The Open Outcry: The Current State of the CAD and US Rates Markets

With the Federal Reserve and Bank of Canada (BoC) travelling on what appear to be different policy trajectories, Jason Daw, head of North American rates strategy for RBC Capital Markets, joins Bipan Rai to discuss what that means for North American bonds. The pair also discuss the latest Financial Stability Report from the BoC. This podcast was recorded live on May 13, 2015.

Show link (Spotify): ⁠⁠⁠⁠https://open.spotify.com/show/54bsOfP7M4a6IMujUzRyBK⁠⁠⁠⁠

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GFC: the Great Financial Crisis, also known as the 2008 financial crisis or global financial crisis, refers to a severe global economic downturn triggered by the collapse of the US housing market.

Yield curve: a line that plots the interest rates of bonds having equal credit quality but differing maturity dates. A normal or steep yield curve indicates that long-term interest rates are higher than short-term interest rates. A flat yield curve indicates that short-term rates are in line with long-term rates, whereas an inverted yield curve indicates that short-term rates are higher than long-term rates.

Term premium: the extra money you get if you're going to the trouble of locking up your money for a decade or more in a bond.

Foreign buyer strike: a situation where foreign buyers significantly reduce or halt their purchasing activity in a particular market, often impacting prices and supply.

Liquidity: The degree to which an asset or security can be quickly bought or sold in the market without affecting the asset’s price.

Terminal rate: the interest rate level that a central bank believes is consistent with a balanced economy in the long run.

DV01: means the “Dollar Value of 01,” a term used to quantify the sensitivity of a fixed-income security's price to a change in interest rates.

Duration: a measure of a bond's sensitivity to changes in interest rates. It is expressed in years and helps investors understand how much the price of a bond is likely to change when interest rates move. Essentially, duration estimates the percentage change in a bond's price for a 1% change in interest rates.

Rate spread: refers to the difference between two interest rates or other financial rates. It's essentially the margin or premium applied when comparing one rate to another.

GOC: The Government of Canada.

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