BOC to bring overnight rate to 0.25% in Q1 16

The BOC is expected to bring the overnight rate to 0.25% in January. 

"Lowering the overnight rate below 0.25% is unlikely, given potential disruptions in the functioning of repo markets, where increased fails are already an issue, and money market funds", says RBC capital markets. 

If any further easing is needed, it is more likely to be achieved through forward guidance and asset purchases. 

Although a further decline is expected in rates in the front end, only a modest rally is expected at the back end of the curve due to a selloff in the UST market triggered by Fed tightening.