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On an announcement date when the Bank of Canada announces a 50 basis-point increase in its...

On an announcement date when the Bank of Canada announces a 50 basis-point increase in its target for the overnight interest rate the yield to maturity of a 30 day Government of Canada Treasury Bill usually increases by 50 basis points as well. Briefly explain why we observe this correlation between these two events.

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If the rate of interest increase by 50 basis-point then the price of the Treasury Bill will also reduce due to the reduction of the spread (lets say bank offered 2.5% which is now increased to 3.0% and the bill coupon rate was 4% then the spread reduced form 1.5% to 1.0%). This is why the price of bond will decrease due to the risk vs return of the investment. In ideal cases it will be equal to the change in spread that was occurred due to change in Interest Rate that is 50 basic points

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