Posted by: Daryl & Wendy Ashby | July 13, 2010

You Heard it Here First

Canada’s key lending rate is headed at least 1/4 point higher in eight days…that is, if the financial markets are right.

Here’s the latest…

  • Friday’s eye-popping employment report has lifted the odds of a quarter-point hike to 96%, based on the price of overnight index swaps.
  • Bankers’ acceptance (BA) yields have averaged 20 bps above the overnight rate since 1992. Their current 0.94% level also points to a 25 bps rate increase.
  • Every last one of Canada’s primary securities dealers is now predicting a 25 basis point hike this month, according to a Reuters poll on Friday. Not only that, but every single dealer also forecasts another rate increase in September.

If the overnight rate does rise to 0.75% on July 20, prime rate will likely move to 2.75%. The last time prime was above 2.50% was February 2009.

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