Deciphering Forward Markets for Interest Rate Insights

Forward rates are popular reference points that reflect the "smart money's" expectations for future interest rates.

Who is the smart money? Think big institutional investors with deep pockets.

For decades, investors have used forward rates to predict future rates. Despite the market's flaws, few rate prediction sources are more objective and credible. At a minimum, it beats your uncle's gut feeling at Easter dinner.

Forward rates are also helpful when running borrowing cost scenarios and assessing potential mortgage affordability challenges.

But forward rates are often misunderstood. If you want a better feel for how markets anticipate rate direction changes, watch this fascinating video. It's based on American futures, but the principle also holds for Canadian rates.