Bank of Canada hikes rates by 50 basis points to 1.00%


  • Prior was 0.50%
  • Maturing Government of Canada bonds on the Bank’s balance sheet will no longer be replaced starting April 25
  • “The Governing Council judges that interest rates will need to rise further”
  • “The timing and pace of further increases in the policy rate will be guided by the Bank’s ongoing assessment of the economy and its commitment to achieving the 2% inflation target.”
  • Supply disruptions and increases in commodity prices are primary drivers of upwardly-revised outlook for inflation
  • Core measures of inflation have all moved higher as price pressures broaden
  • There is an increasing risk that expectations of elevated inflation could become entrenched


  • BOC expects 3.5% GDP growth this year vs 4.0% in January
  • Sees 2023 GDP at 2.5% vs 3.5% in January
  • Sees 2024 GDP at 3.25%
  • Expects 5.3% inflation in 2022 vs 4.2% in Jan
  • Expects 2023 inflation at 2.8% vs 2.3% in Jan
  • Sees 2024 inflation at 2.1%

USD/ CAD  was trading at 1.2654 ahead of the release and after a quick move lower it’s at 1.2650 now. There’s no guidance here on the pace and size of upcoming rate hikes so we will have to wait for the press conference for more details at 11 am ET. So far, everything is in line with estimates.

The 3 Proven Levels of Trading Success. – #AnirudhSethi

Rules For Successful Trading - Bramesh's Technical AnalysisUnderstanding the difference between a milestone and a goal is a crucial distinction in trading success generally. Where are you going and what will you get there? The best people and teams I have been around were always good with momentum. When things went bad, they weren’t compounded and when things were going well, they poured every once into allowing it to continue and when it stopped, they rebuilt.

There are three levels of success in trading. it’s up to you to make a decision if they’re goals or milestones.

1st Level: Only Costing You Time

Breaking even is the start line of your trading career not having a trading account. This level is hardest, it’s 1st level. you’ve got to learn to crawl before you’ll walk and you’ve got to learn to break-even before you can remain stay profitable. This is your base, your safe zone. Knowing that you simply can break-even is a huge confidence builder and hopefully the memories of getting there are so devastating you wouldn’t want to go back.

This level is simply a milestone, you haven’t done anything yet.

2nd Level: Keeping Profits

Trading is not about making the money but about keeping the money. What am I to continuously do? All other trades aren’t a trade in the slightest degree, it’s gambling. (There is a place and time to gamble but isn’t a technique .) The 1st check you’re taking out of your trading account is going to be the hardest money you ever earn.

But it also shows you what you’re capable of. When you can take money from your trading account on a consistent basis, anything is feasible. With possibility comes great responsibility.

The important part about this level of success is you’ve got to still increase what you’ll make.

  • In the 1st level you recognize that no matter what, you ought to be ready to break-even over the course of a month.
  • In the second level it’s about building and do the proper things to the purpose where you recognize at least that you can be able to make $1000, $5000, $20000 etc. monthly. This enables you to get to the next level.

This could be a milestone or goal, it’s up to you. (more…)

The Zen of Quantitative Trading – #AnirudhSethi

The Beginners Guide to Quantitative Trading - Warrior TradingThis is a meditation on the essence of what makes for good quantitative trading. From a purely intellectual viewpoint this has attracted attention and has led to questions about what is at the heart of good quantitative models.

The Search For Structure

Whether a quant modeler is able to articulate it or not, eventually good algorithmic trading is about a search for structure in the noisy data of markets. It is about finding patterns, regularity or pockets of predictability. Here is a simple example of what is meant by structure. Let’s say that we observe that whenever the market goes up two days in a row, it usually goes up the third day. If this happens quite often, we have found the pattern or regularity we were looking for. The trading strategy immediately follows. If the market goes up two days in a row then buy at the close of the second day and sell it at the third day’s close. If only!

It is easy to get fooled by randomness and see patterns that in hindsight seem nonsensical at best. Technical analysis books are strewn with all sorts of patterns with colourful names, most of which will not stand even mild statistical scrutiny much less any systematic way of teaching a computer to identify the patterns.

To combine the problem markets are to a first approximation just noise. Yet they fail statistical tests of randomness in enticing ways. That is what randomness would prescribe except that the tail of the distribution is much fatter, i.e. periodically markets have much, much larger moves than a normal distribution.

When we study the dynamics of daily moves rather than the aggregation in a histogram, things get even more interesting. If markets were indeed a random walk, today’s move would be independent of yesterday’s move. Not so, say econometricians where there is a cottage industry of models (called the GARCH models) which suggest that big moves (in absolute terms) are usually followed by big moves i.e. there are times when markets remember yesterday’s moves. Greed and panic leave the markets quite shaken with bursts of volatility! This is a structure that has been modelled by academics and used by practitioners to model volatility for derivatives. From a perspective of trading it can be used not really as a strategy but as a signal of the onset of volatility and also lowering of trade size during this period.

The academics have discovered more that are about financial time-series. It may be hard to figure out what the future holds for a single time-series, but academics have found techniques (called co-integration) that allow us to create portfolios of longs and shorts of different assets in such a way that the value of the portfolio oscillates around a mean value much like a sine wave. Again, this is the regularity a modeler is looking for and the strategy is clear. Buy when it reaches the bottom and sell it when it reaches the top. The trouble alas is that markets change, the relationships break down and the sine wave starts moving out of its band or narrows to the point where the strategy is unprofitable. It is a non-stationary world. The message to a quant is clear – there is structure to be exploited, but beware of noise, fat tails and non-stationarity. (more…)

Fed’s Bullard: It is ‘fantasy’ to believe that neutral is enough to bring down inflation

  • There’s a bit of ‘fantasy’ when it comes to current policy
  • Neutral is not enough to apply downward pressure on inflation
  • All it does is that it ceases to put upward pressure
  • Getting to neutral won’t be enough
  • Yesterday’s inflation report points to urgency in the Fed to act, feeling behind the curve
  • Fed funds rate should move up sharply, endorses a 3% move by Q3

I would argue that there is also a bit of ‘fantasy’ in thinking that rate hikes will do a whole lot to rein in price pressures in general. I made my case here already. But this is more of a credibility issue for the Fed perhaps, especially in trying to anchor inflation expectations.

I reckon a 50 bps move in May is all but certain at this stage. We’ll just have to see if they have the appetite to stick with a more aggressive path in the following months.

US President Biden says Putin committing genocide

Biden was speaking about high prices, specifically gasoline prices.

  • “Your family budget, your ability to fill up your tank, none of it should hinge on whether a dictator declares war and commits genocide half a world away”

I’m not sure what the implications of calling Putin’s war crimes genocide will be. It may be indicative of hardening resolve within the US administration. Whether that amounts to harder action is also a question.

The 3 major stock indices give up solid gains and close lower

The three major US stock indices are closing lower on the day after giving up a solid gains. The NASDAQ index was up over 2% at its highs. The S&P index was up 1.34%. The NASDAQ and S&P are closing lower for the third consecutive day

The small-cap Russell 2000 index did eek out a small gain on the day.

The final numbers are showing:

  • Dow industrial average fell -87.74 points or -0.26% at 34220.35
  • S&P index fell -15.08 points or -0.34% at 4397.46
  •  NASDAQ  index fell -40.39 points or -0.30% at 13371.56
  • Russell 2000 rose 6.61 points or +0.33% at 1986.93
Go to top