4% 1yr GIC - should I lock in or wait some more? | Page 3 | EQ Bank | Discussion forum

We still have the nagging problem that, although BoC signalled in July that it would likely raise rates again in Sept by about .5, five yr GIC rates have not budged. And they were slowing down even before this. In my mind, this does not suggest further hikes in long GICs this year but does fit with lower bond rates.

This was shared in another post but I haven't seen anyone reference it, so I will share the article here: https://financialpost.com/investing/interest-rates-are-still-rising-but-investors-should-start-preparing-for-when-they-come-back-down

This gives excellent 30-year historical context, then provides an educated estimate for the current rate-hike period. The author estimates that the "sweet spot" for locking in (i.e., when rates will peak) will be the end of 2022 or first half of 2023.

As for someone's comment about the stock market rising this past week and giving indications that we're back (or still) in a bull market, I would remain very skeptical of that sentiment. The analyst that I follow (www.pretzelcharts.com) states that this is simply a bounce within a long-term bear market that began in December 2021. Of course, he is but one analyst, but he's been very accurate since I found his site in 2019.

Nirvana7734 said
This was shared in another post but I haven't seen anyone reference it, so I will share the article here: https://financialpost.com/investing/interest-rates-are-still-rising-but-investors-should-start-preparing-for-when-they-come-back-down

This gives excellent 30-year historical context, then provides an educated estimate for the current rate-hike period. The author estimates that the "sweet spot" for locking in (i.e., when rates will peak) will be the end of 2022 or first half of 2023.

As for someone's comment about the stock market rising this past week and giving indications that we're back (or still) in a bull market, I would remain very skeptical of that sentiment. The analyst that I follow (www.pretzelcharts.com) states that this is simply a bounce within a long-term bear market that began in December 2021. Of course, he is but one analyst, but he's been very accurate since I found his site in 2019.  

1. I agree with that FP article where the author estimates that rates will peak at the end of 2022 or first half of 2023.
2. I do not think anyone said "we're back (or still) in a bull market." I think the market sentiment simply might have changed in line with the belief that rates will stabilize end of 2022 or first half of 2023. We have been in a bear market which might continue this year, but I would not be surprised if the markets are up within the next year once inflation and rates stabilize - that does not mean a "bull market". I am not ultra positive on GIC rates this year - the reduction in some of EQ rates is not a good sign.

Nirvana7734 said
https://financialpost.com/investing/interest-rates-are-still-rising-but-investors-should-start-preparing-for-when-they-come-back-down 

Please note the following from the artical and well as since 1961 the Fed rate always was over 2.00% with exception of:
- Dot com bubble
- The financial crisis of 2008
- The Pandemic

Now The inflation,The inflation and The inflation

We’re routinely told that inflation is a great evil that hurts low-income people. But inflation also greatly impacts rich people. (now they are impacted) That’s because inflation erodes the real value of money. That’s why banks, their shareholders and the rest of Bay Street demand that the central bank raise interest rates to kill inflation. By killing inflation with higher interest rates drives up unemployment, it’s actually central strategy, therefore unemployment is up more people looking for work no more need to raise wages, With that CB hopes the inflation wont be "entrenched inflation".

The inflation is not going away anytime soon and high interest are here for few years infact Scotiabank and few other banks forcast that CB rate will go to 3.5% by Dec 2022 and stay @3.5% until the end 2023

cgouimet said

Just looking at EQ Bank's rates ... 3/4/5Yrs are down ...

1Yr 4.35% (was 4.30)
2Yr 4.65% (was 4.60)
3Yr 4.65% (was 4.70)
4Yr 4.70% (was 4.75)
5Yr 4.80% (was 5.00)  

Yet another sign that the longer term GIC rates 'may' have already peaked ❓

Dean

i agree with Norman1

First EQ does NOT set a trend nor the standard what they are doing simply a marketing strategy for EQ Bank

I don't care what EQ is offering or doing they are not a leader they just duplicate Oaken and now they are duplicating Tangerine.

What does matter is to always look for a trend from one the leader in Canadian Banking and now one of the BIG 5 "CIBC" is offering 5 for 5

Norman1 said
The deposit taking financial institutions are not waiting for anything.

They adjust their deposit rates to bring in deposits at a flow that matches their lending. It is as simple as that.

If the Royal Bank finds that 0.8% brings in HISA money adequately, then 0.8% will be the rate of their HISA, regardless what the Bank of Canada has done to its policy rate.

If Equitable Bank finds that 5% is attracting 5-year deposits too quickly in its EQ Bank channel, then it will lower the EQ Bank 5-year GIC rate to fix the situation.  

Fully agree. Too many folk are trying to read (guess) too much into the numbers. Every institution will only do what they need to do to match their loan book. With the inverted GoC bond yield curve, I am surprised we are not seeing more adjustments to completely flatten 3-5 year GIC rates at a minimum.

Given mortgagors are now more likely to stop opting for 5.5% or higher 4-5 year fixed rate mortgages, and the 5 year GIC rate now approximating 200 bp spread with the GoC5 bond, I see corresponding GIC terms to potentially reverse as well.

We live in interesting times.

savemoresaveoften said And for now, its up to the individual investor to determine who has the bigger reinvestment or funding risk, is it the investor or the FI paying 4% plus in 1year GIC....  

I think that 1-yr rates are currently a trap set for those to catch a falling market, with renewal dates right when the rates will fall.

HermanH said

I think that 1-yr rates are currently a trap set for those to catch a falling market, with renewal dates right when the rates will fall.  

I fully agreed with you. Canada will probably be in a recession next year. Interest rates will be dropped in 2023 to stimulate the economy which in turn leads to lower GIC rates.

agit said
This thread is now the justification thread for many of you who bought 5 years GIC or about to do so. Please give me a break taking EQ 5 years GIC drop as the canary in the GIC coal mine is a great lack of intelligence or common sense, when CIBC is offering 5 years for 5%.  

Neither the EQ drop nor the CIBC offering means anything one way or the other.