GIC Rates Increase | Page 2 | Peoples Trust | Discussion forum

GR said
1 yr. GIC increased to 4.50% (matching Tangerine).  

Interesting. Just renewed a 15 month today @ 4.5% for that same term. The rate has been 4.5% and didn't change today (yet).

I was told a GIC's terms can be changed up to 10 days after, ie; if rates go up subsequently. Could be interesting info in a rising rate market.

COIN said
Looking at the GIC chart the gap between 1 year and 5 years is only around 50bp in many, maybe most institutions.  

That may decline to about 0-20bp by end of September. With declining GoC5 bond yields and another BoC rate increase in September, the bond yield curve could be severely inverted.

Technically, the GIC rate curve could go inverted too though I don't believe it has happened in recent times. Perhaps it did in the circa 1980-1981 period.

Added: It is already inverted at a few institutions on the GIC chart.

dougjp said
Nobody else seems to think this, so "I could be wrong"   

Contrarian thinking is sometimes the best. Avoid the herd instinct.

Anyway, the 4-5 year GIC rates may have topped out at 5% or slightly north of.

seh said

"terms can be changed" by whom - People's, or by the customer? Is that 10 business or calendar days? I don't see this in their terms and conditions?

UPDATE: I guess it's their policy, even though not showing in t&c. I was able to phone in and they changed the GIC to the new, higher rate.  

No, only by the customer, so I was told. They can't reduce or otherwise change the rate or other things. I have no idea about the rest that you mentioned, but I do know from experience you can call and retroactively change their automatic renewal of whatever term existed before.

AltaRed said

That may decline to about 0-20bp by end of September. With declining GoC5 bond yields and another BoC rate increase in September, the bond yield curve could be severely inverted.

Technically, the GIC rate curve could go inverted too though I don't believe it has happened in recent times. Perhaps it did in the circa 1980-1981 period.

Added: It is already inverted at a few institutions on the GIC chart.  

Interesting, yeah. I don't know what, if anything, that would signify, but the idea that shorter term rates will be higher than longer term rates is interesting. I'd say that's probably more likely than continuing to see GIC rates continuing to climb. We're already at the point where bond yields are roughly equal to GIC yields, and there's no to only modest premiums on common share/preferred dividend yields relative to GIC yields, despite the higher risk. Bonds and equities do offer much greater liquidity than GICs, but not enough to justify that much of a liquidity premium.

Cheers,
Doug

So, you can cancel an rdr on the phone but you can't make one?

I remember posting "this is why we hedge" some time ago. I bought too early when Oaken was offering 3.4% on a 3-year, noting some inverted yield curves appearing.

Then I got lucky with Peoples' 3- and 5- year terms this month: they've just dropped the 5-year below 5%.

And I got the GIC rate of 3.4% for several months when I would have been making 1-point-something in savings with that money, just as a little sweetener.

This is why we hedge.
RetirEd

Wanderer said
Interest rates are going to go up again in the fall so hedge some more. Maybe PC lowered its 5 year GIC to 4.8 so it only had to go to 5 when the interest rate goes up? I was hoping for at least a 5.2 this fall. I jumped too soon before.  

IMO you're 100% right on this. You see this with everything these days and I've seen it with interest rates before as well. They lower just before they know a raise is coming which will make most expect them to raise their rates.

Nirvana7734 said
In the investing world, this is referred to as a "head-fake" trade. I have little doubt that numerous financial institutions dropped their rates in order to catch the crowd that has been waiting until the rates dropped to be the signal to lock-in on a rate. I promise you that plenty of investors like you and me have done exactly that, even though both the Bank of Canada and Federal Reserve have all but promised that rates are going up for at least the next, and probably the next two, rate announcements (i.e., early-September and late-October).  

Even if BoC raises rate by 50 bps next 3 meetings and get O/N to 4%, if then 4% is considered the rate that they are pause / done. Under the scenario, there is no reason why 1y GIC (as an example) will need to go rise much higher than what they are now (4.25-4.5% ish). Yes 1y will rise a bit more, but those who think it will be in similar lock step with BoC move will be in for a huge disappointment. Same goes for 2y-5y rate.

PT/PB is one of the institutions I'm comfortable dealing with, after a decade with them. I would want to have a solid relationship with a broker before I invested a serious chunk of my change, and so far there isn't one that stands out for me. Having a local office in or near Vancouver would be a big help too.
RetirEd