# GIC rates



## dime (Jun 20, 2013)

If anyone is interested in GIC rates there's a good rates table at:
financialpost.com/personal-finance/rates/gic-annual.html

It lists the GIC rates for about 3 dozen institutions in one nicely formatted table that prints out well. It also lists a summary of the average by year. 

I found the rates were the same rates as what TD Webbroker lists for GICS, except that TD only lists a dozen in comparison. 
Makes me wonder how TD Direct Investing makes money from me putting money into a 5 year GIC at another bank? There must be some hidden fee or commission somewhere?

Anyone have any good thoughts or suggestions when investing in GICs?


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## Koogie (Dec 15, 2014)

Check out www.highinterestsavings.ca

lots of GIC and HISA talk over there.


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## gibor365 (Apr 1, 2011)

dime said:


> If anyone is interested in GIC rates there's a good rates table at:
> financialpost.com/personal-finance/rates/gic-annual.html
> 
> It lists the GIC rates for about 3 dozen institutions in one nicely formatted table that prints out well. It also lists a summary of the average by year.
> ...


I checked link you provided for Peoples Trust and it's wrong... everything , amounts and interests ... it's 2.1% for 5 years


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## james4beach (Nov 15, 2012)

Scotia offers a 5 year GIC at 2.0% which is a very good rate. Big five bank. However I can't see this rate through the GIC brokerages like TDDI or iTrade; I got the 2.0% GIC through Scotia proper.


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## Eder (Feb 16, 2011)

Perfect...you're only losing guaranteed .13% of your capital.


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## dime (Jun 20, 2013)

gibor365 said:


> I checked link you provided for Peoples Trust and it's wrong... everything , amounts and interests ... it's 2.1% for 5 years


Ok good to know. Maybe the data is delayed in this summary table? 

@koogie good tip, thanks!
@James that is a good rate for one of the big 5 banks. I wonder if TDDI will match it but we have to call in to get it? 
@ Eder... what do you mean by " losing guaranteed .13 of your capital"?

http://www.globeinvestor.com/

has a table as well... may be delayed as well...


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## AltaRed (Jun 8, 2009)

dime said:


> Has anyone found an accurate table of GIC rates so we don't have to check each bank individually?


I don't know about a table, but monitoring www.highinterestsavings.ca daily is a good proxy. Someone always picks up on news.


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## Eder (Feb 16, 2011)

dime said:


> @ Eder... what do you mean by " losing guaranteed .13 of your capital"?


January inflation 2.13%. If you lock in 5 year GIC @2% your loss will be much larger as inflation imo is ready to grow. Silly to work hard for 50k, buy a GIC and pay the bank .13% to hold your money.Much more loss if held in investment account.


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## dime (Jun 20, 2013)

Eder said:


> January inflation 2.13%. If you lock in 5 year GIC @2% your loss will be much larger as inflation imo is ready to grow. Silly to work hard for 50k, buy a GIC and pay the bank .13% to hold your money.Much more loss if held in investment account.


So where do you suggested investing 50k to avoid any loss of principle? If you keep it in cash you lose to inflation. Stock market could have a significant pullback this year. At least a 2% GIC can prevent loss of principle and generate a return near inflation.


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## gibor365 (Apr 1, 2011)

dime said:


> So where do you suggested investing 50k to avoid any loss of principle? If you keep it in cash you lose to inflation. Stock market could have a significant pullback this year. At least a 2% GIC can prevent loss of principle and generate a return near inflation.


Stock market "could have a significant pullback" every year . EQ bank gives 2% on HISA


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## Eder (Feb 16, 2011)

HOME TR CO DEP NT Maturity Dec 10 2018 Coupon 3.40


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## TomB19 (Sep 24, 2015)

dime said:


> So where do you suggested investing 50k to avoid any loss of principle? If you keep it in cash you lose to inflation. Stock market could have a significant pullback this year. At least a 2% GIC can prevent loss of principle and generate a return near inflation.


I keep significant cash around, most times. The cost of inflationary and interest losses are offset by opportunity gains during periods of opportunity.


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## Koogie (Dec 15, 2014)

Eder said:


> HOME TR CO DEP NT Maturity Dec 10 2018 Coupon 3.40


That the same Home Trust/Home Capital Group currently under OSC investigation ? )


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## Eder (Feb 16, 2011)

But I bought it when they were the TSX darlings! lol


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## OptsyEagle (Nov 29, 2009)

gibor365 said:


> I checked link you provided for Peoples Trust and it's wrong... everything , amounts and interests ... it's 2.1% for 5 years


The rates on that link are the broker rates. The 2.1% is what a customer gets from People's Trust directly. I think brokers get about 0.25% per year in commission. So People's is effectively saying that using a broker costs them around 0.30% (commission plus costs in dealing with them) and they are willing to give it to the customer if they avoid the broker.

I hope that makes sense. I don't believe all financial institutions do this, but it looks like People's Trust does.


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## gibor365 (Apr 1, 2011)

OptsyEagle said:


> The rates on that link are the broker rates. The 2.1% is what a customer gets from People's Trust directly. I think brokers get about 0.25% per year in commission. So People's is effectively saying that using a broker costs them around 0.30% (commission plus costs in dealing with them) and they are willing to give it to the customer if they avoid the broker.
> 
> I hope that makes sense. I don't believe all financial institutions do this, but it looks like People's Trust does.


From what I see, looks like you can always get higher GIC rate if you buy this GIC with company that issues it .... not only PT, I've seen same with other institutions... also if you buy directly , min amount freq will be less, for ex. PT has 1K min, and discount brokerage with same PT GIC has 5K min


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## OptsyEagle (Nov 29, 2009)

Yes. The exceptions tend to be the Big 5 banks. They take quite the advantage of their trusting and unsuspecting customers who mindlessly walk in and buy their GICs, with few questions asked. They will offer a much more fairer rate through the broker channels who tend to be a little more sophisticated.


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## Koogie (Dec 15, 2014)

Actually, the same can happen with CU. I deal with a deposit broker sometimes and they definitely get better deals as well. I've been there while they've done it on the phone. And CU are supposedly more fair to the "little guy"


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## lonewolf :) (Sep 13, 2016)

Eder said:


> January inflation 2.13%. If you lock in 5 year GIC @2% your loss will be much larger as inflation imo is ready to grow. Silly to work hard for 50k, buy a GIC and pay the bank .13% to hold your money.Much more loss if held in investment account.


 Have to take the math past that of Newton to sine & co sine of cycles. Deflationary crash by next 5 yrs


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## dime (Jun 20, 2013)

Stumbled across this nifty site today: 

http://dollarguide.ca/index/products/3/ GIC rates table
http://dollarguide.ca/index/products/1/ HISA rates table

Features historical data rate chart and customer ratings and reviews


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## Koogie (Dec 15, 2014)

dime said:


> Stumbled across this nifty site today:
> http://dollarguide.ca/index/products/3/ GIC rates table
> http://dollarguide.ca/index/products/1/ HISA rates table
> Features historical data rate chart and customer ratings and reviews



Great find.


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## AltaRed (Jun 8, 2009)

I agree those are cool, but the HISA one in particular is not complete. No mention of Zag Bank @ 1.60%, or some of the more specialty eSavings at big banks, e.g. BMO's Savings Builder at 1.2% (if one adds at least $200/month).


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## gibor365 (Apr 1, 2011)

Koogie said:


> Great find.


good websites, but looks like they are not tracking promos.... CIBC has from Jan 1 until Mar 31 1.75% on HISA and it's not indicated


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## Koogie (Dec 15, 2014)

gibor365 said:


> good websites, but looks like they are not tracking promos.... CIBC has from Jan 1 until Mar 31 1.75% on HISA and it's not indicated


I think the sites are worth every penny you or I paid.... ;o)

www.highinterestsavings.ca is very good for keeping track of promos. There is GIC discussion there to but it is a little weak on that topic.


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## stantistic (Sep 19, 2015)

*Potential Troubles*

I have had for some time a general feeling of unease about the subject matters discussed here in CMF. In this particular thread we are GIC discussing rates. There is nothing wrong with that per se but feel we are like the passengers on the Titanic floating along, discussing rates in the tenths of a percent which amount to fuddle duddle in the big picture, while icebergs pass by unnoticed.
I do not know what that event will be but I would like to take some precautions against it. So just for an example, which to my mind, are significant troubles to our future well being and which have not been discussed (recently) in this forum:
a) breakway from Canada of Quebec
b)race based civil war in the USA or at least something like Black Panthers 

Are my concerns misplaced ?


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## gibor365 (Apr 1, 2011)

stantistic said:


> I have had for some time a general feeling of unease about the subject matters discussed here in CMF. In this particular thread we are GIC discussing rates. There is nothing wrong with that per se but feel we are like the passengers on the Titanic floating along, discussing rates in the tenths of a percent which amount to fuddle duddle in the big picture, while icebergs pass by unnoticed.
> I do not know what that event will be but I would like to take some precautions against it. So just for an example, which to my mind, are significant troubles to our future well being and which have not been discussed (recently) in this forum:
> a) breakway from Canada of Quebec
> b)race based civil war in the USA or at least something like Black Panthers
> ...


I can add more 
c. Zombies attack
d. bad alliens invasion
e. Putin occupies Canada


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## kcowan (Jul 1, 2010)

stantistic said:


> Are my concerns misplaced ?


YES


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## AltaRed (Jun 8, 2009)

Life itself is a risk. Don't sweat what one cannot control. Somehow we muddle through.


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## gibor365 (Apr 1, 2011)

So far GIC is the safest way to safe money. If some of the really bad event will happened, not onlyGIC, but money itself will be useless, you will need just food and weapon to protect yourself


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## stantistic (Sep 19, 2015)

Thanks gibor365, kcowan and AltaRed.
The masses have spoken! I will defer to their judgment.
However the words of the Irish Rovers about “unicorns playing their silly games” while the waters were rising still resonate in my mind.


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## Retired Peasant (Apr 22, 2013)

Irish Rovers - That brings..
_'May you be a half hour in heaven, before the devil knows you're dead'_ 
to my mind.


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## Eder (Feb 16, 2011)

Ok lets go back further...

"Its time gentlemen please, its time you were no longer here!"
"Its time gentlemen please ,its time to drink up your beer!"

https://www.youtube.com/watch?v=CiQe-fnrvVE


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## dime (Jun 20, 2013)

So apparently there's a 5 year Canadian Tire Bank GIC offering 2.5% which seems to be the highest 5 year GIC rate available? Anyone opened a GIC with them and have any thoughts about dealing with them? Apparently it's CIDC insured. My first reaction is Canadian Tire Bank? but the higher rate is certainly attractive... Thoughts?

https://www.myctfs.com/Products/GICs/


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## Ag Driver (Dec 13, 2012)

Deleted


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## like_to_retire (Oct 9, 2016)

dime said:


> So apparently there's a 5 year Canadian Tire Bank GIC offering 2.5% which seems to be the highest 5 year GIC rate available? Anyone opened a GIC with them and have any thoughts about dealing with them? Apparently it's CIDC insured. My first reaction is Canadian Tire Bank? but the higher rate is certainly attractive... Thoughts?


I have quite a few CTC GIC's in my ladders through TDDI broker. No problems. If TDDI trusts them, why not.

ltr


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## Koogie (Dec 15, 2014)

Ag Driver said:


> It's CDIC insured. Why not? Pick the best rate available.


+1 I talked to them about buying one. Unfortunately it wasn't available to me but I wouldn't have hesitated if it was. CDIC protection is as good a guarantee as you are ever going to get in this world.


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## Eclectic12 (Oct 20, 2010)

dime said:


> ... My first reaction is Canadian Tire Bank?


Established in 2003 ... so it's got a decade more years of experience compared to Equitable Bank, one less year experience than Zag Bank and six less than Citizens Bank.
https://en.wikipedia.org/wiki/List_of_banks_and_credit_unions_in_Canada


Cheers


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## james4beach (Nov 15, 2012)

GIC rates seem to be finally going up a bit now. Through iTrade, I see (5 year rates)

2.62% Canadian Tire Bank
2.60% Concentra Bank (rated AL)
2.58% Canadian Western Bank (rated AL)

Starting to look attractive. I might buy the Canadian Western Bank one.


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## Ag Driver (Dec 13, 2012)

Deleted


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## gardner (Feb 13, 2014)

This morning TDDI lists 5y rates above 2.5% for

Equitable Bank	2.64
HomEquity Bank	2.64
Canadian Tire Bank	2.62
B2B Bank	2.60
Canadian Western Bank	2.58
Manulife Bank	2.50

I will need to find a home for a chunk of money at Oaken/HT. Their current 2.75% 5y is still looking good. Here's hoping another few weeks will see an up-tick.


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## GreatLaker (Mar 23, 2014)

Good for me too. I have some GICs maturing in Nov. Last year around this time the best rate available at TDDI was slightly under 2%, now they have 5 year at 2.64% from Equitable Bank and Home Equity Bank.

https://fibondoneselfserve.tdwaterhouse.ca/FIP_GICLinkWeb/GICLink?language=en


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## gibor365 (Apr 1, 2011)

gardner said:


> This morning TDDI lists 5y rates above 2.5% for
> 
> Equitable Bank	2.64
> HomEquity Bank	2.64
> ...


End of July I bought a bunch of 2 and 3 years GICs for 2.95% and 3.05% at Oaken/Home Bank.... Still looking good ,
In CIBC IE current rates similar to TD ones, 5 y highest are
Equitable Bank	2.64
HomEquity Bank	2.64
ICICI 2.63


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## gardner (Feb 13, 2014)

Oaken/HT has raised rates by 25bps to 3.00%/5yr, in case anyone has a GIC to renew. There haven't been options above 2.7% for a few months it seems.


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## james4beach (Nov 15, 2012)

Manulife 5 year is 2.80%. That's the highest rate available in iTrade for an A-rated bank. You can get higher rates from lower grade issuers like Equitable. I would expect the big banks to increase their GIC rates too but they're dragging their feet so far.


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## birdman (Feb 12, 2013)

3.10 at Achieva for 5 yrs.

https://achieva.mb.ca/rates


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## gibor365 (Apr 1, 2011)

frase said:


> 3.10 at Achieva for 5 yrs.
> 
> https://achieva.mb.ca/rates


Oaken gives 3.15% for 5 years


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## Gordo99 (Dec 13, 2011)

Steinbach Credit Union just came out with 53 months special at 3.15%. Going to load up this week. 

Was considering more BCE for the dividends but considering the difference will just park more in fixed income at Steinbach and collect the 3.15% and sleep a bit better.


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## james4beach (Nov 15, 2012)

Gordo99 said:


> Steinbach Credit Union just came out with 53 months special at 3.15%. Going to load up this week.


I guess it's Worth The Trip to Steinbach!


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## StefanGucci (Dec 31, 2017)

Steinbach auto dealers.....

(if you are from from Winnipeg you will get it...haha)


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## lonewolf :) (Sep 13, 2016)

Gordo99 said:


> Steinbach Credit Union just came out with 53 months special at 3.15%. Going to load up this week.
> 
> Was considering more BCE for the dividends but considering the difference will just park more in fixed income at Steinbach and collect the 3.15% and sleep a bit better.


 Do not think is online rate so probably able to collect dividend as well


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## leeder (Jan 28, 2012)

Looks like Oaken GIC rates going up another 25bps effective Jan 26th. https://www.oaken.com/gic-rates/

I'm a bit disappointed that they aren't increasing the rates on their savings account though. Still stuck at 1.5%. Hopefully, Simplii renews its promo rate on new deposits on March 1...


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## james4beach (Nov 15, 2012)

Yeah I'm loving this Simplii 3.0% rate. When does that continue until?

I have new money for my bond allocation, but I'm leaving it in Simplii as long as I get 3.0%. Once the promo rate ends, I'll put it into my bond fund.

I don't go opening new accounts all over the place, but I will use promos at Simplii or great rates at my credit union (if they happen). Basically if the cash promo rate is higher than my bond fund YTM, then I stay with the promo.

However if the cash rates are back to the normal 1.1% or 1.9% (my CU) then my priority is keeping my bond allocation filled. I don't want to fall into the trap of speculating on the bond market and interest rates, causing me to neglect my bond allocation when I should be doing simple bond indexing long term.

The promo rates like 3% are just so high that it makes it worthwhile.


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## FIRE40 (Sep 27, 2017)

The Simplii 3% promotion ends Feb 28th. Any new funds added prior to Feb 28th are eligible for it. I couldn't see how long you get the 3% interest rate for though?


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## Eclectic12 (Oct 20, 2010)

Not finding the details ... but I seem to recall that the new funds to a savings account, TFSA or RRSP was based on the high water mark set on a specific date (Nov or Oct?).

So my pay might go in then be transferred to the HISA ... but if only half the pay results in being above the set amount then only half my pay gets the 3% that is paid after the promotion ends. 

I had transferred $$ out of Tangerine before their offer arrived for activation so when it gets close to the end of the Simplii promo, I will transfer to Tangerine to get the 2.5% until the end of May. If Simplii beats it, where the date makes a transfer back eligible, it may not stay with Tangerine.



Cheers


*PS*

By logging in, I get the full details. The closing balance on Oct 31st sets the high water mark. The offer is also using average daily closing balance during the offer period, with payment in March 2018.


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## gibor365 (Apr 1, 2011)

> gets close to the end of the Simplii promo, I will transfer to Tangerine to get the 2.5% until the end of May. If Simplii beats it, where the date makes a transfer back eligible, it may not stay with Tangerine.


I have sililar plan . I have now in Simplii about 250K, couple of day before Feb 28, will transfer all to Tangerine (also have 2.5% promo). Will see what Simplii has to offer . Also planning to buy more GICs with Oaken. Now via Oaken, I can buy GICs from Home Trust and Home Bank, they have separate CDIC coverages.
So, considering that I can buy individual GIC for myself, for my wifw and joint with my wife, apparently I can invest into Oaken up to 600K and it will be covered by CDIC.
Not too much concern with Simplii and tangerine and put there much more than 100K CDIC limits


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## jargey3000 (Jan 25, 2011)

_"So, considering that I can buy individual GIC for myself, for my wifw and joint with my wife, apparently I can invest into Oaken up to 600K and it will be covered by CDIC."_

...and you'd sleep OK at night , doing this , gibor...?


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## james4beach (Nov 15, 2012)

I'm surprised you guys are this comfortable with Oaken/Home Capital/Equitable after HCG came so close to serious financial difficulties.

Almost all my GICs are from big 5 bank issuers, plus my credit union. I rarely stray outside the big 5 banks, and yes, I realize I can get higher yields elsewhere. Even when I go outside the banks I stay with A credit ratings, like Manulife.

Fixed income is supposed to be safe stuff with zero risk, things you never have to lose sleep over. My thinking on this is that you put your "risk" into the stock basket. The fixed income basket is the safest stuff imaginable. Want more returns? Put more into the "risk" basket -- use asset allocation and adjust the dial to the % risk you want.

But for fixed income I go with the rock solid, safe stuff. GICs from big 5 banks, government bonds, and XBB.


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## Eclectic12 (Oct 20, 2010)

So what you are saying is that you value CDIC insurance but are aiming to stay with the big guy to avoid ever using it, right? :biggrin:

If you are including me in the "surprised you guys" then you will be disappointed to hear none of my GICs are Oaken/Home Capital/Equitable. :eek2:
I do have an EQ bank account but that is for limited % of total funds.


Cheers


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## gibor365 (Apr 1, 2011)

> I'm surprised you guys are this comfortable with Oaken/Home Capital/Equitable after HCG came so close to serious financial difficulties.


Same time I called CDIC and they told me that if Oaken goes belly up, they will pay me all funds that covered within 2-3 days.... Don't you believe our incredible government institutions?!


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## like_to_retire (Oct 9, 2016)

james4beach said:


> Fixed income is supposed to be safe stuff with zero risk, things you never have to lose sleep over. My thinking on this is that you put your "risk" into the stock basket. The fixed income basket is the safest stuff imaginable. Want more returns? Put more into the "risk" basket -- use asset allocation and adjust the dial to the % risk you want.


So your strategy is to modify your asset allocation between fixed income and equities such that all risk is directed at stocks. I guess it's a matter of what you perceive as risky with respect to the fixed income. I generally support your position, and often chastise people when they stray into debentures or junk bonds to juice their fixed income returns. 

At the same time, I accept that the increased risk of a CDIC insured GIC from Home Equity Bank, CTC, or Equitable Bank is fairly small compared to the rather large increase in yield from a big 5 bank. It's almost criminal, and I wonder if they are playing on the negative feelings that the public has to anything that doesn't come from the big 5. Obviously it's working or the big 5 would narrow the spread.

ltr


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## james4beach (Nov 15, 2012)

I know the CDIC protection is there and is solid. Here's my view on it:

CDIC insurance is a _last resort_ back-stop. The first decision I make is fundamentally, is this a creditworthy borrower? Am I willing to lend money to this borrower? I only do this if I think they can make good on their promise to repay me.

With the Big Five banks, I have no doubts about their ability to repay my loan to them (the GIC). However with Home Capital, Equitable, Peoples Trust, I have serious doubts about their ability to repay loans. Canada has had a lot of bank failures historically and they have all been of the variety of these real-estate exposed trust companies.

So that's the judgement I make from first principles: am I comfortable lending to them? If the answer is no, it doesn't really matter that CDIC insurance is there. Again CDIC is a last resort back stop for me. I think it's a bad idea to lend to someone who is not a worthy borrower only because there happens to be an insurance back-stop.


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## Eder (Feb 16, 2011)

I'm surprised you trust Manulife then...they arguably came closest to insolvency. There is no difference (other than price) when buying insurance from various agents if the underwriter for each policy is the same company.


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## birdman (Feb 12, 2013)

james4beach said:


> I know the CDIC protection is there and is solid. Here's my view on it:
> 
> CDIC insurance is a _last resort_ back-stop. The first decision I make is fundamentally, is this a creditworthy borrower? Am I willing to lend money to this borrower? I only do this if I think they can make good on their promise to repay me.
> 
> ...


+1


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## jargey3000 (Jan 25, 2011)

just came across this from HSBC ...seems like a decent offer.... (2% for 180 days)

http://www.hsbc.ca/1/2/personal/special/wealth-security-2018?cid=WES0000002


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## james4beach (Nov 15, 2012)

Concentra has a 5 year GIC at 3.25% which is quite high, available through iTrade.

They're a CDIC member. As I understand it, the company is a back-end provider for other credit unions. DBRS rates them AL which is stronger than Equitable & Home Trust (Home Capital Group).


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## AltaRed (Jun 8, 2009)

I have bought Concentra GICs on a fairly regular basis over the past several years.


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## james4beach (Nov 15, 2012)

AltaRed said:


> I have bought Concentra GICs on a fairly regular basis over the past several years.


Thanks, that's good to know. Are you more comfortable lending to Concentra than Manulife? About the same? They have similar credit ratings, but it's true that Manulife came within an inch of their lives just a few years ago.


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## gibor365 (Apr 1, 2011)

james4beach said:


> Concentra has a 5 year GIC at 3.25% which is quite high, available through iTrade.
> 
> They're a CDIC member. As I understand it, the company is a back-end provider for other credit unions. DBRS rates them AL which is stronger than Equitable & Home Trust (Home Capital Group).


But Oaken and EQ give you 3.5% for 5 years. In any case , I wouldn;t buy GIC longer than 2 years. Oaken gives 3% for 18 months, not a ig difference comparing to 5 years GIC


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## AltaRed (Jun 8, 2009)

I don't worry about it since I stay within $100k. Having said that, I prefer a Concentra GIC over those from alternative lenders like EQ or Home Capital due to its scope and breadth. I also have no issue buying GICs from Manulife either. Neither of Concentra or Manulife are going insolvent any time soon.

Concentra became a Schedule 1 Bank in 2017 and services over 85% of Canada's credit unions.


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## hfp75 (Mar 15, 2018)

Hubert Financial has a 2 yr @ 3%
I use Hubert for the HISA


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## FIRE40 (Sep 27, 2017)

I still haven't found anything consistently better than Oaken. They are offering 3.1% for 2 year and 3.5% for 5 year currently.


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## AltaRed (Jun 8, 2009)

Provided you don't mind having a proliferation of FI accounts. I keep things simple for my eventual POA or Executor by sticking to my discount brokerage accounts.


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## agent99 (Sep 11, 2013)

AltaRed said:


> Provided you don't mind having a proliferation of FI accounts. I keep things simple for my eventual POA or Executor by sticking to my discount brokerage accounts.


Same here. And only have FI in registered accounts.

When 5yr GICs yield a real return of over 2%, I might start moving to them as existing bonds mature. Currently they yield more like 1%?


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## AltaRed (Jun 8, 2009)

There are a number of 5 year GICs at discount brokerages in the 3.0-3.05% range. Perfectly fine with me... That is about 1.8% after tax = inflation.

Scotia iTrade even had a 3 year Zag bank GIC at 3.03% this morning.


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## birdman (Feb 12, 2013)

Just received a rate of 3% for 3 yrs through the BNS. They also offered 2.5% for 15 mos.


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## james4beach (Nov 15, 2012)

frase said:


> Just received a rate of 3% for 3 yrs through the BNS. They also offered 2.5% for 15 mos.


