The 1-year OIS trades in a multi-billion marketplace. Traders use it to bet on what the Bank of Canada’s key lending rate will average over the next 12 months.
Just over a week ago, the market was pricing in a “100%” chance of a rate hike by the BoC’s July 19 meeting.
Now, traders have pushed back that estimate, indicating they’re not totally confident of a rate hike until September 7.
Meanwhile, economists at Canada’s primary dealers expect an earlier rate increase. According to Reuters, their median call is for the BoC to lift rates at its May 31 meeting.
Expectations will likely get readjusted again this week. On Monday we get the latest data on November GDP. Then on Friday we get the most important stats of the month: the US & Canadian employment numbers. If these reports disappoint traders, it should hold the 5-year government yield below the key 2.60-2.65% level. That would keep fixed mortgage rates low for at least a bit longer.
Rob McLister, CMT
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