What Moved
The Bank of Canada cut its overnight rate by 25 basis points to 4.25% on September 4 — the third consecutive reduction and total easing of 75bp since June (BoC, Sep 4, 2024).
Two weeks later, on September 18, Fed cuts began in earnest as the US Federal Reserve reduced its benchmark rate by 50 basis points — its first reduction since March 2020. The larger-than-expected cut signaled that the US central bank was joining the global easing cycle with conviction (Fed, Sep 18, 2024).
The synchronized central bank easing boosted global risk appetite. Equity markets rallied, bond yields declined, and credit conditions eased further. The Canadian dollar was broadly stable as both countries eased simultaneously.
Housing markets continued to improve. Fall activity was exceeding expectations in several major markets, with year-over-year price gains returning for the first time since the 2022 correction (CREA, Sep 2024).
PE deal activity remained robust, with the strongest H2 pipeline in years.
What It Means
The synchronized BoC-Fed easing was the most significant global monetary development since the coordinated tightening of 2022. For Canadian private markets, it was unambiguously positive.
The combined effect of lower domestic rates and global easing was working through multiple channels: reduced borrowing costs for borrowers (supporting private credit performance), improved risk appetite (supporting PE valuations and deal activity), recovering housing (supporting collateral values), and growing investor confidence (supporting capital flows into alternatives).
For private credit, the September data showed the easing cycle working as intended. Loan repayment rates were improving, borrower delinquencies were declining, and new origination was proceeding at terms that still offered meaningful yield above the declining risk-free rate.
The PE recovery was now firmly established. Deal volume was tracking well above 2023, and the quality of deals — measured by entry valuations, leverage levels, and underwriting assumptions — was materially better than the 2021 vintage. Investors in 2024-vintage PE funds were positioned for strong risk-adjusted returns. The exit pipeline was also benefiting from improved public market conditions, with strategic acquirers returning to the M&A market after a cautious 2023 and offering PE sponsors a viable exit path for mature portfolio holdings.
What We're Watching
The pace of further BoC cuts through Q4 was the key variable. Markets were pricing in 50bp of additional easing before year-end, which would bring rates to 3.25-3.75%.
Whether the housing recovery would accelerate further or stabilize at current levels would shape the outlook for 2025. Affordability constraints remained real even with lower rates.
The Bridging Finance legal proceedings were expected to reach a significant milestone in October — the OSC's case against the executives was moving toward conclusion.
Closing
September's synchronized global easing was the confirmation that the post-tightening era was fully underway. For Canadian alternative investments across the board, the recovery that began with anticipation in January and was confirmed with the first cut in June was now accelerating. The cycle had turned.
For the full quarterly analysis, see Q3 2024: Synchronized Easing.
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