GIC Rates Increase | Page 5 | Tangerine Bank | Discussion forum

If they take money at 5% then they need to lend money at a higher rate. 7% mortgages might have quite a bit of “resistance” unless either the house prices drop or salaries rise. By A LOT.

agit said

so funny you sound like you just finished a meeting with Tiff Macklem.

Warren Buffett “A prediction about the direction of the stock market tells you nothing about where stocks are headed, but a whole lot about the person doing the predicting.”

“A prediction about the direction of the GIC tells you nothing about where GIC are headed, but a whole lot about the person doing the predicting.”  

A meeting with Tiff is not needed as he as zero power nor authority to set the GIC rate offer by any FIs. Thats not how FI works.....
I also shot down the idea of 1y GIC to reach 5% by August a few months ago after bank rose 100bps a clip. And yes it only got to 4.5%-4.6% in August. I am happy to see prove me wrong.

You can mark my words and I am happy for you to show me a 6% 5y GIC rate within the next 3 months.

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'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.  

"At any time on or after a Special Event Redemption Date prior to October 27, 2027, the Bank may, at its option, with the prior approval of the Superintendent, on giving not more than 60 nor less than 10 days' notice to the registered holders of the Notes, redeem all (but not less than all) of the Notes at a redemption price that is equal to the greater of the Canada Yield Price and par, together in either case with accrued and unpaid interest to, but excluding, the date fixed for redemption."

Does that mean that the bank has the option to redeem the notes prior to Oct 27, 2027?

Norman1 said
Yes, the bank will have the option to redeem the notes before October 27, 2027 should a "Special Event" occur.

According to the definition of “Special Event Redemption Date”, that would be

1. a "Tax Event" that changes the tax treatment of the notes significantly or
2. a Regulatory Event that disqualifies the notes from being Tier 2 Capital or Total Capital.

  

Thank you. So pretty good odds this won't be redeemed prior to Oct 27, 2027. Looking for a fixed income investment that is 5+ years, and this seems fairly attractive, but want the return for at least 5 years, so this should work..

savemoresaveoften said

Bobby J said

Thank you. So pretty good odds this won't be redeemed prior to Oct 27, 2027. Looking for a fixed income investment that is 5+ years, and this seems fairly attractive, but want the return for at least 5 years, so this should work..  

Just keep in mind year 6 to 10 is a floating rate coupon. The downside is you receive a much lower coupon for the final 5 years of this 10y bonds.
The call feature in the first 5 years are typical of a NVCC bonds. NVCC were first issued in 2014, allows regulator to convert debt into common equity under distress situation to prop up the capital.
Because of this feature, they all offer a higher yield than a traditional bank debt issue.  

For sure. Historically bank fixed floater bonds in Canada get called, and if not, I’m comfortable with Corra + 2.70%.

mordko said

savemoresaveoften said

A meeting with Tiff is not needed as he as zero power nor authority to set the GIC rate offer by any FIs. Thats not how FI works.....

He can’t set the GIC rate but he can influence it indirectly. For example via QT and sucking up all the liquidity. We don’t actually know the future. Its a probability, not a certainty  

Of course no one knows the future, or at least those time travelers haven’t come out and admit it yet.

However when it comes to finance and investment, there is certainty in some cases. Just like the Nigeria prince asking for your help to transfer funds and you get a cut is a scam, it’s a certainty, not probability.

There is a fine difference between hope vs dream.

agit said
There is a BIG BIG difference between Fact and Opinion. Your opinion are not supported by facts and principles, in which case it has not becomes an argument.

My "opinion" remains 5y GIC rates wont reach 6% in the next month or 2 or 3. That is supported by facts that one just choose to ignore, cuz they "like" to see 6%....

You can choose to believe it will reach 7% and support it with all your facts and principles. Unfortunately that does not mean it will happen.

If this is a university exam, then yes you will get some part marks for justifying your "wrong" answer with assumptions, principles, etc. In investing, either you are right or wrong.

Every time someone says rates are not going much higher, you jump in quickly to counter why it should be higher. I will stop at that.

Well Tangerine still at top charts for most gic terms -well done!! They were proactive ahead of boc rate hike --Have some term ending in a couple months there & past coyple yrs had given up keeping a ladder there -- interesting to see if others (Oaken EQ ...) will match ... EQ did raise but still a little lower -- is this just another of Tan's lures or will they keep their rates high (next boc dec7 then jan25...). ?