That's a good rate for a big 5 bank. How did you get that? Was it through a discount broker's GIC selection, or another way?


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## birdman (Feb 12, 2013)

Did not do anything too special. Had a large amount of GIC's maturing tomorrow and never received a note from the bank or account mgr. Tried to connect with my acct
mgr but got to a voicemail saying he had retired and his replacement wouldn't be starting until the 5th of the month and would not be taking appointments until the following week. I was rather upset so called the Scotia on line service and pressed Zero and got through to the Investment Dept and after she looked at the size of my account offered me 2.5 for 15 mos or 3% for 3 yrs. This fits quite well with the 4% I rec'd from Coast Capital about 6 mos ago which has maybe 30 mos to go. BNS also has a 3% 5 yr prom o rate. They also broke the deposits into 3 different companies own by them and guaranteed by them and each is independently CDIC insured. The advisor also gave me their direct number for assistance in the future and set me up with an appointment with my new advisor in about a week. As I have previously posted I do not run a strict GIC ladder (agree that they are good but feel I can do better) however, I watch my maturities and spread them out to 5 years depending on the interest rate curve and my own feeling on where rates are going. Would like to put some in the five year bucket but expect that rates have further to run.


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## gardner (Feb 13, 2014)

TDDI lists a few 5y options at >3% today. I am comfortable with my combo of Tangerine and Oaken still though.

B2B Bank	3.050
Canadian Tire Bank	3.100
Canadian Western Bank	3.150
Equitable Bank	3.100
HomEquity Bank	3.100
Laurentian Bank	3.050


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## james4beach (Nov 15, 2012)

Wow you're right, Scotia has a 3% GIC promotion for 5 years. That's pretty good.
https://www.scotiabank.com/ca/en/0,,1115,00.html

frase: you might want to use Scotia online banking, then you don't have to phone or visit any of their people. I actually see 3.03% for the 5 year GIC through online banking. Basically means a Scotia GIC pays as much as a Laurentian or B2B.

One thing to be careful with Scotia (when purchased directly through online banking) is that they will always be set up to automatically renew at maturity, so you have to contact them to change that instruction.


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## birdman (Feb 12, 2013)

Right James and I am going to do something like that as I currently deal with Credential Securities and their fixed income GIC options are poor. However, they are switching to the Qtrade platform this fall and I am going to wait and see how it is. I used to deal with Qtrade but moved to Credential who is the brokerage company affiliated with my financial institution and liked it better. Also, have had some issues with BNS in the past and actually had to go to the ombudsman to get it straightened out. In any event, I do agree that buying GIC's through your broker would be easier and just get away from any account manager who simply acts as a middle person.


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## gibor365 (Apr 1, 2011)

CIBC IE offers Canadian Western Bank 3.15% for 5 years, but like gardner, I prefer Oaken's 3% for 18 mo + EQ


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## hfp75 (Mar 15, 2018)

Hubert Financial (Sunova Credit Union) has :
2 Yr @ 3% 
1 Yr @ 2.55% & is cashable on the quarters. Its an escalating rate every 90 days, this way the highest rate is at the end to entice you not to cash it. Averages 2.55%

I use Hubert for my HISA and some GICs

I feel that Hubert is safe. They lend in Manitoba with lower risk lending vs Equitable, Home Cap, ect


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## james4beach (Nov 15, 2012)

gibor365 said:


> CIBC IE offers Canadian Western Bank 3.15% for 5 years, but like gardner, I prefer Oaken's 3% for 18 mo + EQ


Seems to have gone up slightly today. Canadian Western Bank has 5 year at 3.20% at TDDI


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## james4beach (Nov 15, 2012)

Manulife (rated A) has 3.15% for 5 years


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## fatcat (Nov 11, 2009)

just bought laurentian at 3.29 for 5

https://fibondoneselfserve.td.com/FIP_GICLinkWeb/GICLink?language=en


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## agent99 (Sep 11, 2013)

Been buying slowly too. 3,4 & 5. 

BMOIL 5yr compound offerings:

SBI CANADA BANK	N/A	5 years	3.350%
CONCENTRA BANK	N/A	5 years	3.300%
HOMEQUITY BANK	N/A	5 years	3.300%
LAURENTIAN BANK	N/A	5 years	3.290%
CANADIAN TIRE BK	N/A	5 years	3.260%
CDN WESTERN BK	N/A	5 years	3.260%


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## Beaver101 (Nov 14, 2011)

I couldn't help notice all the recent postings of GIC rates, particularly on 5 years. Is it a sign of something? Like rates are at a peak or it's just exciting to see rates are finally climbing?


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## 319905 (Mar 7, 2016)

^ My stepson (the guy with the silver bullion in the basement and the virtual cryptocurrency who knows where ... talk about extremes) says I'm crazy, stay invested, look at all the money you could be making. So, why GICs? I have enough ... I've lost interest in equities/the markets; if I've lost interest I'll make mistakes ... todays/tomorrows GIC rates vs the markets are good enough for me. And pension splitting is helping out a lot with that marginal rate and no more OAS clawback.


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## agent99 (Sep 11, 2013)

Beaver101 said:


> I couldn't help notice all the recent postings of GIC rates, particularly on 5 years. Is it a sign of something? Like rates are at a peak or it's just exciting to see rates are finally climbing?


Doubtful we are at a peak! 3% is not exciting either!

Reason to be interested in GICs for some of us, is that we are well into a bull market. Risk free FI with a yield above the CPI has been hard to come by, so we had to increase risk to achieve reasonable FI yield. Now we can earn 1% over inflation rate pre tax, relatively risk free. 

I have started a ladder using 3,4 and 5yr GICs and as rates rise, hopefully in 2 years I will once again have a 5yr GIC ladder (and fewer corporate bonds)


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## Beaver101 (Nov 14, 2011)

^ + ^^ ... okay, I see reasons above make sense. Thanks!


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## fatcat (Nov 11, 2009)

rikk2 said:


> ^ My stepson (the guy with the silver bullion in the basement and the virtual cryptocurrency who knows where ... talk about extremes) says I'm crazy, stay invested, look at all the money you could be making. So, why GICs? I have enough ... I've lost interest in equities/the markets; if I've lost interest I'll make mistakes ... todays/tomorrows GIC rates vs the markets are good enough for me. And pension splitting is helping out a lot with that marginal rate and no more OAS clawback.


if you think inflation will continue to be low and you can pay the bills on guaranteed investments there is nothing wrong with gic's especially if own some gold and oil to hedge any possible inflation especially if we see 5 year rates touching on 4% here one day


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## 319905 (Mar 7, 2016)

^ Well, I think the inflation rate will increase near term ... but imo inflation is to a large extent personal/self inflicted and can be minimized/managed. Interestingly I can currently pay most of the bills on HISAs and GICs interest but don't have to. No thanks to gold, no thanks to oil ... I'm good with HISAs, GICs.

Just to say, I for one appreciate Beaver101's question ... it's a good idea to question/challenge one's own decisions now and then, consider change.


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## FIRE40 (Sep 27, 2017)

It seems to be me that there are a couple of banks consistently providing the best GIC rates - Oaken / EQ bank which are CDIC insured (though the latter you cannot open an RRSP with). Why is it that so many are going TD / Manulife / etc which tend to have 10’s of basis points lower return? Is it simply due to the simplicity of having all investments at a single location or to split up risk across multiple places?


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## james4beach (Nov 15, 2012)

FIRE40 said:


> It seems to be me that there are a couple of banks consistently providing the best GIC rates - Oaken / EQ bank which are CDIC insured (though the latter you cannot open an RRSP with). Why is it that so many are going TD / Manulife / etc which tend to have 10’s of basis points lower return?


It's because places like Home Trust, Equitable Bank, People Trust are riskier banks that are more likely to collapse when the housing market slows down. If you look at the history of Canadian bank failures, it's practically always these mortgage lenders who fail during bad times.

Many people (myself included) don't ever want to have to deal with the stress of having a bank collapse. I consider CDIC insurance the back stop, an absolute final measure. Fundamentally, I don't lend to untrustworthy borrowers. I don't want to ever have to depend on the CDIC back stop.

It's that ^ kind of market force which causes Oaken aka Home Trust aka Home Capital Group to compensate lenders (you & me) with higher interest rates. Personally I don't think 10 basis points extra yield is worth the risk for the riskier GICs.

When I want risk, I go to the stock market. When I want safety, I go to government bonds and GICs at banks with high credit ratings.


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## FIRE40 (Sep 27, 2017)

^^ I agree with that statement, and you can see from the list here:
http://www.cdic.ca/en/about-cdic/resolution/Pages/history.aspx

However, I guess it is in one's own judgement. Manulife @ 3.15% vs Oaken (Home Trust) @ 3.5% can be a significant amount of money over the course of 5 years. I guess it boils down to, can you justify the slight higher risk of having to rely on CDIC insurance for this increased rate?


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## like_to_retire (Oct 9, 2016)

james4beach said:


> It's because places like Home Trust, Equitable Bank, People Trust are riskier banks that are more likely to collapse when the housing market slows down. If you look at the history of Canadian bank failures, it's practically always these mortgage lenders who fail during bad times.


Yeah, I don't really know what to think about these alternative lenders. Ever since the Home Capital scare, I tend to get squeamish now when I buy a Home Equity or Equitable Bank GIC. I look at Equitable and see it's now Canada’s ninth largest independent bank, with more than $25 billion in assets under management with over $10 billion in deposits and is insured by the Canada Deposit Insurance Corporation. 

That's nice, but different from regular banks that raise money in a variety of ways, alternative lenders basically raise funds through savings accounts and GICs. They then take those funds and loan them out, making money from the couple of percentage point gap between what they pay out in interest to savers, and what they charge borrowers. We saw what happened to Home Capital.

Trouble is, for some people, you can reach the $100K limit on lower risk banks fairly fast. Then do you go higher than $100K on those banks or move to alternative lenders like HomEquity or Equitable and rely on CDIC if something bad happens. TDDI only supports 12 GIC entities, so sometimes you're forced to move to less than top rated banks.

ltr


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## AltaRed (Jun 8, 2009)

FIRE40 said:


> It seems to be me that there are a couple of banks consistently providing the best GIC rates - Oaken / EQ bank which are CDIC insured (though the latter you cannot open an RRSP with). Why is it that so many are going TD / Manulife / etc which tend to have 10’s of basis points lower return? Is it simply due to the simplicity of having all investments at a single location or to split up risk across multiple places?


I want all my investments in my discount brokerages, i.e. I am not prepared to have accounts at multiple institutions. That said, GICs/HISAs are a small part of my investable portfolio, in the order of 10% so I am not giving up much to have convenience and safety. Per Agent99's post, those 5 year rates are acceptable to me.


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## Eclectic12 (Oct 20, 2010)

like_to_retire said:


> ... Trouble is, for some people, you can reach the $100K limit on lower risk banks fairly fast. Then do you go higher than $100K on those banks or move to alternative lenders like HomEquity or Equitable ...


I haven't hit the limits so I haven't called in to confirm. But I thought I saw a post saying one could call in to make sure that the first $100K was a TD bank GIC, the second $100K was the TD Mortgage GIC (being a different entity, another $100K of CDIC coverage is in effect), the third ... you get the idea.

Or was this info incorrect?


Cheers


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## like_to_retire (Oct 9, 2016)

Eclectic12 said:


> I haven't hit the limits so I haven't called in to confirm. But I thought I saw a post saying one could call in to make sure that the first $100K was a TD bank GIC, the second $100K was the TD Mortgage GIC (being a different entity, another $100K of CDIC coverage is in effect), the third ... you get the idea.
> 
> Or was this info incorrect?
> 
> ...


I haven't heard that before, but maybe it's true. Whenever I phone in to renew a GIC, the agent's info seems to match the info I have online and there are usually about 12 different entities. All the usual banks plus the higher rated alternatives. They seem to have added Laurentian in the last while, so that's another possibility.

I keep a spreadsheet since I have 5 year ladders in my non-registered, RRSP and TFSA accounts. It's a lot of GIC's to keep track of. The spreadsheet warns me when I go over $100K in any one entity. I don't mind being a little bit over, but I tend to move to alternative lenders that TDDI supports that have CDIC backing rather than move too far past $100K in any of the big 5. I don't know if that's smart or not? What do others do in this situation. It can't be that unusual, even with a modest $2 million portfolio with a 40/60 split would require $1.2 million in GIC's. How could you not avoid alternative lenders?

ltr


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## Beaver101 (Nov 14, 2011)

^ I wouldn't be uncomfortable with $500K with one major bank but at most 18 months.


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## like_to_retire (Oct 9, 2016)

Beaver101 said:


> ^ I wouldn't be uncomfortable with $500K with one major bank but at most 18 months.


I think we're talking about 5 year ladders.

ltr


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## Beaver101 (Nov 14, 2011)

^ Okay, in that case, smart move and agree can't avoid alternative lenders to spread $2M in order to fall under CDIC insurance.


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## lonewolf :) (Sep 13, 2016)

Meridian 3.75% GIC new accounts


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## james4beach (Nov 15, 2012)

Beaver101 said:


> ^ Okay, in that case, smart move and agree can't avoid alternative lenders to spread $2M in order to fall under CDIC insurance.


Are people really trying to cram 2M into GICs? I would think they'd buy GICs up to the point it makes sense, and then put the rest into bond funds.

There's a reason XBB has $2.5 billion invested in it, ZAG has $3.5 billion, VAB has $1.6 billion!


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## like_to_retire (Oct 9, 2016)

james4beach said:


> Are people really trying to cram 2M into GICs? I would think they'd buy GICs up to the point it makes sense, and then put the rest into bond funds.


People invest in GIC's that match their asset allocation. If they're CDIC insured, why do you think bond funds are a better choice?

ltr


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## fireseeker (Jul 24, 2017)

like_to_retire said:


> People invest in GIC's that match their asset allocation. If they're CDIC insured, why do you think bond funds are a better choice?
> 
> ltr


To be CDIC insured would require holding GICs with 20 different FIs (10 if it's a couple with $2M)


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## james4beach (Nov 15, 2012)

like_to_retire said:


> People invest in GIC's that match their asset allocation. If they're CDIC insured, why do you think bond funds are a better choice?


Bonds are generally easier to deal with for very large amounts. GICs are great, but if you've bought every possible issuer that you can easily find through your brokerage and are starting to carefully manage those CDIC maximums, it probably would be easier to move a bunch of money into a bond fund.


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## gibor365 (Apr 1, 2011)

fireseeker said:


> To be CDIC insured would require holding GICs with 20 different FIs (10 if it's a couple with $2M)


Actually with a couple it's just 7, as you can have 2 ind and 1 joint GIC


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## Eder (Feb 16, 2011)

fireseeker said:


> To be CDIC insured would require holding GICs with 20 different FIs (10 if it's a couple with $2M)


More like 6 or 7 as you can use joint GIC for another 100k CDIC insured. 300k each institution...it would be easy to lay off 5-6 million.


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## like_to_retire (Oct 9, 2016)

gibor365 said:


> Actually with a couple it's just 7, as you can have 2 ind and 1 joint GIC


Yep, CDIC protects eligible deposits to a maximum of $100,000 for each of seven deposit categories.

ltr


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## gibor365 (Apr 1, 2011)

like_to_retire said:


> Yep, CDIC protects eligible deposits to a maximum of $100,000 for each of seven deposit categories.
> 
> ltr


Generally, it's very easy to buy GICs/HISAs for couple of millions and be within CDIC limits... You may buy GIC joint with your kid, with your parent, joint with spouse and kid ... a lot of combinations.... was doing it for years


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## james4beach (Nov 15, 2012)

Saw an uptick today, 5 year Scotiabank at 3.22% ... at both iTrade and TDDI.

I'm considering getting this one as I'm a bit light on fixed income


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## lonewolf :) (Sep 13, 2016)

Apparently some GICs will give one extra day of interest on the leap year as the rate is based on 365 days a year. When there is a leap year they will pay an extra day of interest.


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## jargey3000 (Jan 25, 2011)

james4beach said:


> Saw an uptick today, 5 year Scotiabank at 3.22% ... at both iTrade and TDDI.
> 
> I'm considering getting this one as I'm a bit light on fixed income


would people have any qualms about putting $300k into this one at scotia , for 5 years..?(from cdic coverage standpoint, i mean)


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## seh (Nov 10, 2014)

jargey3000 said:


> would people have any qualms about putting $300k into this one at scotia , for 5 years..?(from cdic coverage standpoint, i mean)


I've been putting money into Scotia USD GICs (now up to 2.5% for 1 yr. through iTrade), so also no CDIC coverage. Guess I figure that if one of the big 5 can't pay out on a GIC, we're all in deep doo doo!


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## Koogie (Dec 15, 2014)

jargey3000 said:


> would people have any qualms about putting $300k into this one at scotia , for 5 years..?(from cdic coverage standpoint, i mean)


Scotia can game the CDIC coverage on your behalf if you ask them to. They have multiple CDIC entities, each with separate 100K coverage. They could split your 300K so it has complete CDIC backing.


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## jargey3000 (Jan 25, 2011)

Koogie said:


> Scotia can game the CDIC coverage on your behalf if you ask them to. They have multiple CDIC entities, each with separate 100K coverage. They could split your 300K so it has complete CDIC backing.


thanks koogie...I'd be buying thru RBC DI though...?


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## like_to_retire (Oct 9, 2016)

jargey3000 said:


> would people have any qualms about putting $300k into this one at scotia , for 5 years..?(from cdic coverage standpoint, i mean)


But doesn't Scotia sell a long list of GIC's from different entities that all have CDIC coverage? I tend to use just about every one that TDDI offers, and usually move to the next one when I get to about $110K.

ltr


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## james4beach (Nov 15, 2012)

Through iTrade, all the different Scotia issuers are visible. One can buy 100k under each name for 500k total at 3.22%, CDIC insured.

Remember that the protections are for total amounts across everywhere, so if you already have 50k in a Scotia savings account, then you'd only want to get 50k of the GIC with the same issuer name.

Same goes for the various TD issuer names, a total of 4, each eligible for 100k CDIC
https://www.tdcanadatrust.com/products-services/index.jsp


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## jargey3000 (Jan 25, 2011)

seh said:


> I've been putting money into Scotia USD GICs (now up to 2.5% for 1 yr. through iTrade), so also no CDIC coverage. Guess I figure that if one of the big 5 can't pay out on a GIC, we're all in deep doo doo!


seh- do you know if RBC DI offers similar USD GIC rates?
all I can find there is dismal rates on US "term deposits".
anyone?


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## AltaRed (Jun 8, 2009)

jargey3000 said:


> seh- do you know if RBC DI offers similar USD GIC rates?
> all I can find there is dismal rates on US "term deposits".
> anyone?


Seems you and Seh are mixing up the conversations between Cdn CAD GICs and USD deposits... Totally different things. I don't know of any discount brokerage that lists USD denominated GICs, etc.


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## james4beach (Nov 15, 2012)

USD deposits with Canadian banks are also not covered under CDIC, if that matters to you.

If safety is a concern that you could use a vehicle like SHV which stores the USD in government-backed tbills.


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## seh (Nov 10, 2014)

AltaRed said:


> Seems you and Seh are mixing up the conversations between Cdn CAD GICs and USD deposits... Totally different things. I don't know of any discount brokerage that lists USD denominated GICs, etc.


Not really mixing up the conversations, as the question was whether he should have any qualms having non CDIC insured deposits with Scotia. USD (any amount), or over the limit CAD GICs, fall into the same category for CDIC purposes - not covered. One needs to decide if they're worried about a big 5 bank not being able to pay out on a non-insured deposit, and act accordingly.

I actually did look into USD deposits at any of the Sask/Alberta/B.C. credit unions, as they're the only (domestic) institutions I know of with deposit insurance corporations that ARE backed by provincial governments (I'm pretty sure Manitoba Deposit Insurance Corporation is NOT specifically backed by the government), AND do cover all (including USD) deposits. No good for me since they require you be a resident of that province to open an account, and sometimes also a personal visit.


iTrade does offer US pay GICs placed with Scotia. Today's rates range from 2.2%-3.1%. Don't know about any other discount brokerages.


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## james4beach (Nov 15, 2012)

Another increase, this time Concentra. Current rates at iTrade:

Concentra Bank: 3.25% for 5 year GIC
Scotiabank: 3.22% for 5 year GIC


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## gardner (Feb 13, 2014)

Still renewing with HT/Oaken next week -- currently 3.60% 5yr.


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## lonewolf :) (Sep 13, 2016)

gardner said:


> Still renewing with HT/Oaken next week -- currently 3.60% 5yr.


 Merridian a few days ago 3.75% 5 yr


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## newfoundlander61 (Feb 6, 2011)

I noticed in my investors edge account that they offer a good variety of *3rd party* GIC's but no *1* year, only *2 *years and up.


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## Beaver101 (Nov 14, 2011)

^ ? Yes, there're "annual" 3rd party GIC rates. 

Click the "Annually" on the top row: Interest Paid:At Maturity Annually Semi-annually Monthly
Then click "Annually" column to sort and right now GIC Issuer Equitable Bank pays highest at 2.45%. 

That was fun.


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## newfoundlander61 (Feb 6, 2011)

Worked and yes that was fun


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## robfordlives (Sep 18, 2014)

My entire RRSP and good chunk of TFSA is with Itrade and it is about 80% PH&N bond funds and then 20% 1 year GIC's which I picked up recently as they started offering what I considered an attractive rate.

The 5 year rate posted on Itrade looks very appealing to me. The $ values are not small.....would liquidating most of the PH&N fund entirely and investing in 2-5 year GIC's constitute market timing?

I'm unhappy with the PH&N fund as it's avg term to maturity is 10.8 years. Nowhere in their prospectus does it state it would take such a long term view. I've emailed them about that with no response.

In any event looking for advice. Perhaps I should liquidate that fund over 6-12 months and move into GIC's? I plan to retain some in either a bond fund or ETF as I can then rebalance into equities if the need arises.


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## like_to_retire (Oct 9, 2016)

robfordlives said:


> My entire RRSP and good chunk of TFSA is with Itrade and it is about 80% PH&N bond funds and then 20% 1 year GIC's which I picked up recently as they started offering what I considered an attractive rate.
> 
> The 5 year rate posted on Itrade looks very appealing to me. The $ values are not small.....would liquidating most of the PH&N fund entirely and investing in 2-5 year GIC's constitute market timing?
> 
> ...


I wonder why you wouldn't just start assembling a 5 year GIC ladder for your fixed income?

ltr


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## AltaRed (Jun 8, 2009)

I agree. Seems like market timing to be in 1 year GICs. I might suggest 50% in a bond ETF and 50% in a 5 year GIC ladder. The ETF provides for re-balancing flexibility and opportunistic equity purchases.


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## like_to_retire (Oct 9, 2016)

AltaRed said:


> I agree. Seems like market timing to be in 1 year GICs. I might suggest 50% in a bond ETF and 50% in a 5 year GIC ladder. The ETF provides for re-balancing flexibility and opportunistic equity purchases.


Exactly. 

No one is beating 5 year GIC ladders these days, except for liquidity. So, add in a bond ETF if that's important. Case closed.

ltr


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## james4beach (Nov 15, 2012)

like_to_retire said:


> No one is beating 5 year GIC ladders these days, except for liquidity. So, add in a bond ETF if that's important. Case closed.


It took me a while to get on board with the 5 year GIC ladder idea. I used to keep saying to myself, why buy a 5 year GIC when sometimes a 2 year etc offers what looks like a better "deal" (nearly the same yield etc).

But now I get it. On average, the 5 year GIC gives you the highest yield and only buying 5 years gives you the highest returns over time.


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## like_to_retire (Oct 9, 2016)

james4beach said:


> On average, the 5 year GIC gives you the highest yield and only buying 5 years gives you the highest returns over time.


And with a 5 year ladder you're picking up the latest rates on 20% of your total every year. Some of us have 5 year ladders with two steps a year, so every 6 months you get the new rates of the day on 10% of your holdings.

ltr


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## agent99 (Sep 11, 2013)

like_to_retire said:


> Exactly.
> 
> No one is beating 5 year GIC ladders these days, except for liquidity. So, add in a bond ETF if that's important. Case closed.
> 
> ltr


Now that interest rates are a bit higher, GIC ladder does look a bit better than a year or two ago. But a current 5yr ladder would barely match the inflation rate after tax, so not something to get excited about. 

Having said that, I have started a new GIC ladder . Just 3,4,5 yrs at present and will fill it out as some corporate bonds mature. Not much attractive in corporates at present, but that may change too as bond prices drop. I have ladder of those out to 2022. Split preferreds which are very much bond-like with fixed maturity dates do beat corporates and GICs at present. Not guaranteed though. I have FI spread among all three. No ETFs! Aim is to get 4+% yield on FI.


