08:07 AM EST, 01/13/2025 (MT Newswires) -- It's a quiet start to the week in Canada with no top tier releases and nothing out until Wednesday, said Bank of Montreal (BMO).

The highlight this week is December home sales, noted the bank. They look to rise 13.5% y/y, which would be a modest pullback on a monthly basis. It expects a mixed bag, with Toronto slowing sharply, while other parts of the country performed better. Price momentum looks to continue improving.

This week's other highlight is Thursday's speech from Bank of Canada Deputy Governor Toni Gravelle. He'll provide the annual update on the BoC's balance sheet normalization and if thinking has changed on when quantitative tightening (QT) will end and how the BoC will expand its balance sheet after, stated BMO.

QT will likely end later this year, with the timing somewhat in flux given the various moving part on the BoC's balance sheet. Gravelle noted in his last speech on normalization that Canada's central bank will use term repos and treasury bills to expand the balance sheet once QT ends. The bank will be watching to see if anything has changed on that front.

The rest of the data this week include: November manufacturing sales and wholesale trade on Wednesday, December housing starts on Thursday, November international securities transactions on Friday and household credit on Friday.

The Canadian dollar (CAD or loonie) finally stabilized after weakening consistently over the past month, closing around C$1.444, pointed out BMO. The currency continues to hover around the weakest levels since the pandemic. Friday's strong jobs report allowed the loonie to keep pace with the US dollar (USD) since U.S. payrolls were solid as well while gaining ground on the crosses.

If Canada gets further strength in the economic data, that will further dampen BoC rate cut expectations and support the CAD, added the bank.

Government of Canada yields rose across the curve led by the belly with five- and 10-year yields about 21bps higher, with the bulk of the move coming after the strong dual North American jobs reports, according to BMO. Canadas underperformed U.S. Treasuries in all tenors by 3-to-4 bps, and have backed off record-rich levels seen earlier in the week.

There is one bond auction this week: C$5 billion March 2030s on Wednesday.