GIC Wealth | Page 2 | GIC discussions | Discussion forum

Rate Updates for GIC Wealth:

1 year 1.90% *
18 mth 2.00% *
2 year 2.15% *
30 mth 2.25% *
3 year 2.50% *
4 year 2.70% *
5 year 2.92% *

Minimum Investment $25,000 *

Big Rate Jump:

1 year 3.05%*
18 month 3.15%*
2 year 3.30%**
30 month 3.50%**
3 year 3.75%**
4 year 3.80%**
5 year 3.85%**

* Minimum Investment $25,000
** Minimum Investment $50,000
*** Minimum Investment $100,000

Great news, but I'm not biting yet. It's still a long way from the rate of inflation, which so far is not going away and IMO likely to increase.

I am not saying rates will ever keep up with inflation, only that the gap is much wider than it has been in the recent past.

I know BoC and gov't want to put the brakes on inflation, but so far they aren't doing much of anything in my view and inflation is growing by leaps and bounds.

I think there are a lot of factors contributing to ongoing inflation, well beyond supply chain, and they have been lurking for some time. I thin it's at least questionable whether BoC and gov't will be able to do much about it in the end. I have been told on this forum several times that retail rates precede BoC rates and anticipate them, but retail rates continue to rise and very little happens on the other end.

There may indeed be a major financial crisis coming. I simply don't know, but would not be surprised. Remains to be seen what will be done to avert it.

I'm no economist, and you can't count on my opinion, but what is going on now and the explanations offered just don't make sense to me. We have major banks socking away relatively high-priced GICs, much higher than it would seem they need to offer. I am told this is for industrial mortgages, but how many of those can you really need and why the huge leap in rates? Doesn't make sense. Even Norman, who believes in the theory that inflation will average out to a reasonable rate, couldn't explain it to his satisfaction. My guess is that the banks foresee much higher rates coming soon and are stockpiling for that. 3% will look like chicken scratch soon, but it was only a few short months ago that we first hit it. Everyone knows BoC is making another announcement in a week or so but still rates are rising. They started rising well before any movement on the part of BoC, so I assume we are now "anticipating" even more rate hikes down the road if we believe in the "anticipation" theory.

It may be that I am totally off-base, but, so far, I haven't heard anything that is credible to me which points in another direction.
Fortunately for me, I am in a position where I can afford to be wrong on this.

Nobody should make any decisions based on what I've said. It's just an opinion.

Government of Canada 5-year bonds are now trading with yields around 2½% per annum. See Bank of Canada: Selected Bond Yields.

Any financial institution that wishes to attract five-year funds needs to compete with that.

RBC Royal Bank's current special 3.1% rate on its 5-year non-redeemable GIC's is not that far off. The 3.1% rate is also quite reasonable considering Province of Ontario 2027-Jun-02 bonds are trading around a yield of 2.91%.

Banks are not in the business of interest rate speculation. They know that interest rates are hard to predictable reliably.

Fortunately, they don't need to be involved in rate speculation. They have learned to make lots of money by locking in the spread between their loans and deposits and leveraging that spread.

The banks are not socking away all that GIC deposit money they are trying to attract. It would be foolish to park that 3%+ GIC money for any significant time in treasury bills yielding less than 1% to lose 2%+.

-2% spread on funds is quite significant for a bank. Royal Bank of Canada, for example, has about $1.142 trillion in deposits and about $94 billion in common shareholder equity. That is a deposit to equity leverage of around 12X.

With a 12X leverage, a -2% per annum spread will eat shareholder equity at a rate of 24% per annum.

If your fund is only earning a HISA which is around 1.55% top rate right now, the 1y at >3% is a better option then wait.

savemoresaveoften said
If your fund is only earning a HISA which is around 1.55% top rate right now, the 1y at >3% is a better option then wait.  

Some are getting as high as 2.8 at Tangerine, and there are other offers out there as you know.
If you lock in for a year, and five year rates start to level out of decline, you are stuck.

Rates are very much in flux right now, so my feeling is that I don't want to lock in more than a few months at most, preferably not at all. DUCA or Hubert are enough for now, and I anticipate there will likely be more HISA offers.
In addition, my personal circumstances are such that a strategy of waiting makes sense (long story!).

There is also the HSBC offer, which as I recall you liked, at 2.4 or something like that. One could probably put in more than CDIC limits there although it's not a bank I follow very much. I've had both good and bad experiences there.

Yes, one year GIC at ~3% will make sense for some people, especially if have more than 100K and aren't comfortable with CU insurance. As far as I have noticed, it's only available through deposit brokers and most likely through CDIC-insured bank (WealthOne, Heaventree and MCan are the ones that have been reported recently), which might also limit you to 100K; I haven't asked about these offers.

I'm not suggesting waiting indefinitely. Personally, I will almost certainly put money into a five year GIC by the end of the year in order to maintain my ladder and moderate my taxes. I agree rates might well go even higher next year. My personal feeling is that we're in for an extended inflationary period, but I could be wrong. I am comfortable with maintaining a ladder even as rates may continue to rise in future years. Last year I was ahead of inflation and taxes due to GICs bought in better years.

In looking for five year GICs, I will be looking not just at the rate but at whether they offer possibility of anniversary rate adjustments. There aren't too many of those out there but they do exist. I had one that just matured at DUCA but no upward adjustment had been possible. I have a couple more currently in progress elsewhere about which I am hopeful. One needs to read the fine print carefully with these.

Latest Update:

1 year 3.28%*
18 month 3.25%*
2 year 3.45%**
30 month 3.50%**
3 year 3.80%**
4 year 3.90%**
5 year 4.05%**
* Minimum Investment $25,000
** Minimum Investment $50,000
*** Minimum Investment $100,000

CDIC Deposits Insured up to $100,000 FSRA Deposits Insured up to $250,000 Assuris Deposits Insured up to $100,000
Rates are subject to change without notice.
Certain minimums may apply. Call for details.
E&OE.