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## Koogie (Dec 15, 2014)

james4beach said:


> It took me a while to get on board with the 5 year GIC ladder idea. I used to keep saying to myself, why buy a 5 year GIC when sometimes a 2 year etc offers what looks like a better "deal" (nearly the same yield etc).
> But now I get it. On average, the 5 year GIC gives you the highest yield and only buying 5 years gives you the highest returns over time.


lol.. you argue for paragraphs and paragraphs about the finest nuances of different equity investing scenarios, about the effects of inflation, about backtesting and graphing historical returns but struggle to appreciate the plain logic behind a GIC ladder.

sorry, this isn't meant to be negative or an attack James. it's just funny how the mind works (i hope you see the humor in it). god knows i have bigger blind spots and do dumber stuff.


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## james4beach (Nov 15, 2012)

You're right Koogie, and it's amazing how many mental blocks and hurdles come up in investing.

Many people make a similar mistake in fixed income by investing in short term bonds instead of the regular bond funds (XBB, VAB, ZAG). If your time horizon is long enough, you will get the highest returns with those regular bond funds. It's a direct parallel to the GIC issue, because you get compensated for higher returns the farther down the yield curve you go.

That's why 5 year GICs provide higher returns than 2 year GICs...
And why XBB provides higher returns than XSB (over 10 year time frame)


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## jargey3000 (Jan 25, 2011)

does the idea of a 3-year GIC ladder have any merit...in a rising rates environment....???


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## agent99 (Sep 11, 2013)

jargey3000 said:


> does the idea of a 3-year GIC ladder have any merit...in a rising rates environment....???


Well it does for me, and that is what I have done. (3,4 &5 to start) But it might become a 4 or 5 yr if I add a new 5 yr in coming years. Don't think there is anything special about the number of years. 3 might be better than 5. I just wouldn't start with 123 at present! 

Right now, not really happy about GIC after tax yields. Just a small part of portfolio.


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## like_to_retire (Oct 9, 2016)

jargey3000 said:


> does the idea of a 3-year GIC ladder have any merit...in a rising rates environment....???


Obviously at this time, the 5 year ladder offers a return higher than a 3 year ladder, but depending on the rate of rise of interest rates over 3 and 5 years you could show the math that would support your idea. It would mean you need to be able to predict the rate of rise. You could spreadsheet the whole thing and plug in numbers and find out what the rates would have to be over the next 5 years to make it worthwhile going for the shorter ladder. The rate of rise would be fairly high to make it work for you.

Also remember, initially it takes 5 years before a 5 year ladder is running on all cylinders.

ltr


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## agent99 (Sep 11, 2013)

LTR, 3 yr would have higher return if you bought 3,4 & 5 as I did. They are not much different in yield. It may make sense to add another 5yr each of next two years if interest rates continue to climb. So after 2 and a bit years you have a 5yr ladder.


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## like_to_retire (Oct 9, 2016)

agent99 said:


> LTR, 3 yr would have higher return if you bought 3,4 & 5 as I did. They are not much different in yield. It may make sense to add another 5yr each of next two years if interest rates continue to climb. So after 2 and a bit years you have a 5yr ladder.


Yeah, it's always a crap shoot when you first build a ladder as to what the best method should be. I remember when my ladders were all bonds and then GIC's started to enjoy better rates, so I just patched the GIC's in when bonds came due. The standard method to start a 5 year ladder would be to buy 1,2,3,4,5 and then wait until you had all 5 year maturities and then you'd be running on all cylinders (I suppose it would actually be 4 years when that occurred - right?).

Your method makes a call on interest rates. You have to wait 3 years before you pick up the newest rates of the day. Interest rates could go to the moon during that time and your 3,4,5 year maturities wouldn't be picking them up. But, if rates remain the same, drop or rise slowly, you'll probably be ahead. So, it's a gamble. The 1,2,3,4,5 method to start a ladder removes any guesswork.

ltr


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## james4beach (Nov 15, 2012)

Some of this comes down to whether you prefer 'couch potato' passive approaches, vs actively trying to time and anticipate markets.

If you think you can predict central bank policy rates and bond yields, predict what the yield curve looks like, and predict how fast those things change -- then you could try timing the bond market and going shorter term strategically. Remember that you will have to also re-adjust when rates stabilize or start dropping again. I wouldn't recommend doing this unless you have one of those $60,000 Bloomberg terminals since people with those things have a trading advantage*. Without that information advantage, you're just eating the bad side of all of their trades.

On the other hand, if you think you can't time the market, then the passive approach is to consistently do the 5 year GIC ladder with all new purchases being 5 year GICs.


* there are futures contracts on short term Canadian rates and Bank of Canada rates. It's possible to use these futures prices to calculate a probability of rate hike at any given time. However, it takes a Bloomberg terminal to get the data and run the calculation. These are the kinds of people you are trading against when you try to strategically buy short term bonds or GICs.


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## agent99 (Sep 11, 2013)

like_to_retire said:


> Your method makes a call on interest rates. You have to wait 3 years before you pick up the newest rates of the day.


Well it is hardly a "method". Just can't see buying anything with less than about 3% yield. (Was 4% a few years back!). The GIC ladder is small part of my FI, so I do have bonds and split pfds maturing at varios dates too. I lump them all together in spreadsheet (which needs updating!)


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## james4beach (Nov 15, 2012)

I bought a 5 year Royal Bank GIC at 3.25% today because I prefer going with the big banks. There's also Concentra at 3.30%.

Something to watch out for, at iTrade. At the top of the GIC issuer table you can select between Annual (which pays out interest) and Annual Compound (which reinvests interest).


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## AltaRed (Jun 8, 2009)

It's similar at BMO IL, and I imagine other brokerages. Some seniors want Annual Pay, especially in non-reg accounts.


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## james4beach (Nov 15, 2012)

AltaRed said:


> It's similar at BMO IL, and I imagine other brokerages. Some seniors want Annual Pay, especially in non-reg accounts.


If one strongly expects interest rates to rise, I could see how annual payments could be an advantage. You'll get to reinvest the distributions at higher rates (maybe).


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## like_to_retire (Oct 9, 2016)

james4beach said:


> If one strongly expects interest rates to rise, I could see how annual payments could be an advantage. You'll get to reinvest the distributions at higher rates (maybe).


Yeah perhaps, but generally, I think the decision between compound and simple interest is one where retired types want the income and accumulators want the re-investment option, so as not to have to fuss with the clipped coupon cash.

ltr


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## james4beach (Nov 15, 2012)

Another uptick, 5 year Scotia (and the other issuer names) at 3.35%


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## hfp75 (Mar 15, 2018)

Hubert Financial in Mb - credit union, is at 3.5%


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## Kayshaunsmith1996 (Jul 19, 2018)

james4beach said:


> Another uptick, 5 year Scotia (and the other issuer names) at 3.35%


is that locked in or can you withdraw at any time?


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## james4beach (Nov 15, 2012)

Kayshaunsmith1996 said:


> is that locked in or can you withdraw at any time?


Locked in, non redeemable.


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## doctrine (Sep 30, 2011)

With 1 year GIC rates around 2.8-3%, I would take that over 5 year at 3.3%. The Canadian yield curve is quite flat. I'm not sure what a healthy spread is, but I would think I would want close to 1% between 1 and 5 year.


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## AltaRed (Jun 8, 2009)

Those of us with 5 year ladders don't play that game. At some point, the roulette wheel stops in the wrong place where one then has a disproportionate number of maturities coming due. Then what? One then needs to pick up a low interest 3 year to get back on track just because of poor judgement picking up a 2 year back in 2018.

The purpose of a 5 year ladder is always to have 5 year rates.


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## james4beach (Nov 15, 2012)

doctrine said:


> With 1 year GIC rates around 2.8-3%, I would take that over 5 year at 3.3%. The Canadian yield curve is quite flat. I'm not sure what a healthy spread is, but I would think I would want close to 1% between 1 and 5 year.


I agree it feels like that, but you will get higher returns over the long term if you only ever buy 5 year GICs. The yield curve might be quite flat, but you still get the highest yield at 5 years. Therefore, highest return.

Remember that interest rates could also go down. It is not certain they will keep rising. On average, and over many years, you will get the highest returns the farther down the yield curve you go. XBB returns more than XSB, and 5 year GICs return more than 2 year GICs.

I'm trying to reduce the spacing of my ladder to 6 months, maybe even less. Rising interest rates will be nice to see.


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## AltaRed (Jun 8, 2009)

Plus you have to be right twice when that short term GIC matures.


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## like_to_retire (Oct 9, 2016)

I didn't know they sold 3 month GIC's. I think the shortest TDDI has is 1 year.

Equitable Bank 3 month GIC 3.33%

ltr


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## like_to_retire (Oct 9, 2016)

I had a couple GIC's that matured yesterday, so I fought my way through the TDDI voice recognition system and bought the GIC's. A bit disappointing as the GIC yields dropped since yesterday when I checked them. BNS dropped -0.15% and Manulife dropped -0.08. Not a lot, but still not what I expected. I thought interest rates were rising.

All my GIC totals are getting over the $100K limit now, so I sure hope they change that rather low limit or I'll be switching to bonds next I guess.

As always I asked when TDDI will allow online GIC purchases and the guy said they just had a meeting a week ago on that very subject and supposedly will be complete by mid 2019. I can't imagine what has taken so long, but I will be glad when it happens as the phone system is truly a work in progress.

When you phone in, it asks for your account number, and it simply would not understand what I told it. That's weird, because I can mumble and hum and haw and carry on when I use Google Assistant voice recognition and it always knows what I am saying. After repeating my account number about ten times it says to key in the account number on my phone. That's difficult since there are several alphanumeric characters in the account number, so yeah, there's that problem. 

I started swearing at it and it said if I wanted to speak to an agent (yes please!), then say "TD Direct Investment Representative". Seriously, can't I just press 1?
Nope, you have to say the exact phrase "TD Direct Investment Representative". I didn't get the entire wording correct the first few times, but then I wrote down what they wanted me to say, word for word, and finally I made it through to an agent.

Whew, they make it difficult to buy GIC's at TDDI.

ltr


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## fireseeker (Jul 24, 2017)

like_to_retire said:


> I started swearing at it and it said if I wanted to speak to an agent (yes please!), then say "TD Direct Investment Representative". Seriously, can't I just press 1?


"Your call is important to us. Please stay on the line ..."


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## OptsyEagle (Nov 29, 2009)

like_to_retire said:


> I didn't know they sold 3 month GIC's. I think the shortest TDDI has is 1 year.
> 
> Equitable Bank 3 month GIC 3.33%
> 
> ltr


It's because they don't really make enough money selling a competitors GIC lower then 1 Yr. If I recall, they earn 0.25% per year of term in commission on GICs. So a 3 month GIC would only pay 0.0625%, or about $6.25 on $10,000. I would think that you could find a 3 month TD Bank GIC if you wanted but it would not be at that rate.


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## james4beach (Nov 15, 2012)

Yeah it's disappointing that GIC rates have dropped slightly. At iTrade, among the big banks, I'm still seeing CIBC 5 year at 3.35%

However I have a few months before my next 5 year GIC purchase. I just hope interest rates don't drop between now and then.


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## AltaRed (Jun 8, 2009)

I am going to need to buy a 2 (or 3) year term GIC as soon as Zag 'redeems' its GICs in my iTrade account. I need to have a 2021 maturity for my annual RRIF withdrawal then. I'll have to take what I can get.


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## agent99 (Sep 11, 2013)

james4beach said:


> Yeah it's disappointing that GIC rates have dropped slightly. At iTrade, among the big banks, I'm still seeing CIBC 5 year at 3.35%


When I checked this morning, BMOIL had 2 5yr at 3.44 and another (Can Tire) at 3.43 . For 2 yrs, they were at 3.12 (cdn westn bank) Of course, Monday may be different. But at least on BMOIL, you can see rates and buy on-line. I was thinking about a 5yr for $10k that matured in my RRIF, but might just add to a perpetual CU pfd that is yielding 5.6%. Any sign of high inflation coming in next 10 yrs? (my horizon  )


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## james4beach (Nov 15, 2012)

Sounds like BMOIL has a similarly nice selection to iTrade. I no longer buy GICs at TDDI, only do them at iTrade now as it's a good inventory and pleasant online interface for GICs.

If you have a time horizon that matches, I think the 5 year ladder is the best way to go. I don't see any reason to buy a 2 year @ 3.12% when you can get 5 year @ 3.44%. Just keep filling in the ladder and regularly buying a new 5 year every few months. Once it's up and running, you'll have a GIC maturing every few months, and you'll always be buying the highest posted rate (almost always the 5 year).

No idea where inflation is headed... I'm hoping that my stock & gold allocations protect me on the inflation side.


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## agent99 (Sep 11, 2013)

james4beach said:


> Sounds like BMOIL has a similarly nice selection to iTrade. I no longer buy GICs at TDDI, only do them at iTrade now as it's a good inventory and pleasant online interface for GICs.
> 
> If you have a time horizon that matches, I think the 5 year ladder is the best way to go. I don't see any reason to buy a 2 year @ 3.12% when you can get 5 year @ 3.44%. Just keep filling in the ladder and regularly buying a new 5 year every few months. Once it's up and running, you'll have a GIC maturing every few months, and you'll always be buying the highest posted rate (almost always the 5 year).
> 
> No idea where inflation is headed... I'm hoping that my stock & gold allocations protect me on the inflation side.


I'm having trouble seeing GICs yielding 5.6% on average over next 10yrs, so CU or similar pfd is looking better! Or maybe a corporate with similar yield, but known and fixed maturity. 2+% spread for security??


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## lonewolf :) (Sep 13, 2016)

Meridian credit union 5 yr GIC is still @ 3.75%. Would have to go through the complete list of cu in Canada to find the best rate. Globe & mail or rate hub does not list all the rates. Seasonality it is best to have the GICs renew in late April early May


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## AltaRed (Jun 8, 2009)

james4beach said:


> If you have a time horizon that matches, I think the 5 year ladder is the best way to go. I don't see any reason to buy a 2 year @ 3.12% when you can get 5 year @ 3.44%. Just keep filling in the ladder and regularly buying a new 5 year every few months. Once it's up and running, you'll have a GIC maturing every few months, and you'll always be buying the highest posted rate (almost always the 5 year).


I specifically brought up 2 year only because of a unique situation where my 5 year Zag GIC which matures in 2021 is being 'redeemed' shortly because Desjardins is closing Zag bank, so depending on whether the 'redemption' occurs this month (when I can still buy a 3 year to mature in 2021) or doesn't happen until January, (I will have to buy a 2 year GIC to maintain 2021 maturity, remains unknown.


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## fireseeker (Jul 24, 2017)

agent99 said:


> I'm having trouble seeing GICs yielding 5.6% on average over next 10yrs, so CU or similar pfd is looking better!


Yabbut, not really comparable, right? You will almost certainly get your 5.6% in yield over the next 10 years, but if you need to sell a perpetual in 2028 I will bet you all my bitcoins (zero) that the price you get will not match the price you paid. (Whether it's higher or lower, who can say?)


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## like_to_retire (Oct 9, 2016)

fireseeker said:


> Yabbut, not really comparable, right? You will almost certainly get your 5.6% in yield over the next 10 years, but if you need to sell a perpetual in 2028 I will bet you all my bitcoins (zero) that the price you get will not match the price you paid. (Whether it's higher or lower, who can say?)


Yeah agreed, I think if you're retired and looking for income, then preferreds are fine, but otherwise in accumulation mode you have to consider total return and it may not be good. If you're sharp you can trade them and do OK because the pricing is often nuts. Prefs are fixed income, but best to not be substituting prefs for GIC's or at least a very small percentage. Back when GIC's were offering 1.7% for 5 years I know I read a lot from people saying they were buying prefs when their GIC's came due. That was somewhat understandable, but now that GIC's are back to paying 3.5%, I wouldn't consider it.

ltr


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## james4beach (Nov 15, 2012)

I can't agree with the line of thinking, whether accumulation stage or living off capital, that the price of a security can be completely ignored (e.g. focusing just on a pref's yield). I've seen this kind of thinking get people into trouble time and again when they buy something for its yield. In _some_ cases the investment doesn't work out, for whatever reason, and now you have to re-allocate the capital. Suddenly the price matters.

Same story with dividend stocks. GE was an excellent dividend aristocrat until it wasn't, and now its price matters a whole lot -- even for people who insisted that the price never matters. As for preferred shares, they are equity, not fixed income by definition:



> Perferreds are carried on the corporate balance sheet in the shareholder's equity column, not the debt column.


I understand that some preferreds might be great deals right now (I have no idea) but they just aren't the same as fixed income. Both GICs and bonds guarantee principal at maturity, and are fundamentally debt instruments. Failure to pay the interest or principal constitutes a *default* on debt, and is a huge deal. Equities provide no assurances of the dividends or price of the security.


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## like_to_retire (Oct 9, 2016)

james4beach said:


> As for preferred shares, they are equity, not fixed income by definition:


Yet the income is fixed, so there's that.

I don't think you read your own link James, it says: _"Preferred stock has a fixed dividend rate, which makes it a fixed-income security"._



> I understand that some preferreds might be great deals right now (I have no idea) but they just aren't the same as fixed income.


We sure agree on that.



> Equities provide no assurances of the dividends or price of the security


But preferreds rank senior to common equity in the event of default by the corporation, and their income is fixed for their term.

My main point was to agent99 when he said, "I'm having trouble seeing GICs yielding 5.6% on average over next 10yrs, so CU or similar pfd is looking better!". It sure sounded like he was thinking of taking an allocation he had to GIC's and switching it to preferred shares. They have their place, and can boost income in retirement with a thoughtful portion of your fixed income, but when you switch from GIC's to preferred shares you're really blurring the lines. 

ltr


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## Onagoth (May 12, 2017)

like_to_retire said:


> Yet the income is fixed, so there's that.
> 
> I don't think you read your own link James, it says: _"Preferred stock has a fixed dividend rate, which makes it a fixed-income security"._
> 
> ...


Preferred share income is not fixed, because dividends are not guaranteed, even if the dividend rate is. Companies do not have to pay preferred dividends so I wouldn't consider these investments "fixed income" either.


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## agent99 (Sep 11, 2013)

fireseeker said:


> Yabbut, not really comparable, right? You will almost certainly get your 5.6% in yield over the next 10 years, but if you need to sell a perpetual in 2028 I will bet you all my bitcoins (zero) that the price you get will not match the price you paid. (Whether it's higher or lower, who can say?)


Fixed income for us is just for safety. A perpetual is not something we will ever _want_ to trade. They help in keeping our overall portfolio yield above our withdrawal rate. Also have ladder of bonds, pfds and a few GICs with fixed maturity dates. 

In real terms, at present the perpetual yields about 3%. GICs are likely under 1% (Don't have current cpi figures) - just slightly better these days than cash under mattress. Better than a year or two ago though.


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## agent99 (Sep 11, 2013)

Onagoth said:


> Preferred share income is not fixed, because dividends are not guaranteed, even if the dividend rate is. Companies do not have to pay preferred dividends so I wouldn't consider these investments "fixed income" either.


If they are cumulative pfds (like the CU shares I own) and a dividend is missed, then they have to pay the missed dividend before any others. 

LTR - I am aware of the difference between current yield and total return. However, with a relatively short investing horizon, seems to me that 5.6% cash flow from original investment is not that easy to get other from riskier common stock. Right now, about 1% of our portfolio is in perpetual pfds. May add to that using funds from maturing corporate bonds. We hardly have any GICs and may add to them too. Rest of FI is in corp bonds, conv deb and split pfds. Never all eggs in one basket


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## like_to_retire (Oct 9, 2016)

agent99 said:


> I am aware of the difference between current yield and total return. However, with a relatively short investing horizon, seems to me that 5.6% cash flow from original investment is not that easy to get other from riskier common stock.


If I compare that CU pref at 5.6% against the CU common which enjoys 46 years of continuous dividend increases and a share price that follows, I might bet that the total return over 10 years would favour the common. What do you think?

ltr


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## agent99 (Sep 11, 2013)

like_to_retire said:


> If I compare that CU pref at 5.6% against the CU common which enjoys 46 years of continuous dividend increases and a share price that follows, I might bet that the total return over 10 years would favour the common. What do you think?
> 
> ltr


Well, I have some of that too  . But on the equity side of portfolio  I think you are right though, the common will probably do better. 

One thing that came to mind. Consider buying $100k of a basket of perpetuals that will yield 5.6%. Then compare that with buying an annuity with survivor benefits at age 70. The pfds would pay out $5600/yr of dividend income with good chance of keeping most of your capital. The annuity would be about $5600/yr with no chance of keeping any capital. There may be some difference in taxes to be paid, but the killer for the annuity is the total loss of the capital. 

Buying basket of common dividend paying shares, may or may not be better, but certainly more downside risk.

Note: After reading recent perpetual rates, changed basket to 5.6% yield. https://advisor.scotiawealthmanagement.com/content/uploads/sites/194/Daily-6.pdf


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## like_to_retire (Oct 9, 2016)

agent99 said:


> One thing that came to mind. Consider buying $100k of a basket of perpetuals that will yield 5.6%. Then compare that with buying an annuity with survivor benefits at age 70. The pfds would pay out $5600/yr of dividend income with good chance of keeping most of your capital. The annuity would be about $5600/yr with no chance of keeping any capital. There may be some difference in taxes to be paid, but the killer for the annuity is the total loss of the capital.
> 
> Buying basket of common dividend paying shares, may or may not be better, but certainly more downside risk.


No doubt the pref basket would win, but I guess people buy annuities for the lower risk and more importantly for ease of use when they become addle-minded. You'd have to maintain that basket of prefs, but not so with the annuity.

You could even burn down a portion of those prefs every year and boost your income past an annuity. I suppose that's what people do when they specifically look for premium bonds for the higher payout commensurate with loss of capital.

ltr


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## agent99 (Sep 11, 2013)

like_to_retire said:


> No doubt the pref basket would win, but I guess people buy annuities for the lower risk and more importantly for ease of use when they become addle-minded. You'd have to maintain that basket of prefs, but not so with the annuity.
> 
> You could even burn down a portion of those prefs every year and boost your income past an annuity. I suppose that's what people do when they specifically look for premium bonds for the higher payout commensurate with loss of capital.
> 
> ltr


They sell them to addle minded retirees?? Shame on them! Not there yet and hopefully won't be. Wish I had a relative to pass torch to, but none of them are qualified or interested. Gradually moving toward a portfolio that will almost run itself. One of the benefits of perpetuals is that they don't mature and require decisions on re-investment.


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## OnlyMyOpinion (Sep 1, 2013)

Relatively small trading volumes might make assembling $100k of perp prefs a challenge?


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## agent99 (Sep 11, 2013)

OnlyMyOpinion said:


> Relatively small trading volumes might make assembling $100k of perp prefs a challenge?


Us retirees have time on our hands  Actually, I haven't had trouble buying, but selling can take time.

By the way, I posted more on subject in Jargeys thread on annuities.


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## james4beach (Nov 15, 2012)

Just bought a CIBC 5 year GIC at 3.35%, the highest rate yet in my ladder. With market interest rates down so much in the last few months I'm not sure these rates are going to stay this high.


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## like_to_retire (Oct 9, 2016)

james4beach said:


> Just bought a CIBC 5 year GIC at 3.35%, the highest rate yet in my ladder. With market interest rates down so much in the last few months I'm not sure these rates are going to stay this high.


They have pulled back a bit from the high though - at least at TDDI. That 3.35% for CIBC is pretty good.

I'm just looking at my ladder's spreadsheet. I have 5 year ladders in my RSP, TFSA and OPEN accounts. Most come due twice a year - so a lot of GIC's. 50% of my asset allocation.

Fun to look at the worst rates in the spreadsheet. I see a 5 year HomEquity Bank purchased Sept 2016 @ 1.86%. I have to wait until 2021 until that one matures. I remember cringing whenever I bought any under 2%. Now when I add any above 3% it sure helps the overall yield of the ladder.

ltr


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## OptsyEagle (Nov 29, 2009)

GIC rates are like gas prices. I always said that it only takes a couple of days paying $1.50 per litre to make $1.25 seem like a bargain. 

Interest rates work the same way. I remember when they went below 10%, in the 90s, hearing people say that they were going to keep their maturities short until they were at least above 10%. Obviously they lost on that line in the sand, very badly, but my point is that the only reason 3% could possibly look good now, is because it use to be under 2%. I can guarantee you that 3% didn't look so good, on the way down.


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## dubmac (Jan 9, 2011)

Agree. 
It's been a long time since GIC's added much to the overall bottom line. Like you, I have kept my ladder going through the lean years of low rates. 
Now I am seeing 3.53% offered for 5 yrs, and 2.91% for 1 year. Hopefully rates will go up between now and renewal in July 2019. 
I take the interest and buy index ETF's with the proceeds, then return the capital into the GIC for another cycle. Lowest GIC rate in ladder is 2.45% (2016).
average 2018 yield on 5 yr GIC ladder was 2.45%. 2018 average yield on bond fund was 2.50%.

overcourse - hindsight is always 20/20. 2.5 to 3% in 2018 always looks better when you compare it to the -15% that is the TSX in 2018.


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## like_to_retire (Oct 9, 2016)

OptsyEagle said:


> GIC rates are like gas prices. I always said that it only takes a couple of days paying $1.50 per litre to make $1.25 seem like a bargain.
> 
> Interest rates work the same way. I remember when they went below 10%, in the 90s, hearing people say that they were going to keep their maturities short until they were at least above 10%. Obviously they lost on that line in the sand, very badly, but my point is that the only reason 3% could possibly look good now, is because it use to be under 2%. I can guarantee you that 3% didn't look so good, on the way down.


