Banks that don't raise GIC rates will be stuck in a liquidity crisis | GIC discussions | Discussion forum

I think Home Trust/Bank ran into a liquidity crisis a few years ago when depositors made a "run on the bank".

They had a mismatched book where they were funding long term mortgages with short term deposits.

It is better to search for another bank that is looking for more deposit money and is willing to offer better rates.

Otherwise, the bank CFO doesn't care. He knows first hand that when the bank tried to raise $500 million in deposit notes in February, around $1 billion came calling! He had to turn away $500 million in deposits that the bank didn't need.

AltaRed said Financial institutions who have extraordinarily high HISA rates must either be laying off that risk in some way with counterparties, or possibly living further on the edge than their peers.  

Maybe they are doing this:
How to rob a bank (from the inside, that is)

This reads like wishful thinking.

I have never been a bank CFO, so the following is pure speculation… I am guessing that CFOs have multiple ways of balancing liabilities and assets. Like issuing bonds and other similar instruments. And if Bank of Canada pays about 3.5% on a 5 year bond, TD can issue bonds with rates only marginally higher and it would be snapped up. Smaller institutions have to pay a bit more but not a whole lot unless they are already in distress.

So why would the banks pay more on term deposits? There could be good regulatory and taxation reasons but its not going to push the needle much. And some institutions might not be able to issue bonds; they would be the ones to pay a bit more for GICs but BoC bonds are still likely to be the benchmark.

So for 5 year GICs to start paying more, the market needs to change its current thinking to “Bank of Canada is not going to be able to deliver on 2% inflation. Not this year, not next, not in 2024”. Then investors won’t buy 5 year bonds at 3.5%. Then 5 year GICs would pay more. But not until then.

…but like I say, the above is just speculation. I dont really know.

For investors to “dump”, investors have to buy. So, the other way to read this ls “ Investors have been buying government bonds this year, and they are buying bonds from America’s top companies even faster." Wsj Sept 8/22 (amended)

There's no dumping of bonds. That's just fake drama.

As mordko wrote, there is a buyer for each bond "dumped". Some of that $500 million turned away by Equitable Bank earlier in the year may be among the buyers.

As well, most bonds don't trade. They are bought by institutional buyers and held to maturity in investment pools for their products.

Hellohello said
That's a new one lower prices don't matter. I guess not when equity holders expect to be bailed out. It feels like that still.

Right he got 15% less than last year for example

Norman1 said
There's no dumping of bonds. That's just fake drama.

Lower prices is fake?

Those bonds dumped at discount prices. It be like buying a $50 stock one day, the next day a buyer decided to sell for 40 and the rest follow.  

do u even know what discounted price means ..... sigh

they trade at market price, whatever the market is.

you need to learn how the investment community works or just become a laugh here .....

AltaRed said
…
Financial institutions who have extraordinarily high HISA rates must either be laying off that risk in some way with counterparties, or possibly living further on the edge than their peers.

HermanH said
Maybe they are doing this:
How to rob a bank (from the inside, that is)

Fraud isn't necessary. There are lots of lending that is more specialized and have higher rates.

Home Trust and Equitable Bank specialize in near-prime mortgages that the regular banks reject. They charge such borrowers more because they know such borrowers won't qualify for a prime mortgage at a bank or credit union.

Another example is Peoples Trust's First Inheritance probate loans to front the probate taxes, often needed to be paid up front, to get that grant of probate from the probate court. $5,000 placement fee + 15.99% per annum interest for up to one year term. One can easily pay an extra ½% per annum on deposits if one is funding 15.99% per annum loans instead of 5.29% prime 5-year residential mortgages!

Canadian Western Bank, who are behind Motive Financial, focuses on commercial lending instead of personal lending. Commercial mortgages are larger and have higher rates than residential mortgages.