BAX futures suggest that the overnight target rate will be held at 1% for the December 7, 2010 Bank of Canada meeting:
| Month / Strike | Bid Price | Ask Price | Settl. Price | Net Change | Vol. |
| + 10 NO | 0.000 | 0.000 | 98.690 | 0.000 | 0 |
| + 10 DE | 98.710 | 98.715 | 98.710 | 0.000 | 4741 |
| + 11 JA | 0.000 | 0.000 | 98.675 | 0.000 | 0 |
| + 11 MR | 98.600 | 98.610 | 98.600 | 0.000 | 12558 |
| + 11 JN | 98.460 | 98.470 | 98.460 | 0.000 | 15591 |
| + 11 SE | 98.280 | 98.300 | 98.290 | 0.000 | 13157 |
| + 11 DE | 98.140 | 98.150 | 98.140 | 0.010 | 7394 |
| + 12 MR | 98.020 | 98.040 | 98.030 | 0.000 | 3483 |
| + 12 JN | 97.930 | 97.970 | 97.950 | 0.010 | 274 |
| + 12 SE | 97.850 | 97.930 | 97.910 | 0.010 | 108 |
| + 12 DE | 97.780 | 97.830 | 97.830 | 0.010 | 7 |
The rates do suggest that by mid-year we might see another 0.5% increase in rates throughout 2011, but this is financially speculative noise peeking through the woodwork. 3-month corporate paper is yielding 1.17% at present, so there is not much of a divergence between existing rates and implied December 2010 rates.
In terms of long-term rates, Canadian 10-year bonds have crept up to 2.98% at the end of November 10th trading. While this is not anything significant in terms of the range over the past 12 months, it is up about a quarter point over the past month. The big scare for real estate gurus out there was likely in the early second quarter (April) when 10-year bond rates went to 3.7%. Still, this is nothing close to the past decade’s average of 4.3%, and the peak rate of roughly 5.96% back in the year 2001.
I am struggling to make what is a rather boring interest rate post interesting, so I will leave it here.
Do you have a mortgage Sacha? You spend sufficient time deciphering interest rates….
My guess is to give you a picture of the housing market or more importantly the calculation for a risk free rate of return?
I would guess that your true risk free rate would be whatever IB gives you on your money sitting in cash. Ques gives nothing really, but i thought you mentioned in a previous post IB offers a decent (laughs) rate on idle cash.
Derek
No mortgage, although I’d take a million dollars at a 5-year rate of 3.4% if somebody threw it my way for investment purposes (just not in real estate).
Interest rates determine a lot more than what retail is going to pay for mortgages. The risk-free calculation is another one, yes. Basically rates give you a good impression as to what the availability of credit will be.
IB does not give good cash returns. I think right now Ally is the best place for liquid returns (2%) of up to $100k principal.
I have mentioned in the past that IB is a great place for borrowing, however. Currently 2.5% for the first $110k, 2.0% for the next $990k, 1.5% thereafter. Subtract about 0.84% for USD.
Considering all of the hoops that have to be jumped to do the smith maneuver compared to just using plain and simple margin, one wonders why anybody bothers doing it.