Yeah, it's all relative I guess. I remember my mortgage at 21% and I specifically remember at work they use to offer us Canada Savings Bonds where we could get a little taken off our cheque each week and buy a CSB. I remember the year they were offering 19.5% rate and we all laughed and said no way because next year it'll be 21% and that 19.5% sucks. (yeah, 19.5% guaranteed from the federal government sucks)....

ltr


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## james4beach (Nov 15, 2012)

It's true that hindsight is 20/20 and one might well regret these 3% rates later. But the great thing about a 5 year GIC ladder, especially if you space the renewals out every 3 or 6 months, is that you always have something maturing. You constantly get to re-invest it at the best available rate (5 years) at the time. If interest rates soar in the coming years, you will benefit from it.

The exact same thing is true of bond funds like XBB, but that's usually less obvious because the reinvestment happens under the hood. XBB investors will also benefit from rising interest rates.

It's not at all clear whether interest rates will go up or down. Probably not a good idea trying to time the bond market or predict the shape of the yield curve.


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## like_to_retire (Oct 9, 2016)

I bought a GIC at TDDI with my TFSA contribution along with all this year's interest, for my ladder. 

I had decided to get a five year Royal Bank @3.15%, but doggone-it if the price didn't drop overnight to 2.95%. I hate to see these GIC rates start dropping again. 

I took a CTC @3.27% instead. Standard procedure, yields drop and people take on more risk.

ltr


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## Eclectic12 (Oct 20, 2010)

like_to_retire said:


> ... I remember the year they (Canada Savings Bonds) were offering 19.5% rate and we all laughed and said no way because next year it'll be 21% and that 19.5% sucks. (yeah, 19.5% guaranteed from the federal government sucks)....


I guess we had different source of info then. Between the other FI's offering substantially less than CSB and the commentary that this was a an overly high estimate (done once a year by the gov't) of where rates were going - everyone in the family plus others were putting as much as we could scrape together into that CSB.


Cheers


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## Bruins63 (Jan 18, 2018)

Some banks are negotiable on GIC rates...I negotiated a 5 year ladder with one of the big 5 at 3.05 year 1 to 4.05 year 5 based on .25 percent increments for years 2,3,4...


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## james4beach (Nov 15, 2012)

like_to_retire said:


> I bought a GIC at TDDI with my TFSA contribution along with all this year's interest, for my ladder.
> 
> I had decided to get a five year Royal Bank @3.15%, but doggone-it if the price didn't drop overnight to 2.95%. I hate to see these GIC rates start dropping again.
> 
> I took a CTC @3.27% instead. Standard procedure, yields drop and people take on more risk.


True, the yields are dropping now. I took a look at iTrade and many of the big bank GICs have lower yields than they've had over the last couple months.

Royal used to have a 5 year at 3.25% but it's now down to 2.95%
Scotia was at 3.35% but now down to 3.07%

GIC rates track the bond market. Interest rates on the yield curve have plummeted in the last couple months and that's what we're seeing in GICs too. I agree this is disappointing. I was looking forward to replenishing my ladder with rates above 3%



Bruins63 said:


> Some banks are negotiable on GIC rates...I negotiated a 5 year ladder with one of the big 5 at 3.05 year 1 to 4.05 year 5 based on .25 percent increments for years 2,3,4...


That sounds like a good overall rate. I didn't know they could do that.


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## RBull (Jan 20, 2013)

^Do tell. Where? Broker, bank directly etc.


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## Bruins63 (Jan 18, 2018)

RBull said:


> ^Do tell. Where? Broker, bank directly etc.


I negotiated it with the bank directly...needed to move a fairly large sum of $$ over to get the rates...


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## Spudd (Oct 11, 2011)

GICs from the retail bank branch seem to be negotiable regardless of $$ amount (although the amount of negotiability probably differs!). I once redeemed Air Miles to get a $200 GIC from BMO. The lady setting me up gave me an extra quarter percent, if I recall correctly, without my even asking. I was getting a free $200, I wasn't there to negotiate anything. 

Mind you, the base rates from the retail bank branch are probably less than the non-negotiable rates you see at your broker's. I don't buy GICs personally so I don't actually know if this is the case but it would seem to make sense.


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## Beaver101 (Nov 14, 2011)

^


> GICs from the retail bank branch seem to be negotiable regardless of $$ amount (although the amount of negotiability probably differs!). I once redeemed Air Miles to get a $200 GIC from BMO. The lady setting me up gave me an extra quarter percent, if I recall correctly, without my even asking. I was getting a free $200, I wasn't there to negotiate anything.


 ... only if the branch wants to be competitive and/or its banking rep. (er, I mean financial "advisor") isn't pushing mutual funds. 

Is that AirMiles *rewards* redemption an on-going thing?


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## Spudd (Oct 11, 2011)

Beaver101 said:


> ^ ... only if the branch wants to be competitive and/or its banking rep. (er, I mean financial "advisor") isn't pushing mutual funds.
> 
> Is that AirMiles *rewards* redemption an on-going thing?


I looked on their website and I didn't see it, so I guess probably not. It was about 5 years ago that I did it.


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## RBull (Jan 20, 2013)

Bruins63 said:


> I negotiated it with the bank directly...needed to move a fairly large sum of $$ over to get the rates...


That's some serious negotiation and/or seriously large amounts. I've never heard of anyone receiving nearly a half point higher than the highest available in the marketplace even at alternative institutions.


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## Bruins63 (Jan 18, 2018)

RBull said:


> That's some serious negotiation and/or seriously large amounts. I've never heard of anyone receiving nearly a half point higher than the highest available in the marketplace even at alternative institutions.


Yep 

Maybe it was just timing...it’s not like it’s millions and millions...


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## james4beach (Nov 15, 2012)

Simplii is advertising 3.0% for a 1 year GIC on their front page. That seems like a pretty good rate. Actually, all their rates look good. 5 year Simplii is 3.40% and this is CIBC. That looks considerably better than all the big bank GICs available through discount brokerages.

I'm considering buying one of those 3.4% ones. Does anyone else hold GICs through Simplii?


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## Onagoth (May 12, 2017)

Interesting....I'm looking at setting up a GIC ladder...might have to transfer from Questrade to Simplii for this....looks like a 0.3% improvement by going with Simplii. Plus, I bank with Simplii so hopefully it is somewhat easy.


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## james4beach (Nov 15, 2012)

james4beach said:


> 5 year Simplii is 3.40% and this is CIBC


Darn it, I missed these high rates before yields collapsed. The Simplii one dropped 45 basis points. And a whopping 70 to 80 basis point drop for bank GICs through the discount brokerage.

I just didn't act fast enough. Blinked and the rates plummeted.


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## james4beach (Nov 15, 2012)

I deposited into an Outlook cashable 5 year GIC today at 3.40%

Just a few months ago, you'd find rates like this through many issuers but now I think this stands out as one of the best rates anywhere. I expect Outlook will drop it any day now... you might want to jump on this if you've been thinking of getting a GIC.


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## lonewolf :) (Sep 13, 2016)

james4beach said:


> I deposited into an Outlook cashable 5 year GIC today at 3.40%
> 
> Just a few months ago, you'd find rates like this through many issuers but now I think this stands out as one of the best rates anywhere. I expect Outlook will drop it any day now... you might want to jump on this if you've been thinking of getting a GIC.


US 30 year T bond future. The Merrill Lynch move index move to its lowest level ever on March 20th & Fri DSI surged to 93% bulls. The move index is similar to the vix in stocks. The bond market is seeing record complacency with a very high number of bulls.


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## birdman (Feb 12, 2013)

Moved $100,000. from Achieva savings at 2.40% to 5 yrs at 3.40%. Was hoping for rates to go up a bit but this does not appear to be the case. Average yield in ladder over 3%.


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## hfp75 (Mar 15, 2018)

Hubert Financial 

1 year quarterly term*
3.10% average

2 year term
3.20%

3 year term
3.30%

4 year term
3.55%

5 year term
3.50%


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## gardner (Feb 13, 2014)

I noticed that HT/Oaken has dropped rates. Today only [email protected]% and [email protected]% are above 3%. I have a tranche of 5Y ladder coming up and will likely take the 3.2%.
Interestingly, I was in Tangerine planning the renewal of a tranche of $US GIC ladder and I see that they will pay 3.2% on $US for 5yr.


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## pwm (Jan 19, 2012)

The yield curve for GIC rates is almost flat. For example, Achieva's rates increase from 3% at 1 year to 3.4% at 5 years at exactly .1% (10 beeps per year). There's only a 40 beep difference for 5 year lock-in. 
I don't think this is normal. What is this telling us?


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## FI40 (Apr 6, 2015)

pwm said:


> The yield curve for GIC rates is almost flat. For example, Achieva's rates increase from 3% at 1 year to 3.4% at 5 years at exactly .1% (10 beeps per year). There's only a 40 beep difference for 5 year lock-in.
> I don't think this is normal. What is this telling us?


There is an inverted yield curve. I think the main reason is that markets expect a recession. So there is a lot of demand for long term debt, pushing down long term yields.

https://business.financialpost.com/...yield-curve-signals-holding-pattern-for-poloz

Look, the 5 year yields less than the 2 year: https://www.bankofcanada.ca/rates/interest-rates/canadian-bonds/


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## james4beach (Nov 15, 2012)

There's a good chance that the rate tightening cycle is over and rates are headed down from here, across the board.

I'm pretty close to my ladder spacing, but even though it was a bit early I bought this new 5 year @ 3.40%. I'm really concerned this may be the highest GIC rate I'll see in a long time. Worst case scenario, I'm wrong, and rates go even higher (which I would be very happy to see).


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## CPA Candidate (Dec 15, 2013)

pwm said:


> What is this telling us?


GIC investing is a poor use of capital.


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## james4beach (Nov 15, 2012)

CPA Candidate said:


> GIC investing is a poor use of capital.


If rates are plummeting due to a slowdown, I'm not sure you're going to be so happy about equity returns either.


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## like_to_retire (Oct 9, 2016)

CPA Candidate said:


> GIC investing is a poor use of capital.


Please tell us what fixed income investment is better than a GIC ladder for yield vs risk.?

ltr


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## james4beach (Nov 15, 2012)

like_to_retire said:


> Please tell us what fixed income investment is better than a GIC ladder for yield vs risk.?


I suspect CPA Candidate is referring to the low absolute rate of return in fixed income, and implying that equities are better due to the higher historical returns. It's the classic argument for avoiding fixed income but it ignores other factors which mean a lot to some investors: risk, maximum drawdown, consistency of returns.

Among all the traditional investments, GICs offer the most consistent positive returns and have zero maximum drawdown.


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## gardner (Feb 13, 2014)

james4beach said:


> this may be the highest GIC rate I'll see in a long time


Yes. I think rates will go lower now and stay low for another while.  The experiment with rate increases was premature and will be short lived.


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## hfp75 (Mar 15, 2018)

gardner said:


> Yes. I think rates will go lower now and stay low for another while. The experiment with rate increases was premature and will be short lived.





Well put !


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## lonewolf :) (Sep 13, 2016)

When the fed increases rates to slow down consumer spending it increases spending of the government


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## lonewolf :) (Sep 13, 2016)

Friday & Monday saw back to back DSI of 93% bond bulls in the US 30 year bond futures which is in line with my wave count. My top count for price pattern is completing wave 5 up of a fifth wave of a C wave which is quickly completing when complete bond prices should decline for months.


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## james4beach (Nov 15, 2012)

I bought a 5 year GIC (through discount brokerage) issued by Concentra at 1.93%

Seems like a pretty good deal to me.


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## OneSeat (Apr 15, 2020)

Oaken is currently offering 2.20%.
Does Concentra offer something special I don't know about?


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## AltaRed (Jun 8, 2009)

OneSeat said:


> Oaken is currently offering 2.20%.
> Does Concentra offer something special I don't know about?


You can't buy Oaken Financial GICs through a discount brokerage. Home Trust GICs only. 

Many of us refuse to have a proliferation of accounts with a wide range of online digital banks/CUs.

Added: For full disclosure, I have HISA accounts with EQ Bank and LBC Digital for my cash reserve (fixed income component).


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## agent99 (Sep 11, 2013)

james4beach said:


> I bought a 5 year GIC (through discount brokerage) issued by Concentra at 1.93%
> 
> Seems like a pretty good deal to me.


Only if you happy treading water


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## AltaRed (Jun 8, 2009)

agent99 said:


> Only if you happy treading water


That's a pretty good place to be right now for many folk. When one has won the game, why continue to push the boundaries?

Life is much more than the CAGR on one's portfolio in one's advanced retirement years.


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## james4beach (Nov 15, 2012)

@agent99 I'd love to hear your alternative for the safe fixed income part of the portfolio. What kind of recession and market crash-proof investment can beat a GIC at 1.9% ?


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## OneSeat (Apr 15, 2020)

AltaRed said:


> You can't buy Oaken Financial GICs through a discount brokerage. Home Trust GICs only.
> Many of us refuse to have a proliferation of accounts with a wide range of online digital banks/CUs.


Not sure I understand your comment "Home Trust GICs only"
Are you saying those can be bought through discount brokerages? (BMOIL in my case.)

I agree in general with your 'proliferation' comment but the accounts I use for GICs - Oaken Home Bank and Hubert Financial - are both so great for communication and money transfers - better than within BMO (!) - that it is absolutely no problem to me.



AltaRed said:


> Life is much more than the CAGR on one's portfolio in one's advanced retirement years.


Great comment - I seriously considered selling all equities and just keeping GICs etc but ended up using our RRIFs and TFSAs for equities (25-30%) and leaving the GICs etc in non-regs.


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> What kind of recession and market crash-proof investment can beat a GIC at 1.9% ?


1.9% locked in 5 years*

What can beat 1.9% CAGR when locked in 5 years?

There's a handful of uncorrelated stocks combinations which will beat that when held 5 years and rebalanced annually.

We'll see 5 years from now if my ongoing tests are working out.


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## AltaRed (Jun 8, 2009)

OneSeat said:


> Not sure I understand your comment "Home Trust GICs only"
> Are you saying those can be bought through discount brokerages? (BMOIL in my case.)


Yes. Most, if not all, discount brokers have Home Trust GICs in their list*. Same with Equitable Bank (but not EQ Bank which is the retail arm). GICs sold through the broker (brokerage) channel pay commissions to the broker (brokerage) and thus listed coupon rates will often/generally be lower than the equivalents being offered through retail channels (like Oaken Financial).

* When Home Capital Group had their near death experience in 2017? and went sub-investment grade, some discount brokers took Home Trust GICs off their offerings. I remember that well. They only returned after I think Warren Buffett flew in with a rescue package... or some time later when HCG's credit ratings stabilized. I think parts of HCG are still BB+ and not BBB- but I have not kept track recently.


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## agent99 (Sep 11, 2013)

james4beach said:


> @agent99 I'd love to hear your alternative for the safe fixed income part of the portfolio. What kind of recession and market crash-proof investment can beat a GIC at 1.9% ?


James, From your past posts it is clear that your idea of "safe" is not the same as mine. So why even go there?

I think it is unwise for someone of your age to hold GICs or other investments that do not as a bare minimum. have a positive real return. Recently, we have seen inflation of 3.5% and economists are now predicting that we could see rates between 3 and 5% for the next 5 years. If correct, those 1.9% GICs will lose money every year.

I actually do hold some GICs but just~25% of our fixed income. The lowest yields are something like 2.2%, but with short term maturity. Just a place to park some cash until we saw where the pandemic was headed. Others are in the 2.3-3.3% range with maturities out to 2025. Those were all bought when inflation was well under 1%. They all yielded at least 1% over the "expected" inflation rate for their terms when purchased. I will probably buy more GICs, but only when they look to be a better investment.


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## Synergy (Mar 18, 2013)

Inflation is a cash killer for a young investor.


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## OneSeat (Apr 15, 2020)

deleted


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## AltaRed (Jun 8, 2009)

CMFers with highly variable income need to have more cushion than those with steady salaried jobs or even retirees. James is more conservative than I would be but it's not fair to criticize those take a more conservative perspective. It's also not fair to get overly animated about whether fixed income meets or beats inflation, before, or after tax provided it is not a significant part of one's portfolio AND overall CAGR of the overall portfolio is competitive with the market place, e.g. VBAL, or VGRO, etc. That is what benchmarking is all about.

I sure don't fuss about my substantial cash reserves in 1.15-1.25% HISA accounts. It's my overall CAGR portfolio return that is the important thing and if it beats inflation plus 3-4% on a multi-year rolling average, that is within historical averages and for sure, the concept of 4% SWR. It is really no more complex than that and it is time to stop getting distracted by some runt trees in the forest.


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## james4beach (Nov 15, 2012)

Yes, the important thing is what the overall portfolio provides.

Every portfolio will contain some components that do not "perform" at the moment. This is the nature of diversification. At the end of the day, it's the overall CAGR which matters. Even though I have a conservative portfolio, my performance is currently 4% real return (above inflation) since I began tracking this over five years ago.

And yes there are GICs *inside* that portfolio which is generating 4% real return.

Having some fixed income, GICs, bonds, short-term bonds are all valuable for diversification and portfolio stability.


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## agent99 (Sep 11, 2013)

AltaRed said:


> it is time to stop getting distracted by some runt trees in the forest.


This could be taken in different ways!


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## agent99 (Sep 11, 2013)

james4beach said:


> Every portfolio will contain some components that do not "perform" at the moment.


This is true, but why purposely buy those underperformers _at the moment_?


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## james4beach (Nov 15, 2012)

agent99 said:


> This is true, but why purposely buy those underperformers _at the moment_?


The 1.9% GIC may be the deal of a lifetime as Canada is one of the only developed countries in the world which still has positive rates. Interest rates could go much lower. Not only that, but markets could become volatile and other assets could fluctuate wildly. Why aren't you grabbing this deal of a lifetime?

Europeans would kill for GICs rates this high. You're lucky enough to be offered it, and yet you're turning your back on it. That could be a very costly mistake.

~~

Answering your question:

Partly because it doesn't matter if GICs perform poorly. They are in the portfolio for stability and for providing cash flow, living expenses. Same reason one holds cash or short-term bonds; it's not for performance.

But the other reason is that you don't know if they will turn out to be good deals or bad deals. This is the whole idea with passive (not active) strategies and history has shown them to be good approaches in the long term. For all we know, a 1.9% GIC could turn out to be the deal of a life time. You will recall that I posted the same argument back when I talked about 3.5% GICs, and then 3% GICs, and every time, someone responded and said "nobody in their right mind would buy a GIC at only 3.5%"

A "passive" strategy like always rolling over GICs and filling your ladder gives you the best chances of navigating changing conditions in interest rates and inflation. It's a *methodology* which has to be followed, no matter where you _think_ interest rates are going. You do the same thing (buy 5 year GICs) whether interest rates go up or down. And you keep doing it if rates actually go up. It automatically handles market conditions.

In comparison, you seem to think that eyeballing market conditions lets you buy superior investments given the conditions at the day. There is a lot of evidence to show that this does not work out well for people, or even professionals such as hedge funds. It's "active management" and although people like to believe that it works, it usually does not.


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## AltaRed (Jun 8, 2009)

agent99 said:


> This could be taken in different ways!


The important point is the overall health of the forest (the aggregate portfolio). It will contain both high performers and low/non-performers, and one might argue, both are needed for a healthy forest. Don't get distracted by cash, or near cash, being negative on a real basis.


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## hfp75 (Mar 15, 2018)

You have to balance:

Capital appreciation vs Capital preservation....

J4B places more emphasis on a preservation approach. Others place more value on appreciation.....

The debate on what constitutes the 2 forests is also valid.

If course its about the size and health of the forest and not just the saplings on the side.


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> The 1.9% GIC may be the deal of a lifetime as Canada is one of the only developed countries in the world which still has positive rates. Interest rates could go much lower. Not only that, but markets could become volatile and other assets could fluctuate wildly. Why aren't you grabbing this deal of a lifetime?


Would you say that if GICs would be 0.1%?

People don't buy GICs because they are too low to them. You just haven't reached the point where you will also agree that the rates are too low.

Meanwhile, with such low rates, there's many more ways to get a real positive return after 5 years of holding period.


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## agent99 (Sep 11, 2013)

Different strokes for different folks. Chose to do whatever you think is right. Only you will have to live with the outcome. But don't try and influence others to follow.

What we have been doing without the sky falling in, is balancing risk and return. And trying to get a positive real return on any investment we make.


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## AltaRed (Jun 8, 2009)

MrBlackhill said:


> Would you say that if GICs would be 0.1%?
> 
> People don't buy GICs because they are too low to them. You just haven't reached the point where you will also agree that the rates are too low.
> 
> Meanwhile, with such low rates, there's many more ways to get a real positive return after 5 years of holding period.


Or that is the price of holding 'near cash' for whatever purpose it's needed for. Everyone has cash or 'near cash'. It is a question of how much and in what form.


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## MrBlackhill (Jun 10, 2020)

AltaRed said:


> Or that is the price of holding 'near cash' for whatever purpose it's needed for. Everyone has cash or 'near cash'. It is a question of how much and in what form.


I'm not very good with my understanding of the strategy with GICs because to me it's a no-go since I found alternatives that better suit me and unfortunately my parents buy only GICs and that's the only financial education they gave me.

To my understanding it's not "near cash" because you have a penalty fee if you break before 5 years. Or if it's cashable then the interest rate is even lower.

No?

To me, the only purpose of cash is for daily/weekly/monthly transactions.

And if it's a ladder then sure you wouldn't have to break it (unless you truly need the money right now) but you'd have access to only one fifth of you total money in GICs.


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## AltaRed (Jun 8, 2009)

It depends. When one does not have a reliable income stream, e.g. consultants et al, one has to carry sufficient float to smooth out the bumps. Could be multi-month stretches of no work. A retiree has to fund annual cash flow plus manage one off lump sums. There are a host of reasons to have more than daily/weekly/monthly transactions.

Similarly there are reasons to have a 5 year fixed income ladder where with 5 GICs/bonds/debentures, one has access to capital once a year. With 10 holdings, it is every 6 months, with 15 holdings, every 4 months and so on. GICs are paying better than A rated bonds in recent times, albeit one foregoes the theoretical liquidity of the bond in a GIC. Mix it with some HISA funds and one has liquidity.

If there was a 5 year equity bear of -30% or so, or worse like the Great Depression, those 2% GICs will look awfully good. THAT is why one has them in the portfolio. Those big events are also the kinds of times when jobs are lost as well. How about employment loss AND a -30% swoon in equities at the same time?


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## james4beach (Nov 15, 2012)

MrBlackhill said:


> Meanwhile, with such low rates, there's many more ways to get a real positive return after 5 years of holding period.


What is a way to guarantee a positive real return in 5 years? I'd love to hear.

The GIC isn't aiming for high return. It guarantees the return of your cash in X years, which is useful if you need the cash.

As AltaRed says,



AltaRed said:


> If there was a 5 year equity bear of -30% or so, or worse like the Great Depression, those 2% GICs will look awfully good. THAT is why one has them in the portfolio.


So if you're in a bad stretch of 5 years like this, what kind of investment offers a better return than a GIC, even with its low yield?


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> What is a way to guarantee a positive real return in 5 years?


A 100% guarantee, that's what you are looking for? None. Your GICs don't guarantee a positive *real* return either.

What if you are currently locking in your money for 5 years at 1.9% while the inflation averages 5% per year?


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## james4beach (Nov 15, 2012)

MrBlackhill said:


> What if you are currently locking in your money for 5 years at 1.9% while the inflation averages 5% per year?


I just want to see the nominal value preserved.

What do you suggest for a solid 5 year return, that is not vulnerable to recession and market crash?


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> What do you suggest for a solid 5 year return, that is not vulnerable to recession and market crash?


When you buy a GICs, when you buy bonds, when you buy gold, it's also because they are uncorrelated asset classes, that's why it's called diversification. But since diversification only means uncorrelated, it doesn't have to be low-performing assets. The lack of correlation provides the stability. When looking at each stock in the portfolio, there's some volatility, but the aggregate has very low volatility and during crashes some of the uncorrelated stocks will soar to compensate.


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## james4beach (Nov 15, 2012)

So has anyone else been buying GICs, or am I the only one remaining who has a GIC ladder?

I've been reducing my spacing between GICs. I used to have 1 year intervals, then down to 6 months, and recently have started aiming for closer to 3 months.



MrBlackhill said:


> When you buy a GICs, when you buy bonds, when you buy gold, it's also because they are uncorrelated asset classes, that's why it's called diversification. But since diversification only means uncorrelated, it doesn't have to be low-performing assets. The lack of correlation provides the stability.


That's all true, and my portfolio has good diversification, but the resulting "smoothness" is probabilistic. It's not a guarantee. Yes thankfully my portfolio was quite stable during the 2019 weakness and 2020 crash, but that won't always happen.


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## gardner (Feb 13, 2014)

I have been tending my $CAN and $US ladders. I have a tranche coming up in Sep and intend to roll it over at 2.2% or 2.3%. What really hurts is $US at 0.7%.


