Canadian Short Rates Have Become Unhinged From Oil Prices
Is the oil shock over, or just starting to spread?
Deep Dive: Oil Prices, Odds of a Rate Cut in Canada
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The collapse in oil prices in the second half of 2014 provoked a surprise rate cut from the Bank of Canada at the start of this year. Six months later, the prolonged downdraft in crude spurred another reduction in the overnight rate to 0.5 percent amid back-to-back quarters of economic contraction.
But as oil prices (in Canadian dollars) have been tumbling since early November, the yield on the one-year Government of Canada bill has continued to inch higher to 0.549 percent: