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Will GIC rates go higher soon?

58K views 202 replies 46 participants last post by  lonewolf 
#1 ·
I've been heavily endorsing GICs lately but I'm actually thinking now that it may be good to hold off on purchasing new GICs, as I think rates may start creeping higher. This is due to market interest rates jumping in the last couple weeks --- I don't mean the Bank of Canada rate. I mean prevailing interest rates like those on 5 year and 10 year bonds.

Obviously this is a kind of market timing/speculation but just sharing my thoughts. I'm now willing to wait in cash as it seems there's a good chance that higher interest rates are coming in the broad market.

Using ING Direct as a benchmark, currently 2013-06-20 it's
1yr 1.35%
2yr 1.75%
3yr 2.00%
4yr 2.00%
5yr 2.25%
 
#2 ·
I noticed Home Trust ad today 1 year at 2.11. I have been considering laddering some of the MF proceeds. Sitting in HISA 1.27 at the moment. Have been carefully thinking over my risk tolerance and in this market I am happy I have mostly cash (some blue chips in non-registered account). Definitely revising my allocation to more fixed income and less stocks. That said, I'm not jumping into the market with the RRSP money yet.
 
#3 ·
Using ING Direct as a benchmark, currently 2013-06-20 it's
1yr 1.35%
2yr 1.75%
3yr 2.00%
4yr 2.00%
5yr 2.25%
In ING I'm enjoying until June 30 very nice in current environment 2.5% interest on new money. I moved all my available Cash into this HISA. And considering that I'm getting 2% in ING on regular basis, don't see much sense to buy GIC now.
BTW, in CIBC Investor Edge the best rates are:
1yr 1.86%
2yr 1.95%
3yr 2.05%
4yr 2.25%
5yr 2.45%
 
#16 ·
BTW, in CIBC Investor Edge the best rates are:
1yr 1.86%
2yr 1.95%
3yr 2.05%
4yr 2.25%
5yr 2.45%
I compared today's rate vs week ago and current rates are:
1yr 1.75%
2yr 1.85%
3yr 2.11%
4yr 2.31%
5yr 2.56%
So, you can see that 1 and 2yr rates are slightly lower, and 3,4,5 yr are slightly higher...
Does it mean that banks beleive that interest rates will go up only after 3 years from now?
 
#10 ·
Don't nominal rates mean little without adjusting for inflation, whether you are spending now or later?

Prices don't drop, so when you eventually spend in the future, you're still encountering the same inflated prices (barring future deflation, in which case your savings would indeed put you ahead of the game), no?
 
#11 ·
If you buy used, Kijiji and the like, you can either get the price you want to pay (sans taxes) or not buy it at all......(i.e. don't convince yourself you need something, just because you want it)............it's not perfect but it has its advantages.
 
#14 · (Edited)
I was right... GIC rates are creeping up in response to the bond market (even though ING's rates haven't budged, but their rates haven't been competitive for a while now). I occasionally survey the rates available through TD Waterhouse.

This table shows available GIC rates through the brokerage, Big Five bank issuers, highest rate. You can see from my data below that 3 year GIC rates have gone up +0.20% and 4 year rates are up +0.15%, suggesting that the best deal is probably in the 3 year GIC right now.

Code:
Date        1 Year  2 Year  3 Year  4 Year
2013-06-05   1.40%   1.70%   1.90%   2.15%
2013-06-24   1.40%   1.75%   2.00%   2.25%
2013-06-28   1.40%   1.75%   2.10%   2.30%
 
#20 ·
Rates at financial institutions are a factor of G/C Bond rates and if I knew exactly where they were going I think I would be rich. Its a crap shoot whatever you do. When rates are low, like they are now, I keep my term deposit investments short (under 2 yrs), when they are high or are coming down I invest long. I still have terms paying 5.55 and 4.25% but the first one is just about over and the last only has a year or 2 to go. Historically, term deposit rate were 2 to 3% above inflation but this is no longer the case. My only suggestion is that rates are low so why invest long. Also, watch the yield curve.
 
#23 ·
Just wanted to add a comment that I think Canadian GIC rates have more or less finished responding to that big move in the bond market from a couple months ago. That being said if bonds keep falling, then GIC rates will keep going higher.

Here are the rates I see at my broker, the highest rates from big five bank issuers, along with some rate history

Code:
Date        1 Year  2 Year  3 Year  4 Year  5 Year
2013-06-05   1.40%   1.70%   1.90%   2.15%
2013-06-28   1.40%   1.75%   2.10%   2.30%   2.55%
2013-07-26   1.40%   1.70%   2.20%   2.30%   2.60%
 
#29 · (Edited)
How do you purchase GIC's at various institutions? I am using Qtrade, but I can not purchase anything for less than 15k (which is out of my reach!).

Do you use a broker like GICdirect.com? Do you open up an account at each institution? My current bank and credit union appear to be lacking in the rate department in comparison to the rates seen on gic direct.

I am looking at starting a 5 yr ladder with $5000 (5 GIC's @ $1000 each)
 
#31 ·
How do you purchase GIC's at various institutions? I am using Qtrade, but I can not purchase anything for less than 15k (which is out of my reach!).
I am looking at starting a 5 yr ladder with $5000 (5 GIC's @ $1000 each)
In CIBC Investor Edge I can click on 3rd party GIC and buy online. In TDW I can only view rates and in order to buy I need to call.
Generally, the minimum investment into 3rd party GIC is 5K, so for 1K you cannot buy anything
 
#36 ·
Peoples Trust Daily interest savings account for TFSA's has been 3% for a very long time. The GIC's for the TFSA are the same as their regular GIC's
Yes, you can link your People's account to your regular bank (mine is CIBC) and transfers are very quick!! Better than ING
No fees
Check out their website, peoples trust dot com (don't know if I am allowed to post the link)
it is covered by CDIC
 
#40 ·
So, no any "catches" with Peoples Trust ?
The catch is that Peoples Trust is a smaller less diversified bank, while ING is a division of Scotiabank, a too-big-to-fail big bank. Peoples Trust is more likely to lose your deposit money.

Personally I prefer the safety of the large too-big-to-fail banks. From a depositor's perspective, they are safer. Yes I know both are eligible for CDIC insurance, but given the choice I would rather go with the one that is less likely to fail.

Peoples Trust deals nearly entirely in mortgages. As far as I can tell, 100% of the mortgage exposure is in Canada, 75% is in Ontario. Their firm's leverage is higher than the big banks. From my perspective, this is quite a risky business with very concentrated exposures.
 
#39 ·
There is a form on PT website for transfers of TFSA accounts. They do not charge a fee BUT ING might.
I have had no issues with PT at all, very pleased!!

On their website click on High interest Accounts at the top of the page. Then look at the left hand side and scroll to the very bottom and click on Banking Forms, you will find what you need there.
 
#41 ·
I'm going to be opening a Peoples Trust account very shortly. I didn't like that fact that previously there was no online banking facility for the TFSA but now that is in place I will open an account.

With regards to the TFSA transfer charges. Depending on the charge and difference in rate you could simply leave it with ING until December and then deposit to peoples trust in the new year.
 
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