This downloadable Excel file allows the user to customize the model inputs according to his market assessment or preferences, including modifications to the risk and/or term premium discussed above. The information displayed in the graphs and table above is not adjusted for the projected evolution of this risk and/or term premium. Therefore, the implied 3M CDOR rate movements and probabilities combine market views of future Bank of Canada policy along with anticipated risk or term premia. * The 3M CDOR rate may include a risk and/or term premium component in comparison to the Bank of Canada key target rate determined by monetary policy decisions. The implied probabilities are calculated assuming no change in the CDOR-OIS spread*.Įxample with a 3M CDOR rate at 2% and a BAX contract expiring in 6 months priced at $97.60: The implied 3M CDOR rate movement of that contract would be 50bps, and the associated implied probability would be ((100 - 97.60) - 2.25) / 0.25 = 60%. Implied probability (in %): (BAX contract implied 3M CDOR rate - lowest implied 3M CDOR rate (with a 25bps increment change) by BAX contract) / 25bps). Implied 3M CDOR rate movement (in basis points): Highest implied 25 basis points increment change by BAX contract expiry month. The cyan line shows the historical implied probabilities of these changes. The blue bars represent the historical change (in bps) to the 3M CDOR implied by the selected BAX contract, for each business day of the last 3-month period. Source Historical implied short-term interest rate movements and probabilities by BAX contract expiry month Bank of Canada scheduled announcement dates 2023 schedule The best way to interpret the table is by looking at each BAX contract expiry month separately.įor example, it can be interpreted as: "Given the June 2025 BAX contract with the current price of $95.100, there is a 52% chance that the 3M CDOR rate moves by -75 basis points by the time we reach the contract expiry". There is one implied change and one implied probability by BAX contract expiry month. The number at the intersection of a row and a column represents the implied probability of a 3M CDOR rate change for that magnitude (row) and for this BAX contract expiry month (column). BAX contract expiry months are the header of each column. The best way to interpret the graph is by looking at each BAX contract expiry month separately.Įach row represents a potential 3M CDOR rate change in basis points ("bps").
The cyan line shows the implied probability of these changes. The blue bars represent the change in basis points ("bps") to the 3M CDOR implied by each BAX contract price. BAX contract expiry months are on the horizontal axis.
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