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## agent99 (Sep 11, 2013)

MrBlackhill said:


> A 100% guarantee, that's what you are looking for? None. Your GICs don't guarantee a positive *real* return either.
> 
> What if you are currently locking in your money for 5 years at 1.9% while the inflation averages 5% per year?


I can't see mindlessly buying GICs in a ladder just because the first rung matured. Why not first evaluate whether or not replaceent would be a good investment? If it is expected to yield less than the inflation rate for the next 5 years, why buy it? If rates are likely to increase, you could put the money in a HISA and wait. Maybe in another year you will get a higher yield even if you buy a 4yr GIC to fill your ladder? On the other hand you could look for a better investment. Hold cash until you find it.

The preferreds I bought last year are an example. I sold bonds and split pfds to buy rate reset and perpetual pfds at discount prices. On some of those I receive a yield in the 6% range while at the same time the market prices just over a year later have increased by 45%. They were a great buy back then. But right now trading at $25.50, not so much so. As a result, I would think twice about adding. Although because they are a liquid asset, I would almost certainly buy them over GICs at this point.

Following rules type investing doesn't suit me. 

Inflexible GIC/Bond ladders are one rule I avoid. (I do have loosy-goosy ladders  ).
Formulae for % FI in retirement another. How many of you hold a % of FI equal to your age? Why not? That was the "rule" when I retired (and FI yields were higher).

My view, is that it is better to think for yourself rather than follow inflexible rules or on-line investment 'experts'


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## AltaRed (Jun 8, 2009)

Preferred shares have minimal capital (market) value security. They are among the worst investments to protect "return of capital". I have them in a category called Other. That said, I continue to own a few resets and perpetuals.

I am not renewing Bonds or GICs in my 5 year ladder, at least nothing more than 1 year maturity. I have moved to HISAs and accept 1+% return. What matters to me is access to 'cash reserves' or 'near cash reserves', i.e. return of capital, not return on capital, for that component of my portfolio.


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## cainvest (May 1, 2013)

james4beach said:


> So has anyone else been buying GICs, or am I the only one remaining who has a GIC ladder?


Nope, last was in 2019. In 2020 those GICs (1 year term only) got thrown in stocks. I do have some money sitting in HISA.

Add: The only FI purchased was part of the Mawer balanced fund.


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## agent99 (Sep 11, 2013)

AltaRed said:


> Preferred shares have minimal capital (market) value security. They are among the worst investments to protect "return of capital". I have them in a category called Other. That said, I continue to own a few resets and perpetuals.


My point was to be careful not to get into poor investments. Some, but not all preferreds, can be a good investment if investors first educate themselves. I am not buying them now, but if choice is GICs vs Equities vs Preferreds just may have to 

I don't believe I will ever lose capital on my deep discount preferred holdings and in fact expect significant capital gains along with high yields. But that was because I took an opportunity during the Covid crash of moving money into relatively low risk underpriced preferreds.

At same time, I did actually buy some very short term GICs and coupons, most of which have or will soon mature. In real terms they provided negative return. Just provided a holding pattern for some funds while waiting to see what would transpire. Much like using HISAs (BMOIL's were hopeless)

I won't try and rebuff Alta's claims about preferreds. We have heard them before. Worth considering, but some may wish to first read James Hymas's article on GICs vs Preferreds. For those who don't now, James is THE preferred guru  He covers the subject well.


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## like_to_retire (Oct 9, 2016)

AltaRed said:


> Preferred shares have minimal capital (market) value security. They are among the worst investments to protect "return of capital". I have them in a category called Other. That said, I continue to own a few resets and perpetuals.


hehe, I agree except for that last statement. The only difference between your and my opinion is that I got out of preferred shares in 2018 and will never buy them again. Such rubbish. Has there ever been a security that favoured the issuer more than preferred shares. They continue to morph the rules to ensure buyers are fleeced.

ltr


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## like_to_retire (Oct 9, 2016)

james4beach said:


> So has anyone else been buying GICs, or am I the only one remaining who has a GIC ladder?


James, you know I have always had 5 year GIC ladders as my sole fixed income component. If I wanted more risk I would change my asset allocation and then buy equities. The 5 year GIC ladder provides the best return for the least risk. You just can't beat it. Many claims are made, but they might not understand what risk is.

ltr


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## AltaRed (Jun 8, 2009)

agent99 said:


> I won't try and rebuff Alta's claims about preferreds. We have heard them before. Worth considering, but some may wish to first read James Hymas's article on GICs vs Preferreds. For those who don't now, James is THE preferred guru  He covers the subject well.


James does do that and I had a subscription to PrefLetter for some time when I was a pref equity investor. I am fully aware of the multipliers and fully aware of the aggregate return they can provide. James also has an obvious bias for the business that he is in... rightfully so. Regardless, I can do better on common equity than preferred equity products with terms that always favor the issuer. I'll take the common any time and that is what I did when I unwound most of my pref equity positions.


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## like_to_retire (Oct 9, 2016)

AltaRed said:


> James does do that and I had a subscription to PrefLetter for some time when I was a pref equity investor. I am fully aware of the multipliers and fully aware of the aggregate return they can provide. James also has an obvious bias for the business that he is in... rightfully so.


I also had a prescription to PrefLetter, and it was quite good, but pref shares over time were not, unfortunately.



AltaRed said:


> Regardless, I can do better on common equity than preferred equity products with terms that always favor the issuer. I'll take the common any time and that is what I did when I unwound most of my pref equity positions.


Amen.

ltr


----------



## MrBlackhill (Jun 10, 2020)

What I don't get about the risk management of 5-year GICs is this :

If you want to lock in money for 5 years, even though GICs are truly guaranteed, why don't you just put your money in a conservative portfolio that has never had a negative return over 5 years? Not even near negative. Worst case was 3.60% CAGR. Doesn't mean a worst case won't happen, but maybe it'll go down to 3% CAGR? Or 2.7% CAGR? In the very, very worst case... While the most likely could be 5%+ CAGR.

A (US) portfolio made of 30% stocks, 60% bonds and 10% gold never had a negative return in any 5-year period for the past 50 years. It even never had a negative return in any 3-year period!

And it is very, very, very likely to return more than a 1.9% GIC over 5 years.


----------



## like_to_retire (Oct 9, 2016)

MrBlackhill said:


> If you want to lock in money for 5 years, even though GICs are truly guaranteed, why don't you just put your money in a conservative portfolio that has never had a negative return over 5 years?


Because that conservative "equity" portfolio might be down 50% tomorrow and stay there for 20 years. Can that happen to GIC's?

ltr


----------



## AltaRed (Jun 8, 2009)

There is always the potential for a negative return for any market priced product. In the chart above, there were hundreds of times returns were negative if/when one needed the money. The line would have to trend to the northeast 100% of the time to avoid periods of negative return at any given point in time.


----------



## MrBlackhill (Jun 10, 2020)

like_to_retire said:


> Because that conservative "equity" portfolio might be down 50% tomorrow and stay there for 20 years. Can that happen to GIC's?
> 
> ltr


Well, never happened. You have to see the portfolio as a whole, and rebalanced annually, that's it.

See, if you invested $10,000 in 30% stocks, 60% bonds, 10% gold in August 2000 at the peak of the stock bubble, 5 years later at the end of July 2005 :

Your $3,000 in stocks would've increased to $3,398
Your $6,000 in bonds would've increased to $8,380
Your $1,000 in gold would've increased to $1,508
So if you liquidate your portfolio as a whole, you will have $13,286, which is 5.85% CAGR
Want me to try any other 5-year period?

Ok, let me try one that ends at the end of February 2009, therefore started 5 years earlier at the beginning of March 2004 :

Your $3,000 in stocks would've *dropped* to $1,963 (oh no, that's a -34% drop!)
Your $6,000 in bonds would've increased to $8,296
Your $1,000 in gold would've increased to $2,057
So if you liquidate your portfolio as a whole, you will have $12,316, which is 4.25% CAGR
But I guess I don't have to prove to anyone the power of diversification in uncorrelated asset classes, right?


----------



## MrBlackhill (Jun 10, 2020)

AltaRed said:


> There is always the potential for a negative return for any market priced product. In the chart above, there were hundreds of times returns were negative if/when one needed the money.


Yes, but I'm closing it to a 5-year period because if you need money from your 5-year GIC *before* the 5-year term, you'll have a penalty, so you'll be net negative on your GIC also.

And anyways, as shown, even on a short 2-year period, it was _almost_ always positive (1 negative period out of the 572 rolls).


----------



## like_to_retire (Oct 9, 2016)

MrBlackhill said:


> Want me to try any other 5-year period?


The "G" in GIC stands for guaranteed. This offers you the "guarantee" to get your capital returned along with a tuppence. You have to decide what portion of your asset allocation you want to guarantee. Maybe it's 10% or maybe it's 90%. After you have that guarantee in place you can fill your boots with your graphs and rolling returns of an equity combo that you fancy.

ltr


----------



## MrBlackhill (Jun 10, 2020)

like_to_retire said:


> The "G" in GIC stands for guaranteed. This offers you the "guarantee" to get your capital returned


Well, I wouldn't say that because there's an "if". It's guaranteed if you don't withdraw before the 5-year term, otherwise you'd have to pay a penalty. So even if you get back 100% of your capital, you get a penalty and you are net negative overall. So there's still a risk.

I'm pretty sure there's many people who put $50,000 in a GIC, then a bad luck happen, they need that money so they pay the penalty.

That's like the guy from CST trying to get my money for my RESP. "We haven't lost a dollar of our clients in 60 years" (...but you sign a 17-year contract and if you break it you pay thousands of dollars)

And at the moment, by locking in for 5 years, the "G" stands for "guaranteed negative real return". And if you truly don't care about the performance, why don't you keep it cash or HISA so it's truly liquid without any penalty?


----------



## cainvest (May 1, 2013)

MrBlackhill said:


> Well, I wouldn't say that because there's an "if". It's guaranteed if you don't withdraw before the 5-year term, otherwise you'd have to pay a penalty. So even if you get back 100% of your capital, you get a penalty and you are net negative overall. So there's still a risk.


Maybe search for "non redeemable GIC" which normally carry the highest return rates .... removes your "if" above.


----------



## AltaRed (Jun 8, 2009)

MrB, you had a more credible position when you didn't start to reach. Stop digging.


----------



## cainvest (May 1, 2013)

MrBlackhill said:


> What I don't get about the risk management of 5-year GICs is this :
> 
> If you want to lock in money for 5 years, even though GICs are truly guaranteed, why don't you just put your money in a conservative portfolio that has never had a negative return over 5 years?


Sound like you've found a new side hustle!

Offer people the current best 5 year GIC return, you invest it and keep whatever is above the going rate!


----------



## MrBlackhill (Jun 10, 2020)

cainvest said:


> Maybe search for "non redeemable GIC" which normally carry the highest return rates .... removes your "if" above.


Yes, the non redeemable have the highest return if you keep it locked 5 years, while the redeemable have an even lower rate but no penalty. But I guess that 1.9% GIC is non redeemable, right? I wouldn't like to see how low is the rate for redeemable.


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## like_to_retire (Oct 9, 2016)

MrBlackhill said:


> It's guaranteed if you don't withdraw before the 5-year term, otherwise you'd have to pay a penalty.


I can't imagine why anyone would want their money back before the 5 years is up. The guarantee is on the capital, and that's the purpose of buying them. You do it in a ladder so you have access to a portion of the money every year or every 6 months if you have a ten position ladder.



MrBlackhill said:


> That's like the guy from CST trying to get my money for my RESP. "We haven't lost a dollar of our clients in 60 years" (...but you sign a 17-year contract and if you break it you pay thousands of dollars)


Yeah, I don't see the connection to GIC's.



MrBlackhill said:


> And if you truly don't care about the performance, why don't you keep it cash or HISA so it's truly liquid without any penalty?


Because the GIC ladder offers the best guaranteed return. Why not get the best.

ltr


----------



## MrBlackhill (Jun 10, 2020)

AltaRed said:


> MrB, you had a more credible position when you didn't start to reach. Stop digging.


I'm not sure I understand, language barrier here.

But if I'm being offensive I'm sorry. I don't want to. I'll correct my language.

I'm challenging the ideas to help me learn.


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## MrBlackhill (Jun 10, 2020)

like_to_retire said:


> I can't imagine why anyone would want their money back before the 5 years is up.


Because of a bad luck? Lost job, house burnt, accident, disaster, then emptied their 6-month reserve in cash/HISA and now they need more money.




like_to_retire said:


> Because the GIC ladder offers the best guaranteed return. Why not get the best.


You could make a 5-year ladder with a conservative portfolio. You'll have the best return. Put a lump sum in the 30/60/10 portfolio in year 1, then another lump sum in year 2, and so on until year 5, as you'd do with a GIC ladder, but in the conservative portfolio instead.


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## MrBlackhill (Jun 10, 2020)

like_to_retire said:


> Yeah, I don't see the connection to GIC's


You have a penalty if you break it before term. (If it was a non redeemable GIC)


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## like_to_retire (Oct 9, 2016)

MrBlackhill said:


> You have a penalty if you break it before term.


Generally it's not advisable to cash in GIC's. You use emergency funds for that and then tap the GIC ladder as it comes due every year.

Remember 


MrBlackhill said:


> So even if you get back 100% of your capital, you get a penalty and you are net negative overall. So there's still a risk.


If interest rates go negative for a number of years, your equities will suffer and everything else will suffer except your 2% GIC ladder. It will look like gold at that point.

Stop trying to substitute equity for fixed income because of past performance.

ltr


----------



## MrBlackhill (Jun 10, 2020)

like_to_retire said:


> If interest rates go negative for a number of years, your equities will suffer


My understanding was that equities are helped by low rates because companies can take loans at low rates.


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## agent99 (Sep 11, 2013)

MrBlackhill said:


> Yes, but I'm closing it to a 5-year period because if you need money from your 5-year GIC *before* the 5-year term, you'll have a penalty, so you'll be net negative on your GIC also.
> 
> And anyways, as shown, even on a short 2-year period, it was _almost_ always positive (1 negative period out of the 572 rolls).


Mr B,
There are some here who from their posts seem paranoid about taking risk. They may hold GIC ladders, but on the other side may invest in high risk equities. Some may say they lost their shirts on preferreds and preach that they are a poor investment. But perhaps they didn't first do their homework and chose poorly.

Having part of one's investments in no-risk GICs might sound like a low risk plan. But perhaps it is just lipstick on the pig so far as risk management is concerned? Where is the rest of the portfolio invested. 

Just use common sense.


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## MrBlackhill (Jun 10, 2020)

like_to_retire said:


> Generally it's not advisable to cash in GIC's. You use emergency funds for that and then tap the GIC ladder as it comes due every year.


Yes, that's what I don't understand. And I'm open to trying to understand. By building a 5-year ladder, you have access to money every year, but only 1/5th.

Well, I see it both ways, you either have access to only 1/5th or you have to put 5x more money to evenly distribute over 5 years.

And 5 years worth of money into GICs seems like a lot.

But maybe that's because I don't have a big portfolio yet.

I'm still trying to do the maths. But I think I just don't know how to build such a portfolio or in which context.

Say I make $100,000 a year. I build a $50,000 emergency fund in a HISA. Now say I have $200,000 in investments and that's in a balanced portfolio 60/40. Out of the $80,000 in FI, I put half in bonds and half in GICs, therefore $40,000. But since I'm making a 5-year ladder, I put $8,000 in each of the 5 years.

Now say I lose my job and use all of my emergency fund. Then something breaks in my house and it costs $40,000 to repair. What do I do?


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## agent99 (Sep 11, 2013)

cainvest said:


> Offer people the current best 5 year GIC return, you invest it and keep whatever is above the going rate!


What do you think the banks do with your GIC money


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## cainvest (May 1, 2013)

agent99 said:


> What do you think the banks do with your GIC money


Exactly ... the banks are making money, so to can MrBlackhill!


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## MrBlackhill (Jun 10, 2020)

agent99 said:


> What do you think the banks do with your GIC money


That's what I'm thinking, haha.


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## cainvest (May 1, 2013)

MrBlackhill said:


> You could make a 5-year ladder with a conservative portfolio. You'll have the best return.


Maybe it'll be the best return but maybe not and that's the point you're missing. The GIC removes the "maybe" out of the equation and for some it's piece of mind. What would happen to your portfolio in a 15 year bear market?


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## AltaRed (Jun 8, 2009)

MrBlackhill said:


> I'm not sure I understand, language barrier here.
> 
> But if I'm being offensive I'm sorry. I don't want to. I'll correct my language.
> 
> I'm challenging the ideas to help me learn.


Nothing was offensive. Only that your arguments got weak. There is always a way to get one's principal back in a GIC or to borrow against it at face value. The penalty if you want to call it that could be zero interest. That is not a penalty if the important factor is access to face value. Further a ladder of GICs might have one mature every 3 months and no early redemption is needed. You are not understanding the liquidity of such a ladder. Further, the CST reference you used is not remotely an analogy.

Accept that for some people GICs have a place in the portfolio and are a safe haven for banking cash with a guaranteed return of principal with the potential for some return. IT is no more complex than that. . I no longer want to manage ladders of any kind for liquidity purposes so I am now focused on just having HISA cash for even lower rates than GICs. The key thing is it is not an equity that can have market price variability.


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## MrBlackhill (Jun 10, 2020)

cainvest said:


> What would happen to your portfolio in a 15 year bear market


A 15-year bear market where stocks, bonds and gold are all in a bear market at the same time? Is this possible?

The 30/60/10 had been tested since 1970. The only other very bad period was the Great Depression. But that portfolio has 60% bonds which were safe during the Great Depression. So I'm pretty sure the 30/60/10 would've been safe.


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## cainvest (May 1, 2013)

MrBlackhill said:


> A 15-year bear market where stocks, bonds and gold are all in a bear market at the same time? Is this possible?


Is it possible .... yes.
Is it likely .... no.

Some people are not totally comfortable with past history numbers because the future is uncertain .... its that simple.


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## AltaRed (Jun 8, 2009)

History is no guarantee. MrB keeps forgetting there is no 'certainty' in anything other than a guaranteed face value for whatever value that brings an investor. Accept that for what it is.


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## MrBlackhill (Jun 10, 2020)

cainvest said:


> Is it possible .... yes.
> Is it likely .... no.
> 
> Some people are not totally comfortable with past history numbers because the future is uncertain .... its that simple.


But why those people fear a catastrophic crash but don't fear 5% inflation or even more?

Isn't the famous Ray Dalio who recently said "Cash is not safe" because he was fearing inflation.

But at least it's not volatile. Cash, short term bonds, GICs, they are tools against volatility.


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## fireseeker (Jul 24, 2017)

MrBlackhill said:


> What I don't get about the risk management of 5-year GICs is this :
> 
> If you want to lock in money for 5 years, even though GICs are truly guaranteed, why don't you just put your money in a conservative portfolio that has never had a negative return over 5 years? Not even near negative. Worst case was 3.60% CAGR. Doesn't mean a worst case won't happen, but maybe it'll go down to 3% CAGR? Or 2.7% CAGR? In the very, very worst case... While the most likely could be 5%+ CAGR.
> 
> A (US) portfolio made of 30% stocks, 60% bonds and 10% gold never had a negative return in any 5-year period for the past 50 years. It even never had a negative return in any 3-year period!


Mr. Blackhill, when I read your proposal above, I read an argument for buying GICs.

The key is that many GIC investors are not buying the GICs in isolation. They're buying them as part of a portfolio. That's why I'm doing. That's what @james4beach is doing.

Take your 30/60/10 portfolio. It's a terrific, conservative portfolio. (I believe @james4beach runs at 30/50/20.)
A retail investor building that portfolio needs 60% bonds. They can a) buy a broad bond fund like VAB/XBB; b) buy individual bonds from their broker, or c) buy 5-year GICs as de facto bonds.

These days, buying GICs has less volatility than VAB (thanks to shorter duration) and better yield than individual bonds (at the short to medium term, for investment grade). The downside is that GICs are less liquid than either bonds or bond funds.

A reasonable investor who likes your 30/60/10 proposal might well wind up buying GICs!


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## MrBlackhill (Jun 10, 2020)

fireseeker said:


> Mr. Blackhill, when I read your proposal above, I read an argument for buying GICs.
> 
> The key is that many GIC investors are not buying the GICs in isolation. They're buying them as part of a portfolio. That's why I'm doing. That's what @james4beach is doing.
> 
> ...


I believe you are right and I actually thought about that argument and was waiting for it.

I guess it then becomes a debate about bonds vs GICs.









GICs vs. Bond ETFs: A Case Study and Bold Adventure – Canadian Portfolio Manager Blog


Star Trek may have introduced the expression, “to boldly go where no man has gone before,” but we’re the ones who actually get to do it in today’s post. To my knowledge, nobody has ever compared the…



www.canadianportfoliomanagerblog.com


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## james4beach (Nov 15, 2012)

gardner said:


> I have been tending my $CAN and $US ladders. I have a tranche coming up in Sep and intend to roll it over at 2.2% or 2.3%. What really hurts is $US at 0.7%.


Where are you able to get those rates?


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## james4beach (Nov 15, 2012)

agent99 said:


> I can't see mindlessly buying GICs in a ladder just because the first rung matured. Why not first evaluate whether or not replaceent would be a good investment?


Because this cannot be accurately evaluated. It's timing the market (predicting interest rates and inflation).

For all we know, the interest rate of today might be the deal of a lifetime. You are guessing they aren't, but others are guessing they are.

Who is right?


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## james4beach (Nov 15, 2012)

like_to_retire said:


> James, you know I have always had 5 year GIC ladders as my sole fixed income component. If I wanted more risk I would change my asset allocation and then buy equities. The 5 year GIC ladder provides the best return for the least risk. You just can't beat it. Many claims are made, but they might not understand what risk is.


I wholeheartedly agree. They are an excellent risk vs reward tradeoff.


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## james4beach (Nov 15, 2012)

fireseeker said:


> Take your 30/60/10 portfolio. It's a terrific, conservative portfolio. (I believe @james4beach runs at 30/50/20.)


Yup, it's an excellent conservative portfolio, and almost identical to my 30/50/20 allocations.

I've been using this portfolio for over 5 years now and am very happy with it. So far I have 7.4% CAGR with minimal volatility and great handling of the 2020 crash.



fireseeker said:


> A retail investor building that portfolio needs 60% bonds. They can a) buy a broad bond fund like VAB/XBB; b) buy individual bonds from their broker, or c) buy 5-year GICs as de facto bonds.
> . . .
> A reasonable investor who likes your 30/60/10 proposal might well wind up buying GICs!


I do all of (a) (b) (c) from your list. I have a mix of XBB, individual bonds, and GICs in various accounts and together these make up my 50% "bond" allocation.

As @MrBlackhill keeps pointing out, the portfolio has excellent characteristics. And to make this portfolio work, you need a heavy allocation to fixed income. It's part of the strategy.


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## Covariance (Oct 20, 2020)

No GICs at this time. Under what circumstances would I? If I had a liability I absolutely had to fund in the near future I would buy a GIC to cashflow match it. For instance if I was paying off a car loan or mortgage or scheduling an RESP EAP withdrawal in the near future I would buy a GIC to match. Then not worry about it. (Assuming of course the GIC rate is superior to HISA.)

For those looking for diversification benefits. It’s worth understanding that a GIC has no price return (unlike a bond). Ergo it has zero correlation. Whereas other assets such as bonds may have negative correlation to other elements of the portfolio and thus increase in price as others decrease.


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## like_to_retire (Oct 9, 2016)

Covariance said:


> Whereas other assets such as bonds may have negative correlation to other elements of the portfolio and thus increase in price as others decrease.


Generally though, I doubt people care about the price of a bond they hold. It would have to appreciate substantially before it would be worth selling as retail gets shafted pretty bad on the spread. I suspect most plan, and do, keep bonds to maturity.

I use to exclusively have bonds ladders until GIC's started to yield better than the bonds and then I switched. I'm not about to sell a bond, so liquidity isn't a big issue to me. It all comes down to yield and GIC's win hands down in that department for equivalent risk.

ltr


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## Covariance (Oct 20, 2020)

like_to_retire said:


> Generally though, I doubt people care about the price of a bond they hold. It would have to appreciate substantially before it would be worth selling as retail gets shafted pretty bad on the spread. I suspect most plan, and do, keep bonds to maturity.
> 
> I use to exclusively have bonds ladders until GIC's started to yield better than the bonds and then I switched. I'm not about to sell a bond, so liquidity isn't a big issue to me. It all comes down to yield and GIC's win hands down in that department for equivalent risk.
> 
> ltr


Understood. To clarify my post above is about bonds/fixed income as an asset class not an individual bond. And the difference in diversification benefit of same versus GIC. For those that are concerned with MVO portfolios.


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## MrBlackhill (Jun 10, 2020)

fireseeker said:


> Mr. Blackhill, when I read your proposal above, I read an argument for buying GICs.
> 
> The key is that many GIC investors are not buying the GICs in isolation. They're buying them as part of a portfolio. That's why I'm doing. That's what @james4beach is doing.
> 
> ...


