Is This Really the End? An Update on BAX
Monetary tightening at the Bank of Canada (BoC) began in earnest in the first quarter of 2022, just a year ago. As all market participants know, the emergence of inflation, followed by a rapid response to raise the target rate from 0.25% in January 2022 to 4.5% by the end of January 2023 has caused a rise in 3-month CDOR (Canadian Dollar Offered Rate), from 0.5% to just over 5%; a painful move for anyone that was long on Three-Month Canadian Bankers' Acceptance Futures (BAX™) contracts during this time. At present, Montréal Exchange's BAX contracts indicate that market expectations are that rate hikes will pause soon, followed by a more accommodative monetary policy within 12 to 15 months. For the moment, investors who disagree with these implied rates or with their path can execute trades in both BAX contracts and Three-Month CORRA Futures (CRA™) contracts.
