provincial level
The measures already announced are contingent rather than spent: business loans and extended unemployment benefits that are drawn only if they are needed
The second half of the argument is speed rather than size. The federal government has a majority, so money can be deployed quickly, "as we saw last week", and the same is true across several provinces
6. Bank of Canada Needs Growth
Schaffrik put the market pricing to him: three hikes through 2027, with about a 65% chance of one as early as December this year.
RBC's base case is 100 basis points of hikes in 2027, beginning in the first quarter, and Daw said pricing for next year is not wildly off base against that
Two conditions have to be met before the Bank of Canada starts, and one alone will not do it. Growth has to run above trend, which he put at a minimum of 1% in a quarter and maybe higher, and it has to keep doing so "We need to see multi-quarters of above-trend growth." "Both of those are necessary conditions."
A December hike is possible, and Daw prices it below the market. "So, a rate hike in December, it's a non-zero chance, but it probably requires the stars aligning on the level and sustainability of growth for that to happen." He added that if the tariff picture is still unsettled, waiting longer may pay
The two central banks are reading different data, which is his closing distinction on Canada "For the Bank of Canada though, the path to hikes probably runs through the growth data."
7. Europe's Gas Problem
Daw took over the questions at this point so the host could answer, and asked why gas matters so much and what he expects. Schaffrik had written a note on it.
The distinction between oil and gas decides how far the damage travels. Oil reaches the economy mainly through transportation, "and that's about 10%" of it. Gas reaches electricity prices, which is why 2022 was so much broader "And that impacts electricity prices and has much broader impact on both inflation and economy."
Why it is live now: renewed tensions in the Middle East and the closure of the strait stop gas as well as oil. Schaffrik said Europe takes little liquefied natural gas from the Middle East, but that it is a global product and the price is set globally
Europe stores gas for winter in underground caverns, and the level in them now is low
The fear of a cold winter is the wrong fear. Europe has cut consumption and substituted other energy sources since the war in Ukraine "That seems very unlikely to happen because we are just consuming much less gas basically since the Ukraine war."
The bill arrives next spring instead. RBC's modeling has storage drawn down close to the physical limit of how far it can go, which means it has to be refilled quickly in the spring and summer, which keeps prices, and the drag on the economy and on inflation, running longer than the market assumes Schaffrik pushed back on treating this as a short-lived shock, saying instead that "it has the potential to move into something that is much more chronic and will stay with us, let's say well into 2027."
8. The ECB Stops at 250
Daw's next question linked the gas call to monetary policy: the ECB is near-certain to hike in September, so what happens after that, and what about the Bank of England.
September is settled, in his view, and he moved past it quickly "Most ECB speakers have said that they will hike. The market is pricing it." He said the anonymously sourced stories on Bloomberg and Reuters point the same way
After September two forces pull against each other. Gas prices staying higher for longer argue for more; the ECB's own framework argues for stopping One more hike puts it at "250, which they have identified as the top end of the neutral range", and Schaffrik said it does not want to move into restrictive territory for now
The condition for going further is a wage-price spiral, and the ECB's own research says there isn't one. What it wants to see before continuing is what it calls secondary round effects - wages rising, and prices rising because wages did "And they have put a lot of research out." Another paper landed on the day of the recording, and he said they suggest it is not happening
The call is a September hike, then a pause that keeps the option open. "So, my expectation is that they will hike in September, will then sort of go into a bit of a wait-and-see stance with a hiking bias." Where that shows up is 2027: the desk expects a steeper money market curve than the market carries, which prices "just one rate hike of 25 basis points"
9. The Bank of England Holds
The Bank of England started from a higher rate and has been unwilling to sound hawkish, even with three members voting for a hike so far
The domestic data does not support one either: unemployment has been rising and wage growth is falling "So, we don't think that the bank will hike at all."
Gas is the risk to that call. If prices stay high, Schaffrik expects pressure on the bank to act eventually, but he thinks it can "sit on their hands" at least until the end of the year
10. The UK Budget in October
Daw's last question was about the UK: a steep yield curve, high real yields and a new government presenting its budget in October.
Schaffrik began by tying it back to Gwinn's point about the risk of adding term premium in the US "So, all of these arguments apply to the UK in spades." Term premium has risen, the market is watchful for any fiscal slippage, and the economy has not been strong
The new government has gone out of its way not to antagonize the bond market. Burnham's government named Healey as Chancellor, a choice seen as conservative "They have stressed on many occasions that they want to obey the fiscal rules, they do not want to upset the bond market."
The path of least resistance for a left-leaning government that wants to keep the budget intact is tax rises, though nothing has been confirmed and Schaffrik was explicit that he is reading intent rather than policy The versions doing the rounds in the press are a wealth tax of some form, taxes on banks, and windfall taxes on oil or energy companies
His expectation is that the budget defuses the worry rather than setting it off. "And ultimately, we think there's probably a lot of angst going into it, but hopefully afterwards, some of these fears should be alleviated."
Bonus Insights
Schaffrik opened the episode by restating the desk's standing call on bonds, and said the last few days had gone its way. "For markets, we had argued that risks for bond markets are asymmetric. With the risk to yields rising much larger than yields falling. And sadly, the last few days seems to vindicate that view."
The three recorded on 1 September and titled the edition "back to school" for listeners coming back from the summer. Schaffrik said the hardest part of preparing it was deciding where to start, because the summer had not been quiet
The host answers as well as asks on this show. Schaffrik ran the questions for the US and Canada, then handed the microphone to Daw so he could give the European and UK views himself
Schaffrik's reply to the buyback discussion cast the Treasury secretary as King Canute, the king who ordered the tide to turn back: "I like the pushing back against the tide a little bit King Canute here."
The desk's bottom line is that the pressure on yields is still upward on all three sides of the conversation: Gwinn expects 30-year yields to grind higher whatever the Treasury does with buybacks, Daw expects the Bank of Canada to hike only once growth has been above trend for several quarters, and Schaffrik expects gas prices to keep the ECB's hiking bias alive well into 2027.
Products, Companies & Tools Mentioned
Federal Reserve (The September meeting the first half of the episode is built around; Gwinn expects a hold and reads Waller's Jackson Hole speech as message management as much as policy)
US Treasury (Bessent's buyback operations, at "at least 4 billion" apiece with the first in that part of the curve on September 9, are the tool Gwinn says can hold 30-year yields but not turn them)
Bank of Canada (Daw's base case is 100 basis points of hikes in 2027 starting in the first quarter, with a December move less likely than the market prices)
European Central Bank (Near-certain to hike in September, which puts it at the top end of the neutral range it has identified for itself)
Bank of England (Three members have voted for a hike, but Schaffrik expects no hike at all this year)
RBC Capital Markets (The firm all three speakers work for; the views are its desk strategy rather than its published research)
Bloomberg and Reuters (The anonymously sourced stories Schaffrik cites as further evidence the ECB hikes this month)
Books & Resources Mentioned
Peter Schaffrik's RBC note on European gas prices (Daw introduced it as a whole note dedicated to the issue; the storage modeling in this episode comes from it)
The ECB's research on secondary round effects (Schaffrik said the central bank has published a lot of it, including another paper on the day of the recording, and that it shows wages are not yet feeding into prices)
If this was worth your time, send it to someone who has to have a view on this.
Get the latest market chatter as it happens: