Canadian overnight interest rateDeltafx Admin 30 January 2023
The Canadian overnight interest rate is a measure or estimate of the rate at which large dealers can fund their securities balances for one business day. This rate is determined by the Bank of Canada (BOC) at the end of the day based on a survey of major participants in the overnight market.
The Canadian overnight rate represents the weighted average funding costs of the major money market dealers. This index is less volatile than other rates because it includes a larger volume of overnight trades from a larger number of participants.
The central bank conducts monetary policy by influencing short-term interest rates. The bank increases or decreases the overnight target rate.
The overnight rate is the interest rate at which large financial institutions lend and borrow overnight money from each other. The bank sets a target rate for this rate. This target overnight rate is often referred to as the bank’s prime rate.
The Canadian overnight rate index was released at 3:00 p.m. on January 25 and was 4.50%, which was in line with expectations. In the last period of this index, the rate was 4.25%. After the Bank of Canada raised its overnight rate, we saw positive changes in the financial markets.