There are three Bank of Canada announcements concerning interest rates for the rest of the year: September 6, October 25 and December 6.
Right now 3-month Banker’s Acceptance rates are 1.2%.
The BAX futures are signalling that there is a better than 50/50 chance that rates will increase 0.25% in the September 6 cycle, and that there is a slight chance of two 0.25% rate increases by the end of the year:
|Month||Bid price||Ask price||Settl. price||Net change||Open int.||Vol.|
|Open interest: 942,178||Volume: 86,058|
Guessing the impact of these short-term interest rate changes I will leave as an exercise to the reader for now. The one salient fact, however, is that when short-term financing rates increase, the incentive to leveraging decreases and so marginal investments will be less viable. Parking cash in a rising-rate environment is best done with cash rather than using any debt instruments with duration (I wish I had stuck to this – my cash parked in VSB.TO has decidedly unperformed zero-yield cash!).