You are right, I was challenging the use of GICs in a different context. I was challenging a 5-year GIC alone and not as already part of a ladder in a diversified portfolio.

If you have created a 5-year GIC ladder as part of a conservative portfolio strategy to reduce its volatility, then fine, buy GICs, bonds, etc.

In that case, I totally agree. Bonds and GICs, even though they are likely to have a negative real return, they are the best tools against volatility (other than trying to figure a set of uncorrelated stocks). And since the goal is to reduce volatility, it's better to have a low interest rate than none (cash).

But if I think about someone that doesn't have a "portfolio" yet. I mean, he doesn't have enough money to build a diversified portfolio, he's just saving money step by step. Let's say that person has cash for his monthly transactions and now he's done with accumulating an emergency fund in a HISA. His next step is now to start saving for a renovation that he's planning in 5 years. He has the lump sum and he's wondering where to stash it. He looks at his options and he wants to simply buy a 5-year GIC (not as part of a ladder, not as part of a portfolio, it would be his first GIC and it would be spent in 5 years). That means he would buy a 5-year GIC at 1.9% and use that money at the end of the term. In my opinion, instead of buying a 5-year GIC, he should just build right away a 30/60/10 portfolio with his lump sum, rebalance it every year and, after 5 years, liquidate the amount of money he needs for his renovation.


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## like_to_retire (Oct 9, 2016)

MrBlackhill said:


> You are right, I was challenging the use of GICs in a different context. I was challenging a 5-year GIC alone and not as already part of a ladder in a diversified portfolio.
> 
> If you have created a 5-year GIC ladder as part of a conservative portfolio strategy to reduce its volatility, then fine, buy GICs, bonds, etc.


OK, but GIC's are usually part of a conservative portfolio strategy to reduce its volatility, and they usually involve a 5 year ladder. That's pretty much what GIC's are about and what I thought we were discussing.



MrBlackhill said:


> His next step is now to start saving for a renovation that he's planning in 5 years. He has the lump sum and he's wondering where to stash it. He looks at his options and he wants to simply buy a 5-year GIC (not as part of a ladder, not as part of a portfolio, it would be his first GIC and it would be spent in 5 years).


Whew, that's a pretty specific case that hadn't entered into my defense of GIC's. You failed to advance these pre-conditions to us.

ltr


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## cainvest (May 1, 2013)

MrBlackhill said:


> In my opinion, instead of buying a 5-year GIC, he should just build right away a 30/60/10 portfolio with his lump sum, rebalance it every year and, after 5 years, liquidate the amount of money he needs for his renovation.


Once again you are assuming everyone has the same risk tolerance and/or faith in market history as you. Not to mention that a number a novice investors would likely sell everything if the portfolio dropped by 30% one month.


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## gardner (Feb 13, 2014)

james4beach said:


> Where are you able to get those rates?


HT/Oaken currently has 2.2% on offer. They've been creeping upwards and I am hoping for a few bps in Sep.


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## MrBlackhill (Jun 10, 2020)

like_to_retire said:


> OK, but GIC's are usually part of a conservative portfolio strategy to reduce its volatility, and they usually involve a 5 year ladder. That's pretty much what GIC's are about and what I thought we were discussing.
> 
> 
> 
> ...


You are right. I wasn't being specific.

I'm not sure it's a very specific case though, as I'm wondering how much savings Canadians aged 35 have?

I've read that Canadians under 35 have barely $56k saved on average, of which $30k is non-registered accounts. (Not their net worth, but their savings and investments accounts)









Average Savings By Age in Canada (for Retirement) | Ratehub.ca


Earn more, spend less, invest the rest. What should your average savings by age in Canada be? Let's look at all the details.




www.ratehub.ca





With $56k, I guess one has maybe $20k in emergency fund and $20k for a project in a short-term horizon, the reminder for the long term.

On average, Canadians don't have much money.



cainvest said:


> Once again you are assuming everyone has the same risk tolerance and/or faith in market history as you. Not to mention that a number a novice investors would likely sell everything if the portfolio dropped by 30% one mont


Yes, that would be after I make sure of their risk
tolerance and their financial education.

Which I guess, on average, the financial education of Canadians is very poor. So maybe not the wisest advice, I concede.

Meanwhile, sometimes those who are bad with finances may end up being good at taking risk. My wife hates finances. At some point, she had to invest a lump sum that she would hold & forget for decades. I told her : 100% equities. That's what she did. I few years later, I asked her about that investment, how it was doing, out of curiosity. She didn't even recall she had done that investment. Haha!

But I agree that's not the case I was talking about because it's money to be used in 5 years and it would need rebalancing every year, so it's not a "buy & forget". And people without proper education or not enough belief in the strategy could end up panic selling.


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## james4beach (Nov 15, 2012)

Sigh, the 3.25% 5-year CIBC is gone from iTrade.

I guess it was only available briefly. I bought some, but I should have bought much more.


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## like_to_retire (Oct 9, 2016)

james4beach said:


> Sigh, the 3.25% 5-year CIBC is gone from iTrade.
> 
> I guess it was only available briefly. I bought some, but I should have bought much more.


In a year you might be happy you didn't - no one knows.

ltr


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## james4beach (Nov 15, 2012)

The rates at my discount broker are looking better. The highest yields at 5 years are:

Home Trust 2.61%
Equitable 2.61%
Scotiabank 2.60%

That's a great rate from Scotia considering it's a big 5.

If you get the GIC directly from EQ Bank it's 2.65%


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## OneSeat (Apr 15, 2020)

james4beach said:


> Home Trust 2.61%
> Equitable 2.61% (2.65% from bank))
> Scotiabank 2.60%


James it intrigues me when you 'celebrate' your latest rates - my current rates are -
Oaken (Home Trust) 2.75%
Hubert 3.00%
BMO 2.65%

Speaking of Equitable (EQ) - they refused to accept me because I bank with BMO!


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## gardner (Feb 13, 2014)

He is talking about the rates available within a discount broker. They will shave a few bps off the rates from the underlying issuers in exchange for the convenience of one stop shopping direct from your brokerage account. I've been going direct to the issuer, but that wears thin once you have four of five of them on the go with their different logins, tax document policies UIs and reporting formats.


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## OptsyEagle (Nov 29, 2009)

You can shave precisely 0.25% off the annual rate offered at a discount brokerage for the cost of them providing their GIC brokering service. It is usually money well paid. Not only do you get the convenience of having many different banks continuously fighting for your business, but it is a lot easier to keep your total deposits below $100,000 at any one bank, so as to ensure full CDIC protection for those who have multiple hundreds of thousands to invest.

In my experience, I have rarely found a bank that had the best rates for more then a few weeks, sometimes months and on rare occasions years, but none have ever maintained the best rates into perpetuity. So with that in mind, and my unwillingness to keep opening new accounts every time that best company decides to change their competitive model, I find the offering at the brokerages to be the best one can do. As I said, the 0.25% is money well spent when all the issues and costs are accounted for.


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## james4beach (Nov 15, 2012)

OptsyEagle said:


> As I said, the 0.25% is money well spent when all the issues and costs are accounted for.


I agree, it's worth paying this fee. Ever since I moved my GIC ladder to the brokerage, I've had a much easier time maintaining it and finding good replacements. One can also jump on promotions from issuers you don't have a direct bank account with. Unless you happen to keep 10 active accounts with banks all over the country, this is going to be an advantage.

This ability to shop around from one screen is really worth it. Recall that I bought a 3.25% (CIBC) earlier this month when a promotion popped up.


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## OneSeat (Apr 15, 2020)

Appreciate all your input but assuming the 0.25% is typical that is $4000+ in my case over the life of the five year ladder. Not worth it to me for the small amount of time needed every other month. Brokers can take more of one's time than that. Guess we are all different.


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## OptsyEagle (Nov 29, 2009)

In my case I have my GICs in RRSPs so it is also the cost and headache of RRSP transfers and all the time that would take.

Anyway, each to their own. Whatever works. The good thing about these boards is they allow a person to quickly find the options that will work best for them and many of the costs and issues surrounding them. There is rarely a one size fits all solution for everyone.


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## james4beach (Nov 15, 2012)

OptsyEagle said:


> The good thing about these boards is they allow a person to quickly find the options that will work best for them and many of the costs and issues surrounding them. There is rarely a one size fits all solution for everyone.


Yes I've learned about so many new tools and methods since I came to this board. The greatest by far was probably Norbert's Gambit for FX. Converting roughly $1M over the last few years (mostly my US income), it probably saved me 15K to 20K in fees!


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## james4beach (Nov 15, 2012)

GICs are proving to be useful in the current downturn in bonds.

GICs are equivalent to short-term bonds, but have no volatility because they are illiquid. Consider a regular bond fund (something that holds both short + long term) versus swapping in GICs for the short term segment.

The GICs can be less painful to hold in a period like we have now, because at least the price will not fluctuate.


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## like_to_retire (Oct 9, 2016)

james4beach said:


> The GICs can be less painful to hold in a period like we have now, because at least the price will not fluctuate.


I agree that's the case with GIC's compared to funds, but with a bond you have the identical situation since you have a known maturity date and that your principle will be returned to you. 
Over the long term, funds will average out, but I do like the certainty of GIC's and bonds.

ltr


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## Beaver101 (Nov 14, 2011)

OptsyEagle said:


> You can shave precisely 0.25% off the annual rate offered at a discount brokerage for the cost of them providing their GIC brokering service. It is usually money well paid. Not only do you get the convenience of having many different banks continuously fighting for your business, but it is a lot easier to keep your total deposits below $100,000 at any one bank, so as to ensure full CDIC protection for those who have multiple hundreds of thousands to invest.
> 
> In my experience, I have rarely found a bank that had the best rates for more then a few weeks, sometimes months and on rare occasions years, but none have ever maintained the best rates into perpetuity. So with that in mind, and my unwillingness to keep opening new accounts every time that best company decides to change their competitive model, I find the offering at the brokerages to be the best one can do. As I said, the 0.25% is money well spent when all the issues and costs are accounted for.


 ... I didn't see this until now and I would agree. I love the convenience, one shop stop within one's brokerage account - .25% is a small cost to pay for my time and efforts to chase rates and move money here and there ...all over the map.


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## james4beach (Nov 15, 2012)

Rates still creeping higher. At the discount brokerage (after their 25 basis point fee), there's now Manulife at 2.75%

What do you think @m3s and @Jimmy will you be buying these GICs?


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## m3s (Apr 3, 2010)

I built a GIC ladder once and probably never again until I am old and senile.

I got rates that were only available for less than a week and I would love to sell them to you fools if only they were transferable. Because I can get +8% elsewhere and remain liquid. Anything less is negative in real terms and the banks are laughing at you (just look at their insane profits)

Inflation is not good for GICs despite what some boomers on this forum say



m3s said:


> Just built my first GIC ladder:
> 
> 3 months 2.45% (EQ Bank)
> 6 months 2.8%
> ...


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## james4beach (Nov 15, 2012)

m3s said:


> Because I can get +8% elsewhere and remain liquid. Anything less is negative in real terms and the banks are laughing at you (just look at their insane profits)


Is there risk involved in the 8% ? I ask about risk because I'm also able to get 7% elsewhere, but that's in a pretty risky alternative. If you can *safely* get 8% you should absolutely leverage everything you can into that.

Have you looked into ways to borrow money to load up into that?


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## m3s (Apr 3, 2010)

Everything has a risk adjusted return. Bonds have more than people realize. Even GICs have risk of underlying fiat inflation and opportunity cost to being locked in

You can currently get 19% on an algorithmic stablecoin pegged to USD price. The 19% is not sustainable but it has been going for a long time and probably won't end soon either. Of course people created degenerate ways to leverage it but leverage always has a risk of liquidation.

I'm farming crazy high yields but of course there is lots of risks and complications this forum is not ready to digest. The yields will settle down over time that's how markets work. Banks are profiting very well off your liquidity just look at their balance sheets

GICs and bonds are broken in this environment though. They are negative real returns at best and the market is over saturated with magic central banker money


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## Jimmy (May 19, 2017)

james4beach said:


> Rates still creeping higher. At the discount brokerage (after their 25 basis point fee), there's now Manulife at 2.75%
> 
> What do you think @m3s and @Jimmy will you be buying these GICs?


No. Why would anyone want to lose $ in real terms? Maybe when you are 80 and will need to draw down RRSPs. I may look at some corporate bonds once yields get back above 3.5%. I want to get a USDC mastercard that pays 8% once available in Canada

I have Emera and PS for FI. They have never had a -ve 3 yr rolling return in 18 yrs even in 2009. Cagr 8%/yr. Rest in cash to buy stocks on sale.


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## james4beach (Nov 15, 2012)

Well now we're talking. Scotiabank 5 year GICs (from all sub issuers) have hit *3.0%*

That rate is available through the discount brokerages, but is also available direct from Scotia.

A couple months ago, I had bought a 3.25% from CIBC as well. Really nice to see rates this high, and maybe even going higher soon.


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## Gator13 (Jan 5, 2020)

Any predictions what the 5 year GIC rate will be by the end of the year?


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## james4beach (Nov 15, 2012)

Gator13 said:


> Any predictions what the 5 year GIC rate will be by the end of the year?


Good question. One tool we have available for forecasting rates are the BAX interest rate derivatives in Montreal. I took a look, and they are predicting that the Bank of Canada will hike by another 1.25% through this year (5 rate hikes). However they also show very high uncertainty in that forecast.

At first glance you might say that looks like GIC rates could go up by another 1.25% through this year, but the problem is that GIC rates are based on the bond market yields and not the cash rate set by the BoC.

I'll make some assumptions to give an answer. First assumption, that the GIC rates go up by the same amount as the BoC hikes (which is a big assumption). Second, because the rate hikes are very uncertain (as per the derivatives market), instead of 5 hikes, I'll call it a range of between 2 hikes and 6 hikes.

*My forecast: 5 year GIC rates could hit somewhere between 3.5% - 4.5% this year
But also realize that if there's a sudden economic slowdown/crisis, all bets are off the table, and rates could fall.*


As per those derivatives, there is _so much uncertainty_ in future interest rates that there's not much value in trying to make forecasts like this. This is why I think a "passive" and methodical approach is better, such as always buying new 5 year GICs and maintaining a ladder. Just buy a new one every 3 months, or 6 months, no matter what the rates are.


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## Covariance (Oct 20, 2020)

Thinking about @Gator13 question. I don't follow, nor have historical data for GIC rates. Anyone here that tracks GICs know the typical spread over GoCanada bonds of same tenor? IE GIC 5 year rate over BoC 5 year - across the different phases of the economic cycle. @james4beach ?


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## james4beach (Nov 15, 2012)

Covariance said:


> IE GIC 5 year rate over BoC 5 year - across the different phases of the economic cycle. @james4beach ?


Not exactly what you want, but I track the 5 year GIC (for A-rated issuers only) versus Canadian 10 year bond. On average, the 5 year GIC rate is 60 basis points higher than the 10 year bond. Sometimes the spread shrinks to zero, and can be as wide as 150 basis points.

Currently the spread is about average. An A-rated GIC is 3.00% while the 10 year bond is 2.18%, for a spread of 82 basis points.

I use this particular spread as I keep rolling over my fixed income bonds/GICs. I always choose between buying either a 5 year GIC, or a ~ 10 year government bond. If the spread was very low for example, I'd prefer a government bond instead.


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## like_to_retire (Oct 9, 2016)

james4beach said:


> An A-rated GIC is 3.00% while the 10 year bond is 2.18%, for a spread of 82 basis points.


This shows what we've known for a long time - that GIC's are about the only free ride you'll ever get in investing. Their only real drawback of liquidity can easily be solved by multi rung ladders. I got out of bonds and bond ETF's years ago and went all in with GIC ladders because I couldn't pass up their obvious advantage.

ltr


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## james4beach (Nov 15, 2012)

like_to_retire said:


> This shows what we've known for a long time - that GIC's are about the only free ride you'll ever get in investing. Their only real drawback of liquidity can easily be solved by multi rung ladders. I got out of bonds and bond ETF's years ago and went all in with GIC ladders because I couldn't pass up their obvious advantage.


I agree, they're pretty amazing. Practically the same safety as government bonds, _plus an extra_ 60 to 80 basis points!

How crazy is that. As you point out, the one problem is the illiquidity. I'm pretty religious about buying new 5-year GICs every 3 or 4 months and with that much granularity, I basically always have cash at my finger tips.


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## Covariance (Oct 20, 2020)

james4beach said:


> Not exactly what you want, but I track the 5 year GIC (for A-rated issuers only) versus Canadian 10 year bond. On average, the 5 year GIC rate is 60 basis points higher than the 10 year bond. Sometimes the spread shrinks to zero, and can be as wide as 150 basis points.
> 
> Currently the spread is about average. An A-rated GIC is 3.00% while the 10 year bond is 2.18%, for a spread of 82 basis points.
> 
> I use this particular spread as I keep rolling over my fixed income bonds/GICs. I always choose between buying either a 5 year GIC, or a ~ 10 year government bond. If the spread was very low for example, I'd prefer a government bond instead.


Thanks. So a spread of 100bps over the 5Y bond sound reasonable?


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## Covariance (Oct 20, 2020)

james4beach said:


> I agree, they're pretty amazing. Practically the same safety as government bonds, _plus an extra_ 60 to 80 basis points!
> 
> How crazy is that. As you point out, the one problem is the illiquidity. I'm pretty religious about buying new 5-year GICs every 3 or 4 months and with that much granularity, I basically always have cash at my finger tips.


the ladder is key to addressing liquidity. Congrats for staying disciplined and maintaining it.


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## james4beach (Nov 15, 2012)

Covariance said:


> Thanks. So a spread of 100bps over the 5Y bond sound reasonable?


Yes 100bp over 5Y government sounds pretty reasonable/normal to me.

Though note that I was comparing A-rated issuers (usually have slightly lower GIC rates) to government. Some of the lower grade issuers like Home Trust have consistently had higher GIC rates. I prefer the large bank / AA issuers myself.


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## AltaRed (Jun 8, 2009)

The rule of thumb for 5 year fixed mortgages is a 100-200 bp spread over 5 year gov't bond yields. 5 year GIC rates have to be at least 50bp lower and probably as much as 100 bp lower than 5 year fixed mortgage terms to have more than a razor thin net interest margin. 

That likely places 5 year GIC rates as low as 5 year gov't bonds to potentially 100 bp higher than 5 year gov't bonds.


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## Gator13 (Jan 5, 2020)

@james4beach , you mentioned "A-rated issuers". Where can I find the rating for issuers? The following is a screen shot of what's currently available from Investorline. 

We plan to stay in (and add to) cash or near cash until we retire in about two years. At that point we plan to build a GIC ladder. What is a good rule of thumb for the length of time between GIC's maturing? i.e. 3 months, 6 months??


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## AltaRed (Jun 8, 2009)

Scotia iTrade provides credit ratings for the vast majority of their GIC offerings.


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## Gator13 (Jan 5, 2020)

I'll check Investorline during trading hours and find out if they provide credit ratings.


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## AltaRed (Jun 8, 2009)

Gator13 said:


> I'll check Investorline during trading hours and find out if they provide credit ratings.


They don't. I don't know of anyone other than Scotia iTrade that provides credit ratings.


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## cainvest (May 1, 2013)

AltaRed said:


> They don't. I don't know of anyone other than Scotia iTrade that provides credit ratings.


And take those ratings with a grain of salt at Scotia. The last time the DBRS were updated "Ratings as of 01/05/2013".

On the plus side, all of them are CDIC members.


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## james4beach (Nov 15, 2012)

Gator13 said:


> @james4beach , you mentioned "A-rated issuers". Where can I find the rating for issuers?


As AltaRed mentioned, I'm using the ratings from iTrade. They may not be very useful, but basically: I prefer the big 5 bank issuers and some other large financial companies such as Manulife.

That's just a personal preference for peace of mind. You don't really need the actual credit ratings for this, instead (if you prefer big 5 banks like I do) maybe just recognize the different issuer names, e.g.

Scotia = Scotia, Montreal Trust Company, National Trust Company, etc
TD = TD, TD Pacific Mortgage Corporation, Canada Trust Company (CTC) etc

For example that 3.1% in your listing was Scotia (big 5 bank). That's all I mean, sorry for the confusion about "ratings".

It can get a bit tricky sometimes as for example "CTC" is actually under TD Bank, but you wouldn't know it by looking at the name.


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## james4beach (Nov 15, 2012)

Gator13 said:


> At that point we plan to build a GIC ladder. What is a good rule of thumb for the length of time between GIC's maturing? i.e. 3 months, 6 months??


There's no hard rule about this. Some people buy them every 12 months, but I find it's very handy to have amounts maturing several times a year.

From my experience, the main thing to avoid is trying to predict these GIC rates and holding off on buying them because you think a better rate is coming along in a few months. If you do that, your ladder will have large gaps which can cause problems with your liquidity needs down the road.

I buy every 3 or 4 months -- no matter what. I find that this interval is so short that I always feel that I have plenty of cash / liquidity on hand.


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## gardner (Feb 13, 2014)

FWIW, I've found 6 months a reasonable spacing. I have both a $US and $CAN ladder, each at 6 months -- this gives me a renewal every quarter, which is a bit much. A single 10-way/6 month ladder would be fine. The problem is that being the rate-chaser I am, I have chunks at three different banks and it gets to be a headache.


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## AltaRed (Jun 8, 2009)

FWIW, I agree credit ratings don't mean much with CDIC insurance. It is pretty easy to know which ones are BBB-/BBB/BBB+ or in that area and which are likely to be A- and higher....if a person is at all familiar with their bond ratings.

We all know Home Trust/Oaken Financial is still the weakest of the bunch (only their deposit organizations are investment grade at BBB- while their corporate debt is still sub-investment grade) and there is a suite of issuers at BBB or BBB+.such as Equitable Bank, Laurentian Bank, etc.


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## OneSeat (Apr 15, 2020)

AltaRed said:


> We all know Home Trust/Oaken Financial is still the weakest of the bunch - - - - - - - -


If one such organisation does default how difficult and how quick (or slow) is the CDIC insurance?


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## cainvest (May 1, 2013)

OneSeat said:


> If one such organisation does default how difficult and how quick (or slow) is the CDIC insurance?


Bank failures in Canada: a history - cdic.ca

Edit: In case one doesn't want to click on the cidc link above.

One example from 20 yrs ago -> "Within a span of three weeks, CDIC made payment of all insured deposits".

Also noted -> "CDIC can now pay out depositors in a matter of days."


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## OneSeat (Apr 15, 2020)

cainvest said:


> "CDIC can now pay out depositors in a matter of days."


Ah - good - I'll sleep better tonight.


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## cainvest (May 1, 2013)

As AltaRed said above, credit ratings are pretty much meaningless with CIDC. One thing to keep in mind for those doing big GIC ladders is to spread the $100K coverage over multiple FI's and/or accounts so all your money is covered.


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## Gator13 (Jan 5, 2020)

james4beach said:


> There's no hard rule about this. Some people buy them every 12 months, but I find it's very handy to have amounts maturing several times a year.
> 
> From my experience, the main thing to avoid is trying to predict these GIC rates and holding off on buying them because you think a better rate is coming along in a few months. If you do that, your ladder will have large gaps which can cause problems with your liquidity needs down the road.
> 
> I buy every 3 or 4 months -- no matter what. I find that this interval is so short that I always feel that I have plenty of cash / liquidity on hand.


Thanks. The plan is to stay in cash or near cash until after we we go through buying a new home and selling the existing one. As soon as we are settled we will start building a GIC ladder. We will use the interest earned for fun money and the principal amount will be rolled into a new GIC regardless of the rate. The cash is a safety net and the interest is a bonus and not counted on as part of our spending requirements.

Thanks to all for the advice on credit ratings.


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## james4beach (Nov 15, 2012)

cainvest said:


> As AltaRed said above, credit ratings are pretty much meaningless with CIDC


Except for the stress someone may feel from watching their bank collapse. Keep in mind that when banks failed in the US (one I watched was Indymac) people were lining up around the blocks to pull their money. And there's even a thread somewhere at CMF where, as it looked like Home Capital Group might collapse, someone was very stressed out about the safety of their money.

I prefer the big banks for this peace of mind. I do agree the CDIC will 'make me whole' but when times get tough, I don't want the stress of worrying about sketchier banks like Home Equity Bank and Peoples Trust. And the whole reason I keep money in GICs is for safety & peace of mind.


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## cainvest (May 1, 2013)

james4beach said:


> Except for the stress someone may feel from watching their bank collapse.


Sure there will likely be stress (likely not GIC related) but why would there be any for the CDIC protected assets? I can understand if someone had $500K in GICs in one account with only one bank ... they could lose $400K of it.



james4beach said:


> I prefer the big banks for this peace of mind. I do agree the CDIC will 'make me whole' but when times get tough, I don't want the stress of worrying about sketchier banks like Home Equity Bank and Peoples Trust. And the whole reason I keep money in GICs is for safety & peace of mind.


Maybe it's just me but I don't follow this stress when the money is backed by Canada itself. If CIDC defaults we all have much more to worry about. Of course if you "feel" it's needed for your piece of mind, please go ahead.


