Monday Market Minute | Jan 01, 2024

Markets open 2024 pricing in a pivot — but the BoC isn't there yet

What Moved

Bond markets opened the year aggressively pricing in multiple Bank of Canada rate cuts for 2024, with swap markets implying as many as five 25-basis-point reductions by December. The overnight rate sat at 5.00% — its highest level since 2001 — after the BoC's final hold in December 2023. Inflation had decelerated to 3.1% but remained above the 2% target.

Why It Matters

For private market investors, the rate trajectory shaped everything — from private credit yields to PE deal multiples to housing recovery timing. A cutting cycle would compress private credit spreads but also revive deal flow and exit opportunities. The question was not if, but when.

Signal to Watch

The January 24 BoC decision would set the tone. A dovish hold — acknowledging disinflation progress — would confirm mid-year cuts and accelerate private market positioning.

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