What Moved
The Bank of Canada held at 5.00% on March 6, but Governor Macklem's commentary was noticeably dovish. Signs of a private credit recovery were emerging as the Bank acknowledged that monetary policy was working, inflation was declining, and the economy was operating below potential. While no timeline was offered, the direction of travel was unmistakable (BoC, Mar 6, 2024).
Canadian CPI for February came in at 2.8%, continuing the steady descent. Inflation was now within the Bank's 1-3% target range, and core measures were also declining. The data was building the case for cuts (StatsCan, Mar 2024).
Spring housing markets showed early signs of activity. New listings were up, showing visits were increasing, and the psychological shift toward "rates are going to come down" was beginning to influence buyer behaviour (CREA, Mar 2024).
PE deal activity picked up in Q1, with several notable mid-market transactions announced. Sponsors were deploying capital with the expectation that the rate-cutting cycle would improve exit conditions over their typical 3-5 year holding periods.
What It Means
March represented the turning point in market psychology. The BoC hadn't cut yet, but the combination of sub-3% inflation, dovish commentary, and economic slack made cuts feel inevitable. Markets were now debating the pace of easing rather than its likelihood.
For private credit, the improving environment was visible in multiple ways. Borrower inquiries were increasing — potential borrowers who had been waiting for lower rates were beginning to move. Existing borrowers were better positioned as the prospect of lower rates improved their refinancing outlook. And new origination was proceeding at terms that remained attractive despite the growing expectation of cuts.
The spring housing market's early stirring was significant for private lending. More housing activity means more demand for mortgage financing — including the alternative financing provided by MICs. If rate cuts came by mid-year, the combination of lower rates, pent-up demand, and recovering confidence could generate a meaningful housing recovery — positive for both lending volumes and collateral values.
For PE, the March data confirmed that the deal market was reopening. Companies that had been "held" during the tightening period were coming to market, and new platform acquisitions were being pursued. The 2024 vintage was taking shape as a potentially strong one — underwritten with realistic rate assumptions and achievable business plans. Notably, sponsors were also finding opportunities in sectors where the tightening had created operational value — companies that had reduced costs, improved margins, and built resilience during the downturn were now positioned as stronger acquisition targets.
What We're Watching
The April BoC decision would be the next rate test. While some hoped for an April cut, the consensus was June — but the April statement would narrow the timeline.
Spring housing data through April and May would quantify the degree of pent-up demand and set expectations for the recovery.
PE exit activity was worth tracking — any pickup in exits would signal improving market conditions and liquidity.
Closing
March confirmed that the cycle had turned — psychologically if not yet officially. For those tracking alternative investments in Canada, the positioning was clear: the worst was behind, the recovery was forming, and the opportunity to capture the transition from peak rates to easing was at hand.
For the full quarterly analysis, see Q1 2024: The Anticipation Trade.
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