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## james4beach (Nov 15, 2012)

cainvest said:


> Maybe it's just me but I don't follow this stress when the money is backed by Canada itself. If CIDC defaults we all have much more to worry about. Of course if you "feel" it's needed for your piece of mind, please go ahead.


There is uncertainty about the implementation of the CDIC guarantee. I wouldn't be concerned if I held a GIC directly with a bank, but I'm a bit uncertain about how this works when a brokerage holds GICs from multiple issuers.

It's complicated enough that the CDIC had to formulate some strategies for accounting for all this, when GICs are held at a brokerage. I found a technical document from the CDIC some time ago. There is a method of coding the various instruments.... anyway, it was clear to me from the CDIC presentations that this was a work in progress. Having GICs at the discount brokerage is a relatively new thing for the CDIC.

In fact the CDIC has new regulatory rules about this that are coming online as we speak, and that's what I mean by "a work in progress". This style of multiple GICs from multiple issuers, held at a discount brokerage, where the brokerage has to *organize* and properly report all this, and then the CDIC has to track it... it's just not that simple.

In case you think this is simple and straightforward, here are 63 pages of new guidelines on how brokers should be organizing client deposits. This is NOT yet an established process. Some mistakes will be made along the way. And tracking this issue, I know that the CDIC and banks have been working on this challenge for 3 to 4 years at this point.

In other words, there is uncertainty about this NEW mechanism.

The US also struggled with a similar issue. When banks collapsed in 2007-2008, they also had a problem with "brokered deposits" and I remember stories at the time talking about how some of the paperwork was slowing everything down. It's just a more complex reporting and accounting scenario than traditional banking, where everyone holds deposits directly in their own accounts, directly at the banks.

So given the history of American confusion with "brokered deposits", plus indications (as linked above) of efforts to organize this in Canada, I think it's reasonable to have some concern about how smoothly it would go when the CDIC has to reimburse everyone for GICs held at brokerages.


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## AltaRed (Jun 8, 2009)

@post#341 James is correct. I recall 2017 when there was a lot of hand wringing in discussion forums about GICs in particular at Home Trust. I don't think it was much concern of the CDIC guarantee. It was that the holder of a 5 year Oaken Financial/Home Trust GIC was going to carry the mental weight of their funds being held hostage until the GIC matured. It definitely was a play on human psychology.

Investors with only HISA funds at Oaken did not have that issue because they could, and did for the most part, pull their funds. Indeed, it was the run on HISA funds on deposit that required a 'white knight' bailout. Think that is why Oaken no longer is the most competitive on HISA rates. They don't want that experience again either.


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## cainvest (May 1, 2013)

james4beach said:


> There is uncertainty about the implementation of the CDIC guarantee. I wouldn't be concerned if I held a GIC directly with a bank, but I'm a bit uncertain about how this works when a brokerage holds GICs from multiple issuers.


I'm not clear why brokerage bought GIC's for other CIDC member institutions gives you concern? Can you point out a specific area on the CIDC page?

I see a number of changes but almost all have nothing to do with CDN $ GICs other than more reporting requirements.
Here is a good summary FAQ link -> FAQs - cdic.ca


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## AltaRed (Jun 8, 2009)

It is the latter one James was talking about ..


> New requirements for deposits held in trusts, including nominee brokered deposits that enhance CDIC’s ability to extend protection to these deposits and reimburse them quickly after a CDIC member failure


There was not a direct relationship between issuer and investor to ascertain actual coverage for the investor. For example, if an investor held BMS GICs in one or two brokerage accounts and and more directly with BNS, there is only one coverage for all of them in aggregate and paperwork needs to be done to do that. Payout would not be as quick.


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## cainvest (May 1, 2013)

AltaRed said:


> There was not a direct relationship between issuer and investor to ascertain actual coverage for the investor. For example, if an investor held BMS GICs in one or two brokerage accounts and and more directly with BNS, there is only one coverage for all of them in aggregate and paperwork needs to be done to do that. Payout would not be as quick.


Yes, that's a good thing CIDC is doing for faster payout in the "unlikely" event of a failure for those with brokerage account GICs.


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## james4beach (Nov 15, 2012)

AltaRed said:


> It is the latter one James was talking about ..
> 
> There was not a direct relationship between issuer and investor to ascertain actual coverage for the investor. For example, if an investor held BMS GICs in one or two brokerage accounts and and more directly with BNS, there is only one coverage for all of them in aggregate and paperwork needs to be done to do that. Payout would not be as quick.


I have no doubt that in case of a problem, the CDIC will eventually figure it all out. We won't lose money.

But I get anxious that it's a relatively new system (with discount brokerages) and they are still figuring out the accounting for it. Again this is just because I'm extremely risk averse when it comes to my GICs... I'm sure they would eventually figure it out, in case of disaster. I just don't want to be the guinea pig in this brokerage case.

And then I think back to 2008. Back then I looked at my GICs from, say, TD bank. Not once did I feel bad that I got a slightly lower yield in them compared to other higher risk issuers. Of all the things I owned during the disaster years, I was happiest with my big 5 cash + GIC deposits.

But it's a personal choice. It's also fine to say, might as well get a few basis points more yield since the CDIC will figure it all out in case of disaster, even if there's some delay due to accounting headaches with brokerages.


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## cainvest (May 1, 2013)

james4beach said:


> I just don't want to be the guinea pig in this brokerage case.


No more worries as of April 30, 2022 the new reporting requirements are in place though they likely have been already for some time.


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## AltaRed (Jun 8, 2009)

cainvest said:


> No more worries as of April 30, 2022 the new reporting requirements are in place though they likely have been already for some time.


Agreed. The supposed issue never bothered me.


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## Covariance (Oct 20, 2020)

james4beach said:


> I have no doubt that in case of a problem, the CDIC will eventually figure it all out. We won't lose money.
> 
> But I get anxious that it's a relatively new system (with discount brokerages) and they are still figuring out the accounting for it. Again this is just because I'm extremely risk averse when it comes to my GICs... I'm sure they would eventually figure it out, in case of disaster. I just don't want to be the guinea pig in this brokerage case.
> 
> ...


Agreed you will get your cash and probably not to long in waiting.

However, in the event of a default you will be depending on the brokers systems not the issuer's (ie bank or trust companies). CDIC will be capping out to the 100k max / person across all insured products held everywhere. So they are only going to release as the SIN, BIN numbers are cross tabbed to the flow of funds.

In other words. I'd be more concerned about my broker. Assuming I know my CDIC coverage by bank that I am relying upon.


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## like_to_retire (Oct 9, 2016)

Just looking at TDDI rates today, and you know things are crazy when EQ Bank's GIC rate is lower than regular banks like Royal Bank and BNS. I haven't seen that too often.


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## Covariance (Oct 20, 2020)

like_to_retire said:


> Just looking at TDDI rates today, and you know things are crazy when EQ Bank's GIC rate is lower than regular banks like Royal Bank and BNS. I haven't seen that too often.
> 
> View attachment 22964


I noticed that as well a couple of days ago. Clearly they expect rates to go higher or they have a mismatch with their assets (loans extended).


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## cainvest (May 1, 2013)

like_to_retire said:


> Just looking at TDDI rates today, and you know things are crazy when EQ Bank's GIC rate is lower than regular banks like Royal Bank and BNS. I haven't seen that too often.
> 
> View attachment 22964


Think it's just a case of catching up as they are all making changes.
Took a quick look and I see 7 listing sitting at 3.15 for 5/yr right now where you show only 1.

HT and EQ rates are a little bit higher on the shorter terms.


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## james4beach (Nov 15, 2012)

like_to_retire said:


> Just looking at TDDI rates today, and you know things are crazy when EQ Bank's GIC rate is lower than regular banks like Royal Bank and BNS. I haven't seen that too often.


Yeah, I can't remember the last time I saw RBC near the top yields. But this basically means that Royal has matched Scotia's GIC rates.

This looks like it could be a fun year for GIC investors. Seeing higher and higher yields... I hope.


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## like_to_retire (Oct 9, 2016)

james4beach said:


> This looks like it could be a fun year for GIC investors. Seeing higher and higher yields... I hope.


Yeah, I'll be close to doubling my income on many GIC's over this next year if it holds.

ltr


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## james4beach (Nov 15, 2012)

like_to_retire said:


> Yeah, I'll be close to doubling my income on many GIC's over this next year if it holds.


Now here's a real mind-bender for you. Bond fund investors (like someone holding XSB) gets to enjoy all the same fun. Every bond that rolls over, gets a much higher yield than before.

The only real difference is that the GIC doesn't have liquid pricing. If the GICs were liquid and had market prices, you'd see your GIC portfolio fall in price the same way XSB does.


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## Gator13 (Jan 5, 2020)

We have our various investment accounts with BMO Investorline. Are there institutions that offer a better selection of GIC's? (i.e. Scotia iTrade or TD Direct Investing)


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## AltaRed (Jun 8, 2009)

Scotia iTrade sometimes has more issuers than BMOIL, e.g. 27 as of this morning, but it does not mean they have more issuers at better rates. 19 of those 27 issuers have 5 year rates at 3% or higher with 7 of them at 3.15%.

RBC DI currently has 32(?) issuers of which 19 are are 3% or more, with 2 at 3.15%. Unless one has an extraordinary amount of funds one wants to have in GICs, I don't think there is much reason to pursue one over the other.

This morning, BMOIL has 27 issuers of which 13 have 5 year rates of 3% or more, and 1 of those at 3.15%


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## Gator13 (Jan 5, 2020)

We will probably have somewhere between 1m to 1.5m to put towards a GIC ladder and we will want to stick with quality institutions. (We would rather give up a little yield than taking on risk) Would you recommend staying within the 100k CDIC limit with any one institution?


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## OptsyEagle (Nov 29, 2009)

Gator13 said:


> We will probably have somewhere between 1m to 1.5m to put towards a GIC ladder and we will want to stick with quality institutions. (We would rather give up a little yield than taking on risk) Would you recommend staying within the 100k CDIC limit with any one institution?


Without a doubt. Banks are the most leveraged institutions you will find on the planet. With GICs the importance of CDIC protection is much more critical because even if you are lucky to get some notice, that the bank you have deposits with might be faltering, you will rarely get 5 years notice that you would need to if you just bought their 5 year GIC.

You just don't get enough interest return on a GIC to take the any risk of default, in my opinion.


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## like_to_retire (Oct 9, 2016)

Gator13 said:


> We will probably have somewhere between 1m to 1.5m to put towards a GIC ladder and we will want to stick with quality institutions. (We would rather give up a little yield than taking on risk) Would you recommend staying within the 100k CDIC limit with any one institution?


I would certainly try and stay close to the 100K limit. I would move to less than "quality institutions" before I would go over the limit. What I am saying is that given a choice between a $200K GIC with RBC, I would rather a $100K RBC and a $100K EQ Bank.

ltr


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## cainvest (May 1, 2013)

Gator13 said:


> We will probably have somewhere between 1m to 1.5m to put towards a GIC ladder and we will want to stick with quality institutions. (We would rather give up a little yield than taking on risk) Would you recommend staying within the 100k CDIC limit with any one institution?


If you want CDIC coverage for the total amount you likely need to spread it out over multiple institutions. Also separate $100k of coverage applies to many different account types depending on where you are holding your money. For me GICs having CDIC coverage is more important than the difference between an 'A' or 'AA' rating.


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## AltaRed (Jun 8, 2009)

I 'd have no issue with going well over $100k with A- rated institutions and above, e.g. the big banks and their subs, Manulife Bank, Sun Life, HSBC, CWB and possibly Concentra (currently A- but is being bought by Equitable at BBB). One name that continually pops up for discussion is Home Trust/Oaken Financial. Just have to remember it remains the weakest investment grade of the "regulars" at BBB-, and its parent corp still has not regained investment grade ratings from its near death experience in 2017. It will no doubt get there fairly soon.

Not that it is relevant but I cannot comprehend that kind of money in GICs. I've never had more than $300k in GICs myself at any time in my lifetime.


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## cainvest (May 1, 2013)

AltaRed said:


> Not that it is relevant but I cannot comprehend that kind of money in GICs.


Some people are just extremely risk averse.

Edit: I don't think this is as bad later on in life but it can really do damage when building up that nest egg early on.


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## OptsyEagle (Nov 29, 2009)

When buying GICs, I try not to forget Royal Trust. At one point in time it was the 6th largest bank/trust company in Canada. They had branch's all over the country with multiple branch's in many cities. I do not know what their credit ratings were, 5 years before their insolvency, but I bet it was quite high and I try to remember them before I put more then $100,000 with any bank.


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## like_to_retire (Oct 9, 2016)

AltaRed said:


> Not that it is relevant but I cannot comprehend that kind of money in GICs.


You're making $300K in GIC's sound like crazy talk, but I don't think it would be considered unusual for someone with a simple two million dollar portfolio with a 50:50 asset allocation having a million dollars in a GIC ladder. Are you perhaps the outlier? 

ltr


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## Gator13 (Jan 5, 2020)

AltaRed said:


> Not that it is relevant but I cannot comprehend that kind of money in GICs. I've never had more than $300k in GICs myself at any time in my lifetime.





cainvest said:


> Some people are just extremely risk averse.
> 
> Edit: I don't think this is as bad later on in life but it can really do damage when building up that nest egg early on.


Our allocation has typically been +90% equity so I don't think we would be classified as risk adverse. We are +/- 2 years from retirement and have started to simplify our holdings. The majority of our registered accounts will be VRIF and our taxable accounts are Canadian dividend paying stocks. Switching our registered holdings to VRIF will lower our equity allocation a bit. Dividends from the taxable accounts and withdrawals of the VRIF distributions from the registered accounts will provide us with a comfortable retirement income. Our TFSA accounts are 100% REIT holdings and will provide an income safety net.

Due to extraordinary income circumstances, I have/will have extra funds that were not part of our retirement planning. They will be held in a taxable account and due to attribution rules, taxable to me. These are the funds I want to build the GIC ladder with. Interest from the GIC's will be used for some combination of gifting, donating, additional fun money, travel, etc.

As always, I appreciate the advice & feedback.


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## AltaRed (Jun 8, 2009)

like_to_retire said:


> You're making $300K in GIC's sound like crazy talk, but I don't think it would be considered unusual for someone with a simple two million dollar portfolio with a 50:50 asset allocation having a million dollars in a GIC ladder. Are you perhaps the outlier?
> 
> ltr


Perhaps since I only believe in enough FI to handle 2-5 year 'swoons' in equity markets. If I did have 50:50 in a $2M portfolio however, I'd look for alternatives for at least half of that fixed allocation such as inflation indexed securities like RRBs, TIPs, etc. to try and stay in step with inflation. That all said, I acknowledge Gator's logical and rational response just above.. and that I derailed the current discussion enough.


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## Covariance (Oct 20, 2020)

Gator13 said:


> Due to extraordinary income circumstances, I have/will have extra funds that were not part of our retirement planning. They will be held in a taxable account and due to attribution rules, taxable to me. These are the funds I want to build the GIC ladder with. Interest from the GIC's will be used for some combination of gifting, donating, additional fun money, travel, etc.
> 
> As always, I appreciate the advice & feedback.


Two comments. First with respect to CDIC and ladder building. Its worth noting that your coverage is 100k per institution per person for non-registered. Irrespective of the number of accounts or GICs. In other words all the GICs you have with one bank will only get you a maximum of 100k of protection on that Bank. Assuming a notional amount of 1m that means a minimum of 10 instuitions are required (today). With respect to investment beyond that which is insured. If it were me I would invest in a higher yielding instrument since I am not being compensated for the additional risk and the lack of liquidity. A multi year ladder is a long time.

Second, if your goal is to fund non-essential expenses from the returns (in a non-registered account) a more conventional asset allocation approach would be to accept higher risk in return for higher expected returns. There are two factors at play here that underpin such an approach. First, your non registered accounts are taxable and thus the volatility of after tax returns is lower for the same asset (versus a non taxable account). Second, the discretionary aspect of the expenses facilitates a variable withdrawal to overcome any risk of depletion.


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## Gator13 (Jan 5, 2020)

Covariance said:


> Two comments. First with respect to CDIC and ladder building. Its worth noting that your coverage is 100k per institution per person for non-registered. Irrespective of the number of accounts or GICs. In other words all the GICs you have with one bank will only get you a maximum of 100k of protection on that Bank..........


I want to make sure I understand this correctly. If, within my Investorline taxable account, I have a 100k Manulife GIC, a 100k BMO GIC, a 100k Western Bank GIC and a 100k RBC GIC, are each of those GIC's eligible for CDIC coverage or am I only eligible for 100k total CDIC coverage because they are all held within one Investorline account? Thx


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## AltaRed (Jun 8, 2009)

It is the former... They are all different issuing institutions. However, if you also had a $100k RBC GIC at TDDI or RBC itself (GIC or savings account), none of it would be covered. However, many institutions have separate CDIC insured institutions as per the CDIC Member List, so you could have $100k at each of three BMO entities (perhaps more on the list) and have it all covered.


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## Gator13 (Jan 5, 2020)

Thank you for clarifying.


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## Gator13 (Jan 5, 2020)

Covariance said:


> Second, if your goal is to fund non-essential expenses from the returns (in a non-registered account) a more conventional asset allocation approach would be to accept higher risk in return for higher expected returns. There are two factors at play here that underpin such an approach. First, your non registered accounts are taxable and thus the volatility of after tax returns is lower for the same asset (versus a non taxable account). Second, the discretionary aspect of the expenses facilitates a variable withdrawal to overcome any risk of depletion.


The income from these funds are in a non-registered account and will be used for discretionary spending. What are some examples of appropriate investment(s) given that capital preservation is important? Also, what is an acceptable variable withdrawal rate? (3.5%?)


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## nathan79 (Feb 21, 2011)

100K limit seems pretty quaint by today's standards. It looks like it was last raised in 2004 from 60K. It started at 20K in 1967, which is 165K adjusted for inflation. Time to raise it to at least 150K, especially when you consider that a down payment on a house is often 200K or more.


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## cainvest (May 1, 2013)

nathan79 said:


> 100K limit seems pretty quaint by today's standards. It looks like it was last raised in 2004 from 60K. It started at 20K in 1967, which is 165K adjusted for inflation. Time to raise it to at least 150K, especially when you consider that a down payment on a house is often 200K or more.


If it was only a 100k in total I'd agree they need to raise it. However, it's pretty easy to get well beyond that limit with different accounts/institutions.


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## AltaRed (Jun 8, 2009)

I agree there is no real difficulty in getting lots of coverage. For couples, it is even easier... .with TD, there are at least 3 CDIC insured companies. $100k in each for each of Him, Her and Them = $900k at TD alone and that is just in non-registered.


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## gardner (Feb 13, 2014)

Also joint holdings -- eg: with spouse, children -- get separate coverage and this is independent of tax attribution requirements. Each class of registered account is separate and RESP and RDSPs are separate per beneficiary.

EDIT: duh. That's what I get for ignoring the "other posts have been added" warning


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## nathan79 (Feb 21, 2011)

I'm single, so none of those things applies to me. My TFSA and RRSP are full with equities, so that just leaves non-registered accounts. I have four banks that I use for saving accounts, but I'm currently 44K over the limit at one of them. Another one is empty because they're not being competitive with their rates.


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## Covariance (Oct 20, 2020)

Gator13 said:


> The income from these funds are in a non-registered account and will be used for discretionary spending. What are some examples of appropriate investment(s) given that capital preservation is important? Also, what is an acceptable variable withdrawal rate? (3.5%?)


I can't get into specifics without understanding your complete situation. I'm not suggesting you look at anything funky, just consider you up the allocation from 0 equity / 100 GIC (fixed income) to include low cost equity ETFs. For reference your VRIF is about 50/50 equities/fixed income.


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## Gator13 (Jan 5, 2020)

Covariance said:


> I can't get into specifics without understanding your complete situation. I'm not suggesting you look at anything funky, just consider you up the allocation from 0 equity / 100 GIC (fixed income) to include low cost equity ETFs. For reference your VRIF is about 50/50 equities/fixed income.


Cash plus the 50% fixed income portion of VRIF makes up all of my fixed income. My plan was to build up more cash and get our overall allocation down closer to 70/30 or 75/25 heading into retirement.


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## james4beach (Nov 15, 2012)

Covariance said:


> I can't get into specifics without understanding your complete situation. I'm not suggesting you look at anything funky, just consider you up the allocation from 0 equity / 100 GIC (fixed income) to include low cost equity ETFs. For reference your VRIF is about 50/50 equities/fixed income.


Adding to this for @Gator13 one doesn't even need a very large amount of equities to make a pretty good, safe portfolio.

For example you could go 20% equities (maybe a single holding: VEQT) and 80% GICs. This is still awfully conservative and history suggests that it would perform quite well, giving roughly 2% positive real return (after inflation) and most years would be positive.

Basically something like 20/80 or 25/75 should be enough to both preserve capital and allow more "income generation" (withdrawals) than a pure GIC portfolio.

I am 30% equities for a similar reason.


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## james4beach (Nov 15, 2012)

I bought a 5 year Royal Bank GIC at 3.10%


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## AltaRed (Jun 8, 2009)

There are a number of 3.15% offerings at discount brokers these days. Essentially the same as being offered retail at online banks GIC rates comparison chart First time in a long time we have seen essentially 'zero' difference between discount brokerage channels and retail.


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## james4beach (Nov 15, 2012)

AltaRed said:


> There are a number of 3.15% offerings at discount brokers these days. Essentially the same as being offered retail at online banks GIC rates comparison chart First time in a long time we have seen essentially 'zero' difference between discount brokerage channels and retail.


I agree, this is kind of interesting right now. Looking at the rate charts and how it's evolving, I also get the feeling the banks are really competing with each other to get their rates up ahead of other issuers.

A few weeks ago, I picked up 3.25% on CIBC. That was also kind of bizarre, they jumped ahead of many issuers.

Short term corporate bond yields are rising very sharply now. Banks are likely looking at their funding alternatives, and the bond market doesn't look so hot at the moment.


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## gardner (Feb 13, 2014)

I bought an EQBank short term 90day GIC at 2.05% (annualized). I have a tranche on my 5y ladder coming up in June. I anticipate 3.5% by then.


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## OneSeat (Apr 15, 2020)

Please hold my hand - with BMO-IL offering the best* GIC interest rates right now we are considering adding some more - all in our non-reg a/c. We currently have them with five different banks - Equitable, Homequity, Concentra, Canadian Western and Manulife - so if we keep those (or add a sixth one) each under $100k we will have full CDIC insurance. Right? Thanks.

(* best or near best - they change daily these days!)


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## james4beach (Nov 15, 2012)

OneSeat said:


> Please hold my hand - with BMO-IL offering the best* GIC interest rates right now we are considering adding some more - all in our non-reg a/c. We currently have them with five different banks - Equitable, Homequity, Concentra, Canadian Western and Manulife - so if we keep those (or add a sixth one) each under $100k we will have full CDIC insurance. Right? Thanks.


The CDIC covers you for 100K in total deposits under each distinct bank name. For example let's say you had

100k in Equitable, with 50K in Equitable GICs + 50K in EQ savings accounts
100k in Concentra GICs
60k in Manulife GICs

In this example, the maximum has been reached for Equitable and additional GICs won't have deposit insurance. You could buy another 40k in Manulife GICs and they'd still be covered.

If you already have 100k each in the five banks you listed, you could buy GICs from another bank, e.g. Scotia, and that would also be insured up to 100k.


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## birdman (Feb 12, 2013)

In case you were not aware their are separate limits of single accts, jt accts, in trust accts, tax free accts, etc. Here is the link:








Protecting your deposits - cdic.ca


Find out what CDIC considers to be eligble deposits for insurance protection and what deposits CDIC does not protect.




www.cdic.ca


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## OneSeat (Apr 15, 2020)

Thanks both - just wanted to make sure before I took action.
I did read the CDIC website but not as clear - probably written by lawyers!


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## Thal81 (Sep 5, 2017)

I've always wondered what is the logic behind the 100K limit when you can effectively have unlimited CIDC insurance if you spread things out appropriately. It would save everyone a lot of hassle if they removed the 100K limit and just insured all deposits made with CIDC eligible banks regardless of the amount...


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## cainvest (May 1, 2013)

Thal81 said:


> I've always wondered what is the logic behind the 100K limit when you can effectively have unlimited CIDC insurance if you spread things out appropriately.


IMO, simple risk management is the reason, as in, the likelyhood of multiple banks failing is far less than one failing.


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## Covariance (Oct 20, 2020)

Thal81 said:


> I've always wondered what is the logic behind the 100K limit when you can effectively have unlimited CIDC insurance if you spread things out appropriately. It would save everyone a lot of hassle if they removed the 100K limit and just insured all deposits made with CIDC eligible banks regardless of the amount...


The institutions (banks, trusts) pay CDIC to insure their accounts.


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## scorpion_ca (Nov 3, 2014)

james4beach said:


> I bought a 5 year Royal Bank GIC at 3.10%


What is your rational to buy a 5 years GIC now since you know the BOC has started to increase the interest rates and they are not going stop increasing it soon? Isn't it a good idea to wait a couple of more months and then purchase a 5 Years GIC?


