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Email this2:30 pm
September 29, 2017
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mordko said
If bond traders decide future rates then they should know what the forthcoming decision will be with 100% certainty. There shouldn’t have been 20% probability of “no change in rates” priced by the market.
In fact, the price of my bond ETF first dropped immediately before 10am and then jumped in immediate response to the announcement. The announcement must have been worded in such a way that rate change wasn’t obvious until a few minutes into the speech. Clearly the market misjudged what was about to happen and then adjusted once BoC announced the news. You can pinpoint the timing of the rate announcement by looking at yesterday’s bond chart.
From what I can tell looking at all time frames (minutes to hourly and beyond), though there was a brief reaction by the market, the market had already moved down more before that announcement and reaction, and the reaction was not even enough to reverse the amount of the drop just prior. And as you point out, that reaction was quickly reversed.
I have never said that players in the markets do not react at all to the BoC. What I have been putting forward is that the market leads the direction, and sure enough it maintained that lead.
But taking the lead is not the same thing as deciding future rates. The market's moves tend to be incremental, with occasional reactions, meaning that the market tends to set the trend, based on the same factors that the BoC and other CBs observe. The market is not independent of those same factors.
And sure enough, we have the same response here, based on the data I see.
2:39 pm
September 29, 2017
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AltaRed said
Maybe we should try and ignore the theory being spouted by mayer97 in yet another thread (this one) and keep it on the rails best we can. It has become repetitive and tiresome.
...
Actually, this thread is about the change in the BoC rate, and is therefore very much on topic, so why promote it to be ignored? What makes anything you have to offer, about your theories as to the reason for the rates, any more valuable?
We all have insights to share, respectfully, whether you agree with them or not. That is the point of this type of forum. Typical attempt to try to cancel someone's views simply because you do not agree with them. You've made your view apparently clear. I share what I see and I offer evidence for my views. People can do with it what they want and take it or leave it, and even offer an alternative. That's respectful discourse.
3:46 pm
October 27, 2013
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With all due respect, I will let it be when you let it be. Time for a ceasefire?
4:46 am
March 30, 2017
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smayer97 said
But taking the lead is not the same thing as deciding future rates. The market's moves tend to be incremental, with occasional reactions, meaning that the market tends to set the trend, based on the same factors that the BoC and other CBs observe. The market is not independent of those same factors.
This is vastly different from what you have been saying all along, which is "market decides the rate, and BoC simply follow the market..."
Yes both BoC and markets see the same economic data and indicators, while the market may react instantenously, central bank will shape the market via their release what is coming forward (if data are consistent etc).
The central banks decides the future rates, the market then adjusts so at the end of the day, the short term funding rates are inline. In fact short term funding rate is just the math to calculate probability of rate change, not a guess.
8:22 am
November 8, 2018
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There is not one 1yr GIC with 5.5%+ interest left in GIC chart, as of today.
Whoever the man behind the curtain is, I am paying no attention to him. The end result is the same, does not matter who pulls the strings.
I am going to miss high interest rates.
8:24 am
September 29, 2017
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savemoresaveoften said
smayer97 said
But taking the lead is not the same thing as deciding future rates. The market's moves tend to be incremental, with occasional reactions, meaning that the market tends to set the trend, based on the same factors that the BoC and other CBs observe. The market is not independent of those same factors.This is vastly different from what you have been saying all along, which is "market decides the rate, and BoC simply follow the market..."
Yes both BoC and markets see the same economic data and indicators, while the market may react instantenously, central bank will shape the market via their release what is coming forward (if data are consistent etc).
The central banks decides the future rates, the market then adjusts so at the end of the day, the short term funding rates are inline. In fact short term funding rate is just the math to calculate probability of rate change, not a guess.
My use of the word decide still means that the market sets the direction, not the actual rate BUT it does case the BoC to react. So, when looking at the charts, it is the BoC that is adjusting to the market. And as a result, you can fairly easily anticipate if/when the BoC will adjust their rates. That is the message I keep putting forward, and even by how much.
8:27 am
September 29, 2017
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AltaRed said
With all due respect, I will let it be when you let it be. Time for a ceasefire?
No one is fighting... so not sure why you feel the need to "fire".
8:54 am
September 11, 2013
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Guess I just don't really see the point of following charts and all that other info if the result is (even as close as one day before the announcement) the exact wrong prediction is made. Seems a lot of work that doesn't even "fairly easily anticipate" what's happening the very next day, never mind months or longer out.
10:07 am
September 29, 2017
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It has worked very well for me. This analysis got me to hold off for months then lock in at the top of the rate changes for long term based on this information, well in advance. It is only a tool, a source of information. It is all about learning how to apply the information. So, of course, nothing is guaranteed.
3:44 pm
April 21, 2022
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So the market is predicting what the BoC is going to do, which is the same thing as saying it thereby determines interest rates?
12:50 am
September 28, 2023
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I'm anticipating another .25% drop this morning
5:19 am
November 18, 2017
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Bummer. My largest GIC rolls over in early August.
RetirEd
6:58 am
April 21, 2022
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everhopeful said
I'm anticipating another .25% drop this morning
Are you just being ever hopeful?
8:33 am
November 19, 2022
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Why ? Should have kept it at 5% permanently. If inflation persists raise rates more.
This reckless policy will further devalue our loony and put houses out of reach for majority of young Canadians.
9:35 am
October 27, 2013
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UkrainianDude said
Why ? Should have kept it at 5% permanently. If inflation persists raise rates more.
This reckless policy will further devalue our loony and put houses out of reach for majority of young Canadians.
It will also boost house prices for new buyers due to higher demand on no change in supply. The housing situation is a vicious circle that BoC cannot solve. And for those that will be renewing mortgages, it will not decrease debt proportionately. Canadians will simply spend much of the extra cash flow on consumer goods.
I suspect 5% is ultimately too high for a 'neutral' interest rate but there should be no rush to reduce the rate this year. Maybe 4% by the end of 2025 rather than current speculation of as low as 3% by the end of 2025. I don't see this ending well if it goes that way.
9:44 am
January 12, 2019
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" Live Long, Healthy ... And Prosper! "
10:49 am
September 29, 2017
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0.25% drop was TOTALLY foreseeable, based on the short-term bond markets.
The market has been leading with rates falling since mid Oct 2023. This led to the CB drop in May, and with the markets moving low enough again, this gave room for the CB to lower rate again another 25 pts.
BTW, the US markets are now turning over and leading rates lower again, since about May. I expect the Fed will follow suite next week by a 25 pt drop since the market is giving enough room to do so. Keep an eye out.
10:59 am
October 27, 2013
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Deleted.... Wrong thread.
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