GIC Rates Increase | Page 4 | Tangerine Bank | Discussion forum

Math question: my GICs have matured and are in savings account w Oaken getting 3.5%. Yes, I’m waiting for the rates to increase. So I’m loosing approx 1.25% each day/month, waiting for the rates to rise.
So, let’s say the rates go to 5.00 in Dec? (It’s now 4.75) But I’ve missed 3 months of higher interest.
I used to be good at math!

Dean said

As we've already seen, the overall 'Rate Of Increase' in GIC rates has now slowed to a trickle. And as it's been said countless times in many other threads/subjects here ... for a number of reasons, higher BoC rates do Not guarantee higher GIC rates.

And then there's also the GIC 'missed opportunities' (higher interest rates), of leaving $$$ parked in lower paying HISAs.

I could be wrong (I've been wrong before), but I'm beginning to think it's about time to get off the fence, and invest in some of those 5.00+% GICs.

Oh how I miss my Chrystal Ball.

Dean

  

If you're looking searching online for a new chrystal ball, you might have more luck looking for crystal ball. Wasn't Chrystal Ball a porn star in the 80s? Anyhow, I was of this mindset, but I think I'm seeing a little bit of a trend. Long term bond yields pushing higher. The prospect of interest rates staying lofty even after inflation numbers start to retreat. Perhaps the possibility of six percent/five years in another month or two. And collecting 4.5 percent while waiting doesn't seem like a hardship.

dentgal said
Math question: my GICs have matured and are in savings account w Oaken getting 3.5%. Yes, I’m waiting for the rates to increase. So I’m loosing approx 1.25% each day/month, waiting for the rates to rise.
So, let’s say the rates go to 5.00 in Dec? (It’s now 4.75) But I’ve missed 3 months of higher interest.
I used to be good at math!  

Before you do your Oaken math, make sure you factor in that the GIC pickens are Much Better elsewhere ... both now, and probably also in the near future.

e.g. ➡ https://www.highinterestsavings.ca/gic-rates/

Dean

lifeonanisland said
Perhaps the possibility of six percent/five years in another month or two. And collecting 4.5 percent while waiting doesn't seem like a hardship.  

What leads you to believe that long-term rates will rise to 6%?

I am watching them and they appear to have reached a plateau of 5.25%, with some of those offering them already withdrawing their promos. Only one institution remains. I will grant that Tang just went up to 5.2%, but most others appear to be shying away from 5-yr increases.

HermanH said
What leads you to believe that long-term rates will rise to 6%?

I am watching them and they appear to have reached a plateau of 5.25%, with some of those offering them already withdrawing their promos. Only one institution remains. I will grant that Tang just went up to 5.2%, but most others appear to be shying away from 5-yr increases.  

I think the BoC and the Fed are both telegraphing that rates will have to go higher and stay higher for a longer time...perhaps not return to the "giveaway" range for years, if it all. Earlier this year, there was much talk of both central banks (and others around the world) capitulating as soon as they could to stave off recession. That no longer seems likely, as entrenched inflation seems to more and more be viewed as the greater evil when compared to a recession. The result of this, according to some pundits, is that there will be a new normal. This is what some FIs seem to be thinking as well...case in point, Tangerine (BNS), and others like Wealth and Steinbach CI, with very recent raises to longer term rates. It's almost as though they're expecting mortgage and loan applications to eventually continue once the real estate market corrects fully, with higher mortgage rates the new permanent (or semi-permanent) reality...and that they are seeking longer term deposits once again, to fill their coffers. We'll see if there is a trend emerging. First Wealth One, followed by Maxa, Ideal, Steinbach and now Tangerine. If others follow suit, such as Oaken, EQ, etc., it could signal such a trend. Caveat: as always, my opinion only. Where's Chrystal when you need her?

5y GIC has zero chance of getting to 6% in a month or 2 or 3.

Fact

- The markets are returning to the ‘old normal’ of higher bond yields link here

- Inflation IS NOT under control

- GIC rates ARE NOT plateauing just look at the big 5 rate

- The benchmark 10-year Treasury yield climbed over 4.20%, its highest level
since 2008.

- BofC and the Fed are both clearly telegraphing that rates will have to go higher
and stay higher for a longer time.

- BMO recently issued bonds are yielding over 6%. BMO just had an issue yielding 6.35% for 5 years. BMO wont be that if they thought rates will start to drop in a year.

Whether or not you like it those are the fact

Bank of Montreal announced it in their October 20 news release Bank of Montreal Announces Subordinated Note Issue.

Bank of Montreal needs to pay that rate on those notes because the investor doesn't know exactly when the funds will be returned. Could be as early as 5 years or late as 10 years, at Bank of Montreal's option.

What rate would you accept for a GIC that matures sometime between year 5 and year 10, at the option of the GIC issuer, on 10 days notice?

Bank of Montreal is not a hedge fund and knows that interest rates are not predictable. They will issue 5-year bonds at 7% if the bonds fund matching five-year commercial mortgages at 9%.

That will lock in a 2% spread and produce a 20% per annum return with 10:1 leverage on the required regulatory capital to back the mortgages. 20% return with no interest rate predictions required.

Norman1 said
Bank of Montreal announced it in their October 20 news release Bank of Montreal Announces Subordinated Note Issue.

Bank of Montreal needs to pay that rate on those notes because the investor doesn't know exactly when the funds will be returned. Could be as early as 5 years or late as 10 years, at Bank of Montreal option.

What rate would you accept for a GIC that matures sometime between year 5 and year 10, at the option of the GIC issuer, on 10 days notice?

Bank of Montreal is not a hedge fund and knows that interest rates are not predictable. They will issue 5-year bonds at 7% if the bonds fund matching five-year commercial mortgages at 9%.

That will lock in a 2% spread and produce a 20% per annum return with 10:1 leverage on the required regulatory capital to back the mortgages. 20% return with no interest rate predictions required.  

Are these NOTES offered only to institutions and not retail investors?

(That 20% return using leverage is interesting.)

Norman1 said
The offering will close October 27. Most of the major brokers in Canada seem to be involved in the offering:
One can ask one's broker to see if there is any left. They are called "Bank of Montreal 6.534% October 27, 2032 Subordinated Notes".
The 6.534% rate is only for the first five years:

Interest Rate: Fixed at 6.534% per annum, payable in equal semi-annual payments in arrears on April 27 and October 27 of each year, commencing on April 27, 2023 until October 27, 2027. On and after October 27, 2027, and until the Maturity Date, if not redeemed by the Bank, for each Floating Interest Period, at the Daily Compounded CORRA determined for the Observation Period in respect of such Floating Interest Period plus 2.70%, payable quarterly in arrears on each Interest Payment Date.

  

Thanks for the info. When I dealt with a full service broker, I used to be informed regularly of these issues - but since moving to a discount broker - I am not similarly informed.
However, just learned that an existing National Bank Reset Preferred Share issue will not be redeemed by National Bank and NB will pay 7.027% dividend (quarterly) from Nov 16-22 to Nov 15-27. Not a terrible rate for the next 5 years and I think National Bank will still be here in 5 years.