What rising interest rates mean

Interest rates are the price of time. When they rise, a dollar received in ten years is worth less today.

That is why long-duration assets — high-growth equities, long bonds, development-stage projects — react most to rate changes. Duration, in this sense, is not a bond-market technicality; it applies to any asset whose value sits mostly in the distant future.

The three channels

• Discounting: future cash flows are worth less today, so the fair value of every asset falls mechanically.
• Borrowing cost: companies carrying floating-rate or maturing debt see interest expense rise, which lands directly in earnings.
• Competition for capital: when a government bond pays a real return, investors demand more from equities to compensate for the extra risk.

What it means in Canada specifically

The Bank of Canada sets the overnight rate; the market sets everything else. Because Canadian households carry more mortgage debt renewing on shorter terms than American households, a policy change reaches consumer spending here faster than it does south of the border.

Banks are the clearest example of a mixed effect. Higher rates widen net interest margin, but they also raise loan-loss provisions when borrowers struggle. Read both lines together, not either one alone.

What to do with this

• Check the maturity profile of a company's debt before assuming higher rates are harmless.
• Treat a change in expected rates as more important than the current level — markets price expectations, not history.
• Watch the yield curve as a summary of what the market thinks about growth and inflation together.