Tangerine GIC rate curve | Tangerine Bank | Discussion forum

The US rate inches up to 3.75% for 1y as well

The real trick is if u keep waiting for another 6 months and 1y does hit 5% (not saying it will but assume it does), you run the reinvestment risk of rates may already come back down 18 months from today. Waiting does not always mean you remain better off.

cgouimet said

Kinda weird to see TNG as the top rate for 1Yr GIC's ...

https://www.highinterestsavings.ca/gic-rates/  

Yup ... and also when you see that their 5Yr GIC pays slightly 'Less'.

Go figure,

Dean

Dean said

Yup ... and also when you see that their 5Yr GIC pays slightly 'Less'.

…

If Tangerine Bank finds that people are asking for one-year and three-year loans, then there's no point attracting two-, four-, and five-year GIC funds.

Let a competitor pay 5% for five-year money that Tangerine Bank doesn't need.

CIBC recently cut the rate on its 5-year CIBC Bonus Rate GIC from 5% to 4½%. Looks like CIBC doesn't need as much 5-year GIC funds too.

Norman1 said

Dean said

Yup ... and also when you see that their 5Yr GIC pays slightly 'Less'.

…

If Tangerine Bank finds that people are asking for one-year and three-year loans, then there's no point attracting two-, four-, and five-year GIC funds.

Let a competitor pay 5% for five-year money that Tangerine Bank doesn't need.

CIBC recently cut the rate on its 5-year CIBC Bonus Rate GIC from 5% to 4½%. Looks like CIBC doesn't need as much 5-year GIC funds too.  

That's overly simplistic, as it doesn't work quite like that. They don't match every deposit to every mortgage. Ultimately, the bank does realize they will require the same level of funding now as they do in the future, so they'd ultimately like to lock in funding at longer terms. Their strategists and economists may have shifted or evolved their view on interest rate directions, such that they predict the BoC to begin easing (i.e., by cutting rates) sooner than later, too. And there's also the GIC demand, too. They may well need, or desire, five-year GIC funding, but if they're finding the demand isn't there, they may well have to evolve their offer.

Cheers,
Doug

Doug said

Yeah, I noticed this as well...the Tangerine and Simplii Financial GIC rate curves have inverted, which is good for me, since I'm not looking to tie up funds longer than one year, let alone three to five years. The six-month GIC rate of 4.00% looks particularly interesting to me, as I may look to deploy that cash into either (a) equities or (b) possibly a condo purchase at some point. For this month and likely next, I've got it parked at Tangerine in the HISA with their 3% promotional rate.
Cheers,
Doug  

Tandia is offering a 180 day Term Deposit/GIC @ 0.50%. I doubt you will be lining up for that offer. I definitely won't!

Doug said

That's overly simplistic, as it doesn't work quite like that. They don't match every deposit to every mortgage. Ultimately, the bank does realize they will require the same level of funding now as they do in the future, so they'd ultimately like to lock in funding at longer terms. Their strategists and economists may have shifted or evolved their view…

It is actually as simple as that.

They don't need to lock in funding that they don't need right now. If it needs another $1 billion in future funding, Royal Bank can just wait another three months for another quarter to end and have another $4 billion in profit they can use.

The banks are not hedge funds speculating on interest rates. They've been around long enough to know that economists, including their own, don't have good records in predicting interest rates.

It is quite foolish to issue 5-year GIC's at 5% today for five-year funds that aren't needed now. That 5-year GIC has a limited shelf life. It only has four years left a year from now. If four-year GIC's drop to 4% next year, then the bank is going look quite stupid paying 5% for the remaining four years when it and competitors can issue fresh four-year GIC's at 4%.

Just match the GIC money flowing in to the loans being granted to lock in the spread. Leverage by 10:1 to capital, as allowed by the regulators and earn 10% to 20% per annum return on capital. Don't need to rely on shaky economic forecasts.

If it takes an extra ½% to bring in the needed five-year GIC money, then charge an extra ½% to the five-year borrower.

Canadian Western Bank, who is behind Motive, likely is not overrun with short term deposits and can make good use of more HISA money.

If a lender has lots of commercial mortgages or equipment leases that still make sense to fund, then they may not mind paying 5% on the five-year GIC's to fund them. canadian.100 shared that when five-year GIC's were around 3.15%, commercial mortgages were 4½% to 8½%.