Monday Market Minute | Jan 06, 2025

Markets open 2025 with rate cuts priced in — but tariff clouds gather

What Moved

Canadian private markets entered 2025 with cautious optimism. The Bank of Canada's December 2024 cut to 3.25% had set the stage for further easing, and bond markets were pricing in at least two more cuts by mid-year. Private credit deal pipelines reopened after a quiet holiday period, with sponsors preparing to deploy capital into a more accommodating rate environment.

Why It Matters

For private markets investors, the rate trajectory matters more than the level. Lower borrowing costs improve PE deal economics, support real estate valuations, and compress the spread advantage private credit has held over public fixed income. The first quarter was shaping up as a deployment window — but incoming US trade rhetoric was already injecting uncertainty into cross-border deal structures.

Signal to Watch

The January 29 BoC decision loomed as the first major catalyst. Markets expected another 25bps cut, but all eyes were on Governor Macklem's guidance around trade policy risk.

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