4% 1yr GIC - should I lock in or wait some more? | EQ Bank | Discussion forum

I just pulled the trigger today. It's kinda hard to resist jumping on the bandwagon now that it's at a full 4%... and it's also becoming apparent that EQ isn't too serious on raising their HISA rates much at all.

BOC, Fed and EU all clearly stated that rate will go up to 3.00% and maybe higher CPI still going up. Wouldn't be wise to wait at least until BOC reach 2.5%-3.00% ?

Alexandre said

I already see articles on CNN Business and Canadian financial web sites sharing the opinion Central Banks might have gone too far already, recession is inevitable, stock market will crash, etc., etc.

Now, the question is will US government in the next few months be more concerned with weak stock market performance impacting the rich party donors, or with high inflation that is on minds of middle class and poor folks who are majority of voters.  

Judging from TSX, DJ el al volatility in the last few months those opinions are a function of Day of Week, Time of Day and possibly the position the toilet seat was last left in ...

I look at a yield curve spread perspective:

• Bank of Canada policy interest rate is 1.5%. 1 month yield is similar. HISA promo for retail is around 2.75%-3%, a spread of 1.25%-1.5% from Bank of Canada risk-free rate.
• 1 year Canada bond is at 3.1%. So a 4% GIC is a spread of 0.9%.

Granted the HISA is a "promo" while the GIC is not a "promo".

I'd also try to look up rates for debt by Canadian banks on the market but that information seems to be much harder to obtain than risk-free yield curve.

Another thing I look at is US Fed Funds Futures (I don't know what the CAD equivalent is, if it even exists at all). It suggests a 1.6% rise in Fed Funds rate by Dec 2022. (3.3% vs 1.7%) So potentially 5% HISA (2% higher than the current best promo) isn't so unlikely as we think?

Just my two cents. I might pull the trigger on this one, but definitely not dumping everything into it. Thanks for sharing!

Alexandre said

It is now 4.15%. That answers you question.

I wonder if we are going to see 5% 1 year GIC by August 2022.  

Zero chance of 1y reaching 5% by august.

While I am also thinking when to start locking in, I am more concerned the term to lock in, to try to plan ahead for the next round of renewal to not coincide with the rate cut period.

Alexandre said

savemoresaveoften said
Zero chance of 1y reaching 5% by august.

I bookmarked this forum topic and put reminder in my calendar for August 31st to check 1 year GIC rates. Will it be "never say zero chance?" Will see.  

Make sure it’s calendar year 2022, not 2023 or … lol
We shall see in roughly 2 months. Even 4.5-4.75% is a stretch in my mind, my 2 cents.

Since TFSA money isn't what I reach for first when I need liquidity, I'll be going 5-year when I lock in the TFSA cash. Probably mid-month after the latest BoC rate setting, as a hedge against my August-maturing money that may not beat a coming recession or crash.
RetirEd

Unless BoC delivers 1% next week which I don’t think they will, 5% by August remains a no-go. Even if they do hike 100bp, 5% 1 year remains to be seen. It ain’t happen until it actually does.

phrank said There are those who say you're losing by not locking in to the slightly higher rates now, but I'll take those small losses vs waking up to double digit rates being offered while I have funds locked in at 5%.  

What would trigger your willingness to lock in for more than a few years?

To lock my money for more than (at the very most) a year where I actually can't get at it at all would take a lot more political, social and economic stability. So higher bar for me, personally.