BoC Rate vs GIC | Page 2 | General financial discussion | Discussion forum

two_yolks said

No, I'm going to buy a GIC and want to know if I should wait a day, a week or just buy it now. If I buy it today knowing that banks raise their rates on a Monday then that wouldn't be very wise.  

As mentioned by others, and my post just above yours, no one knows. It depends on each FIs particular need for funds of a certain term at a certain time.

AltaRed said

Of course this is the place for members to ask questions. That is what a forum is for. However, to post #14's point, there are a number of recent threads with this kind of discussion in them that provide a lot of good information on this kind of generic subject, be it on HISAs or GICs. The richness and value of any forum is the wealth of information it already provides on a wide range of subjects for members to peruse and broaden thought.

As to Bill's point in #13, I think it is reasonable to expect members to do a bit of legwork to find answers to their questions and/or posting in an existing, but recent, thread on the subject, rather than just blindly starting a new thread. It would seem to be respectful and courteous. I typically would look at 2-3 months of thread titles to see if a 'current' subject has been discussed already, and in select cases on for a specific FI for example, I've gone through a lot more history than that to see what the chatter on that FI has been about historically.

A number of regular posters here do a lot of good work contributing their knowledge on a voluntary basis. Repeating that knowledge on a regular basis, e.g. weekly, does become frustrating. Some will likely simply stop responding to new threads on the same question eventually. That is what it appears I should have done rather than posting about it.  

This is the best advice for new members on how to use this forum.

For all the newbies out there:

Financial institutions have NO obligation to adjust their GIC, savings rate, fixed mortgage rates just because bank changes their O/N nite. In fact BoC can raise their O/N rates and the next day any FI can choose to lower their GIC rates if they want to.

BoC only "mandates" them to change the prime rate to match the bank's move.
I put "mandates" in quotes as its an mutual understanding. Its not carved in stone.
Banks tried to get cute once and were "told" dont try it again.

BOC overnight rate does not determine rates the banks charge. However there are correlations between various “rates”.

BoC rate is positively correlated with inflation today and, perhaps, expected inflation a year out. There is causation: high expected inflation causes BoC to raise (or at least it should).

GIC rates are also positively correlated with inflation but its the expected inflation over the term of the GIC which could be 5 years.

So, there is a decent likelihood that some 1 year GICs would move in the same direction as BOC rate as the time horizon is similar. 5 year GICs could quite plausibility move the other way as BoC lifts the overnight rate, pushing the economy into recession and therefore creating deflationary pressures. The impact on the economy is delayed but it will be felt in a year or so. So, for longer term FI correlation is weak.

two_yolks said

I'm not sure what this has to do with the subject, can you explain this please. Is this some kind of financial saying or inside joke?  

On the surface it does seem off topic but earlier in this thread, Bill was suggesting removing older topics from this forum since many here don't bother doing a little research of their own before asking questions ...

Norman1 said

Norman1 said
So, deposit rates are adjusted up or down depending on how the deposits flowing in compare with the loans being made, regardless of the Bank of Canada rate.

HermanH said
Can you foresee a situation whereby the BoC rate goes up from 3.25% to 5% without any subsequent reaction GIC rates?

Yes. If some GIC rates can be lower with the Bank of Canada rate higher, then GIC rates can certainly do nothing with a higher Bank of Canada rate.

For example, Oaken's two- to five-year GIC rates are lower now than they were in July with the Bank of Canada rate now higher now than in July.  

Exactly, rates market are a function of future rate expectation, demand and supply of funds avail at the time. BoC moves are only relevant in the grand scheme of things, has little to nothing to do with the day to day fluctuation in rates.

Bill said
So you're saying if you'd had OP's original question you would have first searched the site? Ok, fine, but I wouldn't have known what search term would bring up the desired answer - help me, can you suggest one that would brought up the relevant prior posts?  

Just suggesting that an automatic delete of anything older than X days/weeks/months may not be a good idea ..