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## AltaRed (Jun 8, 2009)

There is no assurance 5 year GIC rates will go up proportionately. BoC could raise short term rates to 2% and 5 year GIC rates could remain in the low 3% range, or to be generous, not more than 3.5%. The 5 year GIC rate is tied closer to the 5 year BoC bond yield which has rarely gone beyond 3% for over 10 years (if not more).


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## james4beach (Nov 15, 2012)

scorpion_ca said:


> What is your rational to buy a 5 years GIC now since you know the BOC has started to increase the interest rates and they are not going stop increasing it soon? Isn't it a good idea to wait a couple of more months and then purchase a 5 Years GIC?


1. Yes the BoC has increased rates once, but we don't know when they will stop increasing. I looked at the interest rate derivatives market and it has very low confidence (low probability) in its forecasts for future rates. There is significant uncertainty about how far the Federal Reserve and BoC will raise interest rates. Maybe the BoC will raise rates all the way to 3%, or maybe they will stop at a little over 1%. Nobody knows.

2. As @AltaRed says, the 5 year GIC rate may not track those rates as it's really based off the 5 year bond yield. The BoC rate and the 5 year rate as two different things. It's unpredictable where the 5 year government bond yield will end up.

3. When I buy 5 year GICs, this is a *passive investment strategy*. What I'm doing is constantly rolling over my maturing amounts, to keep cash deployed in 5 year GICs. I am doing that no matter what the current rates are. The net result is that cash in my GIC portfolio always yields more than a savings account. Whether rates rise further, or fall, makes little difference to this strategy.


The idea with a passive strategy (one that's systematic and routine) is that you don't try to time the market, don't try to guess at where stock prices or bond prices are going. We know that in the long term, on average, a GIC ladder yields more than a savings account and are a better use of cash.

Playing the game of timing interest rates will work sometimes and fail other times. The philosophy behind a passive strategy like the GIC ladder is that you will sometimes be sub-optimal, but other times you'll come out ahead. On average it will work out well.

The same thing happens with a passive stock index portfolio. Imagine you are earning money and keep buying stocks -- passively -- no matter where they are. Sometimes you will end up buy stocks way too high (at ridiculous P/E multiples). One could say, you should do more forecasting and prediction and sometimes not buy stocks, and "time the market" to wait for better prices.

Usually, the passive strategies, where you don't try timing the market, are the better way to go.


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## OneSeat (Apr 15, 2020)

One more question - what happens if we both die owning GICs? Anyone have any actual experience or expert knowledge? I do remember asking BMO-IL years ago and I'm left with something like "Don't worry - we can cancel them and credit your account". Not sure if this still applies and I can't find anything in writing, nor can I get anyone from BMO-IL to call back yet on the subject.

In our case it is a little more critical since our beneficiaries are all extended family in the UK. Might it be better/easier to stop buying more GICs in the near future and hold low equity Asset ETFs (or anything else) which can be sold "the next day".


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## Beaver101 (Nov 14, 2011)

^ I think on death of the GIC holder, they've to pay out the entire amount (principal and interest - which is dependent on type of GIC held) to the beneficiary/estate up to the date of death. Ie. it's no longer required that the GIC be held to maturity date (which could be years from dod). There's a blurb on this in the GIC purchase agreement as part of the Terms and Conditions. 

Sadly, with everything going "quick and easy with digital", this agreement gets overlooked. Look for the T&Cs page with your specific GIC purchase agreement which spelled this out.


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## OneSeat (Apr 15, 2020)

Well that is very interesting - I literally have no recollection of ever seeing such a thing. "Quick and easy with digital" may well have caught me out.


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## Covariance (Oct 20, 2020)

OneSeat said:


> One more question - what happens if we both die owning GICs? Anyone have any actual experience or expert knowledge? I do remember asking BMO-IL years ago and I'm left with something like "Don't worry - we can cancel them and credit your account". Not sure if this still applies and I can't find anything in writing, nor can I get anyone from BMO-IL to call back yet on the subject.
> 
> In our case it is a little more critical since our beneficiaries are all extended family in the UK. Might it be better/easier to stop buying more GICs in the near future and hold low equity Asset ETFs (or anything else) which can be sold "the next day".


You need to ask each institution what their terms are or obtain this from the agent selling you the GICs. That is the only way to know for sure. If who ever is selling you the GICs will not call you back I suggest you transfer to another agent, advisor. 

Some GICs (eg TD) can be transferred in kind which is another consideration.


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## AltaRed (Jun 8, 2009)

My recollection is per post #398 but I agree one needs to specifically ask their brokerage of their process. It may differ between registered and non-registered accounts

In the case of RBC DI back in 2015, upon specific request from the Executor (me), GICs in a non-registered account were matured with accrued interest and paid out as cash to the beneficiaries. RBC did charge $100 admin fee per GIC for the privilege. The other option is to direct the brokerage to sell on the secondary market BUT this is a very risky proposition. There are normally heavy discounts in the secondary market.


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## OneSeat (Apr 15, 2020)

OK - as usual thank you all for your various replies.

The BMO-IL GIC expert just called back - apologised for her delay and said
- GICs with less than 1-1/2 years to maturity would be liquidated and the money credited to the beneficiaries
- other GICs would be transferred to My Estate Account until maturity - which we certainly do not want.

I will now approach other GIC providers to see what their terms are.

Any alternative investments to suggest?
- more equities + more HISAs for rainy days?


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## AltaRed (Jun 8, 2009)

I don't know what you mean by "GIC providers" but I am assuming you mean the brokerage itself that is the custodian (holder) of the GICs rather than the issuers of GICs. At some level, the individual GIC issuers like Home Trust, BNS, CT Bank, Equitable Bank might be amenable to intervening (with crystallization) to a death. All they would need to do is issue a 'maturity notice' to BMO IL and BMO IL would act on their instructions. Remember BMO IL is simply the order taker. They don't lay out the T's and C's for the GICs themselves.

When Desjardins closed Zag Bank, they issued instructions, in my case to Scotia iTrade, on how to mature and pay out outstanding GICs and interest. It was a good deal in that case.....full interest owing to date of maturity.

You will always find some estate issues with holdings/securities that don't have good liquidity. Bonds are better but one takes a haircut on them to some extent because the only buyer is the brokerage's bond desk and one has to sell into their Bid price posted.That is the benefit of bond ETFs over both individual bonds and GICs.

As an aside, I am in the process of dismantling the 5 year bond/GIC ladders for myself, my spouse and my ex-spouse in our RRIFs and substituting VCNS as a proxy (VCIP is an option too). We are in our early/mid-70s and I do not want a POA or an Executor to have to deal with crystallizing a bond/GIC ladder upon any of our deaths. It is much easier to sell VCNS or VCIP into the market instead. We will be done with our ladders sometime in 2024-2025.


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## Covariance (Oct 20, 2020)

OneSeat said:


> OK - as usual thank you all for your various replies.
> 
> The BMO-IL GIC expert just called back - apologised for her delay and said
> 
> ...


Were they clear in regard to what liquidation meant? IE you receive accrued interest to date of liquidation, or you just get your original investment back (without interest)? And any fees?

The treatment on greater than 1-1/2 to maturity is a transfer in kind which I have seen TD do.


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## OneSeat (Apr 15, 2020)

AltaRed said:


> You will always find some estate issues with holdings/securities that don't have good liquidity..................
> I am in the process of dismantling the 5 year bond/GIC ladders in our RRIFs and substituting VCNS ..................





Covariance said:


> Were they clear in regard to what liquidation [of GICs] meant?
> The treatment on greater than 1-1/2 to maturity is a transfer in kind which I have seen TD do.


Thanks both for your information - all helps to clear my mind on this significant subject. I have now decided not to buy any more GICs and hope that we both outlive the oldest current one (4-1/2 years). The money will go into stocks or Asset ETFs - and we will be buying them progressively as the GICs mature. Being able to "liquidate tomorrow" is a worthwhile relief.


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## Flugzeug (Aug 15, 2018)

Bought a 3 year BNS GIC @ 3.3% today. It was higher than both the 4 and 5 year best rates on RBC DI which were 3.13% and 3.21% from Equitable Bank.


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## Covariance (Oct 20, 2020)

Flugzeug said:


> Bought a 3 year BNS GIC @ 3.3% today. It was higher than both the 4 and 5 year best rates on RBC DI which were 3.13% and 3.21% from Equitable Bank.


Yes. It's inverted between those two terms. The 5 year rate (3.1) is below the 3 year at the moment (3.3)


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## cainvest (May 1, 2013)

Rates keep climbing, 3.45 for 5 year .. about the same for 3 year.
1 year around 2.3.


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## james4beach (Nov 15, 2012)

So exciting! Anyone think we'll see 4% GICs this year?


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## m3s (Apr 3, 2010)

james4beach said:


> So exciting! Anyone think we'll see 4% GICs this year?


Why not

It's certainly less than inflation


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## Covariance (Oct 20, 2020)

james4beach said:


> So exciting! Anyone think we'll see 4% GICs this year?


Yes I do.


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## MrBlackhill (Jun 10, 2020)

m3s said:


> james4beach said:
> 
> 
> > So exciting! Anyone think we'll see 4% GICs this year?
> ...


So depressing! Anything think we'll see 6% inflation this year?


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## james4beach (Nov 15, 2012)

MrBlackhill said:


> So depressing! Anything think we'll see 6% inflation this year?


Maybe those of us who think it's depressing are working in the wrong industries.

Banking & finance likes inflation. So do high paid executives. CEOs sometimes have targets to hit (before they get paid their millions), like share price. Inflation helps achieve these metrics and can help milk $$ out of the public company. Much easier to hit your share price target when there's a 6% annual tail wind.

Executives also keep increasing their own pay, while refusing to increase the pay of regular workers. So very wealthy people can easily handle high inflation... it's really no big deal.

Those who issue and trade securities, asset managers, and middle men, bankers also like inflation because it results in greater velocity and more action (generally) giving them a chance to take more in fees. Plenty of opportunities to milk $$ out of the hands of the public.


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## Covariance (Oct 20, 2020)

For those abandoning their ladders. It's worth remembering that rebalancing is a discipline. And it is tested the most when the crowd is doing something else. IE it becomes increasingly contrarian. Falling back to the goals helps. A ladder is a really effective tool to address structural risk in a fixed income portfolio, and to manage to a target duration.


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## m3s (Apr 3, 2010)

james4beach said:


> Maybe those of us who think it's depressing are working in the wrong industries.
> 
> Banking & finance likes inflation. So do high paid executives. CEOs sometimes have targets to hit (before they get paid their millions), like share price. Inflation helps achieve these metrics and can help milk $$ out of the public company. Much easier to hit your share price target when there's a 6% annual tail wind.
> 
> ...


Yes inflation is also great for the government

They tax capital gains and income even if the real return is negative. So you pay income tax on your 4% GIC even if the real return is negative. Ingenious scheme

Inflation is also good for those in debt or borrowing to invest because the value of the debt decreases. Inflation is only bad for the responsible savers who didn't irresponsibly borrow to invest

It's mostly bad for the middle class. Particularly the responsible middle class saver


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## Covariance (Oct 20, 2020)

m3s said:


> Yes inflation is also great for the government
> 
> They tax capital gains and income even if the real return is negative. So you pay income tax on your 4% GIC even if the real return is negative. Ingenious scheme
> 
> ...


Inflation most severely impacts those who can not save because they need to spend all of their income on living expenses. Their standard of living goes backwards. When it gets really bad they realize they have nothing to lose and build barricades, light things on fire and revolt. They try to overthrow governments. Trust me on this. It's not pretty.


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## m3s (Apr 3, 2010)

Covariance said:


> They try to overthrow governments. Trust me on this. It's not pretty.


Not according to Chrystia Freeland today quoting Janet Yellen in her budget speech

Money printing is great and increasing money supply is good for GICs. Inshallah


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## james4beach (Nov 15, 2012)

For people who don't like the longer term bond funds, take a look at XSH (short term corporates).

It now has an average yield to maturity of 3.4%. About the same as GICs, but this might be easier for some than managing a GIC ladder.

This is a 3 year term fund. There's just about no interest rate risk involved in this if your time horizon is 3 to 5 years.


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## OneSeat (Apr 15, 2020)

m3s said:


> Money printing is great ........................


For those who don't have much.
Not so great for those who have worked hard to get some


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## james4beach (Nov 15, 2012)

Scotia 5 year is now 3.65% (through iTrade)

BoC rate hike coming this week.


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## Beaver101 (Nov 14, 2011)

james4beach said:


> Scotia 5 year is now 3.65% (through iTrade)
> 
> *BoC rate hike coming this week.*


 ... that sounds like absolute. Good thing for those who are into GICs.


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## scorpion_ca (Nov 3, 2014)

Those who buy GIC, what was the maximum interest rates of 5 year GIC you have seen since 2008?


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## james4beach (Nov 15, 2012)

scorpion_ca said:


> Those who buy GIC, what was the maximum interest rates of 5 year GIC you have seen since 2008?


Looks like my highest were these ones, issued before rates were slashed
Scotia @ 4.60% issued 2008-02-06
Scotia @ 4.50% issued 2008-08-01

If I start *after* the central bank rates were cut to near zero, the next highest I had was Assiniboine Credit Union @ 3.10%

It looks to me like we now have the highest GIC yields since the start of the financial crisis in late 2008, when rates went to zero. That's pretty amazing already.


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## Synergy (Mar 18, 2013)

james4beach said:


> So exciting! Anyone think we'll see 4% GICs this year?


Oaken 5yr GIC is now at 4%


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## Thal81 (Sep 5, 2017)

I think we're getting near the point where guaranteed, risk-free returns start to make the risky returns of stocks look bad. In theory, stocks should actually outperform inflation, not just match it, but it's hard to imagine this happening in the short term. 

Personally, I will start scratching my head when I see GICs at 5%. Should I dump new money in my index funds, or just buy a GIC? 🤔 I guess the correct answer will be to follow my asset allocation plan, but man... investing can be hard sometimes.


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## MrBlackhill (Jun 10, 2020)

The day that GICs reach 5% and people start selling their stocks to buy those GICs, I'll happily buy those stocks during that dip.


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## AltaRed (Jun 8, 2009)

Thal81 said:


> I think we're getting near the point where guaranteed, risk-free returns start to make the risky returns of stocks look bad. In theory, stocks should actually outperform inflation, not just match it, but it's hard to imagine this happening in the short term.


It depends on interest rates and that is the point of increased interest rates, i.e. to take money out of the system and to do it on a positive real rate of return basis. While corporations can increase prices most of the time due to inflation, their cost of debt climbs as well and their margins get squeezed. They become worse off on a net basis and profits stagnate, if not decline. That makes fund flows to bonds and GICs more attractive. 

My take is central bankers are going to have to raise rates considerably more at least temporarily from now through probably 2023 to whack-a-mole the inflation rate.


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## james4beach (Nov 15, 2012)

AltaRed said:


> My take is central bankers are going to have to raise rates considerably more at least temporarily from now through probably 2023 to whack-a-mole the inflation rate.


Unfortunately there's also politics at play in this (or maybe that's a good thing?)

Especially in the US, the Democrats are losing what little support they have due to the high inflation. So Dem-leaning politicians and economists want the central bank to be more aggressive and extinguish inflation. There's political pressure to raise rates, I think.

I get nervous when political pressures interfere with experts doing their jobs. Maybe it means the Federal Reserve could over shoot and keep tightening even as the economy weakens? They haven't even started reducing their balance sheet yet. The earliest that can begin is June so we haven't really seen the effects of "tightening" yet.

These US matters are important because the Bank of Canada always aligns their policy with the Federal Reserve.


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## AltaRed (Jun 8, 2009)

Central bankers are mindful of 'overshoot' but these things are very tricky to manage...much like asking a Panamax to be maneuverable in harbour. They've already been slow to act and while they may be able to keep the horse in the pasture, it has left the barn. I think they will have to apply some stiff short term increases (a few 50bp increases in a row) and then moderate thereafter until they see the effects. They stand to never get on top of it if they are always chasing tail pipes as the car accelerates away. That in my mind would be a worse scenario.

Nothing in today's economy and the surges in inflation and ultimately interest rates is good for the Dems in the mid-terms. The incumbent is always blamed for what is wrong/hurting. Add Biden's bumbling of the Ukraine situation (shut up already to avoid more damage), the Dems are on point to get slaughtered this Fall.


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## Covariance (Oct 20, 2020)

On the evolution of the rate increases in this tightening cycle I agree with @AltaRed - my base case - through to July meetings - a steady series of rate increases and implementation of QT. Then a pause followed by a big reveal by the Fed at Jackson Hole with expectation through to year end.


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## londoncalling (Sep 17, 2011)

We have some RESP money sitting in account from a broken GIC ladder from December. The fund is approximately 50% VEQT 50% fixed. I was going to transfer transfer the funds over to my DIY account and buy VBAL going forward. Now that various quarterly rungs have expired rates have started to climb. I am considering rebuilding the ladder. Will likely put half available cash into a 5 year ladder now and the second half into another ladder in the fall.

Investments | Wyth 

The 1 year is now sitting at 3% and the 5 year at 4%. I could likely eek outa .25% by moving institutions but for the difference it isn't worth the hassle.


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## Covariance (Oct 20, 2020)

londoncalling said:


> We have some RESP money sitting in account from a broken GIC ladder from December. The fund is approximately 50% VEQT 50% fixed. I was going to transfer transfer the funds over to my DIY account and buy VBAL going forward. Now that various quarterly rungs have expired rates have started to climb. I am considering rebuilding the ladder. Will likely put half available cash into a 5 year ladder now and the second half into another ladder in the fall.
> 
> Investments | Wyth
> 
> The 1 year is now sitting at 3% and the 5 year at 4%. I could likely eek outa .25% by moving institutions but for the difference it isn't worth the hassle.


Depending on when the children will take withdrawals - if they are in the next five years - you could consider matching each annual withdrawal date with a maturing FI instrument and doing away with the ladder altogether. Eg each September a maturing FI security. You would then have a hedging portfolio and return seeking portfolio. The hedging portfolio, being 100% FI and held to maturity would have minimal interest rate risk (only on the reinvestment of the interest payments received). And the return seeking portfolio can be fully optimized for growth (subject to your risk tolerance).


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## londoncalling (Sep 17, 2011)

It's like you read my mind @Covariance Withdrawal start is likely 6 years away. This should give some flexibility in creating an education cash wedge. As part of the rebalancing I will likely add VBAL to the equity side as well as we move closer to withdrawal time. I would have liked to have had this account weighted to more risk when it was first started but as it was a joint decision we went with a more conservative portfolio initially. Unfortunately, my wife has become less risk averse just in time when interest rates start climbing.  

Regardless the government matching makes for an exceptional return.


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## james4beach (Nov 15, 2012)

I couldn't find the thread, but someone asked... why would anyone buy a GIC?

Take a look at the market today, and the last few months, and maybe it will be more clear why GICs can be useful. Guaranteed positive returns with no volatility.


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## londoncalling (Sep 17, 2011)

Why would I invest in a GIC? | Canadian Money Forum 

I believe this is the thread that you were seeking. Days like today will definitely result in calls to advisors and posts about should I sell. I made a lot of buys in the past 6 months and some are flat a few are up and most are down. I am not concerned as this too shall pass. I do have some cash sitting in account that was set to lock into some GICs with my bank waiting for a rate match. Should the market see a few more days in a row like today I will definitely look at putting them into equity instead.


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## james4beach (Nov 15, 2012)

londoncalling said:


> Why would I invest in a GIC? | Canadian Money Forum
> 
> I believe this is the thread that you were seeking.


Yes that's the one, thanks!


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## james4beach (Nov 15, 2012)

All five CDIC sub issuers at Scotiabank now pay 3.90% interest.

That means one can deposit 500K, fully insured, at a giant bank guaranteeing 3.90% return with no risk.


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## james4beach (Nov 15, 2012)

Here's my historical GIC rate data. These are the highest 5 year GIC rates I found, from big bank issuers only, at my discount brokerage. Sampled at random intervals.

The run-up you see in 2018 was the previous rate-hiking attempt by central banks. As you might recall, it caused problems and they quickly abandoned that plan and slashed rates again.


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## Retired Peasant (Apr 22, 2013)

james4beach said:


> return with no risk.


You know better than that j4b. Every investment has some type of risk. GICs have inflation risk and liquidity risk.


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## james4beach (Nov 15, 2012)

Milestone! Scotia's 5 year GIC rate is now *4.0%*

This is going to be a fun year for replenishing GICs in my ladder. You can also get 4.15% from EQ Bank directly.


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## james4beach (Nov 15, 2012)

Question for everyone: do you think these 4% ish GIC rates will stick around?

Is there an urgency to lock in these 5 year rates, before they plummet again?


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## Gator13 (Jan 5, 2020)

Very good question. I would hope this becomes the new norm. I think a reasonable interest rate would be healthy for the economy moving forward.


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## gardner (Feb 13, 2014)

james4beach said:


> do you think these 4% ish GIC rates will stick around?


The central banks are telegraphing a strategy of increasing rates over at least several quarters. I think bonds and therefore GICs will follow suit at least for a few quarters too. My gut feel is that it will be at least this time next year before rates start falling.

I've got a GIC coming up in a few weeks and expect to get 4.15% for its replacement.


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## londoncalling (Sep 17, 2011)

It is hard to tell if GIC rates have already gone up in anticipation of the next couple hikes or will we see GIC rates follow B of C. I have no point of reference but I do know morrgage rates will go up faster than GIC rates. I have most of my fixed income sitting in cash at the moment waiting to lock in in July after the June B of C meeting. I will either lock into a 3 or 5 year ladder at that point. Only caveat being that I may end up putting that money into blue chip dividend payers should we see a drop in equities like we did in 2020 or 2008.


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## MrBlackhill (Jun 10, 2020)

Looking at EQBank's GIC, the rates are basically the same from 2-year GIC to 10-year GIC. The yield curve is pretty flat. While I'm definitely not expert, I guess there's not much room left for increases. I believe there will still be rate hikes this year as planned, but then we're pretty much done.


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## Flugzeug (Aug 15, 2018)

My guess is a few more rate hikes and then the BoC will pause and assess. GIC rates will be higher in the coming months, who knows by how much. My crystal ball is a bit opaque these days though.


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## sags (May 15, 2010)

For people who believe central banks will continue to hike rates......any concerns it may trigger a recession ?

Are recessions good or bad for GICs ? I am thinking in a recession, assets tend to fall and sometimes sharply. 

Perhaps using GIC money to scoop up cheap assets would be a valid plan ?


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## Beaver101 (Nov 14, 2011)

^ Good possibility a recession will be triggered and by the time it's officially "declared", we're already in one.

Are recessions good or bad for GICs? If rates go up (and I think it will given the climbing inflation) and then of course it's good for GICs, recession or not. A recession would be bad for job seekers/workers and small businesses in particular. It's not like people on this forum (except millennials, make that GEN Zero, of course) hasn't seen a recession or 2. It's all part of the business cycle. Déja vu I say.

As for scooping up "cheap" assets with GIC monies, my first question(s) would be what kind of "assets" and what're you planning to do with those assets? My second question is - how "cheap"? Half price sale? And third, it would be dependent on what financial stage one is in - accumulation or decumulation (sic).


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## sags (May 15, 2010)

I remember in the last recession, people with cash were scooping up bargains on things like boats, motorcycles, vintage cars, collectibles.

That was average folks with money. The folks with lots of money were scooping up homes and cottages.


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## londoncalling (Sep 17, 2011)

Recessions tend to impact savers less than spenders. They have money to buy depressed assets when the recession comes. Depending on how inflated the assets became and how far the decline during the recession determines who makes out best. After over a decade of punishment savers are seeing a shift. I am not be celebrating the shift in the economy but I will definitely try to benefit from it if I can.

edit: correct typos


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## Flugzeug (Aug 15, 2018)

RBC DI showing 3, 4 and 5 year rates above 4%. Even the 2 year is close at 3.9%


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## AltaRed (Jun 8, 2009)

Spouse bought a 3 year GIC in her RBC DI RRIF a few weeks ago @ 3.92%. She had a hole in her 2025 portion this GIC will help cover. We try to take some equity off the top in good times to provide ballast for annual RRIF withdrawals in some forward years.


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## james4beach (Nov 15, 2012)

HSBC now has 4.15% by the way.

I'm a bit anxious about why our GIC rates are much higher than America's. Both countries have the same 5 year government bond yield, and the central bank trajectories are identical as well, same regime of 50 bp hikes at each meeting.

But American 5 year CD rates barely get to 2.8% for large banks. Why are our big bank GICs over 4% ?

Yields are 125 to 150 basis points better in Canada. I have no idea why. It makes me a bit anxious that our GIC yields may not go any higher than this, maybe this is the best it gets?


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## gardner (Feb 13, 2014)

Effective today, Oaken/HT is at 4.45%/5y. Unlike their historic increases, they are not offering retroactive increases for GICs set up in the past few days. Things are obviously moving fast.


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## scorpion_ca (Nov 3, 2014)

5 year GIC at 4.5% now. I hope it goes to 5%.


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## james4beach (Nov 15, 2012)

Scotia 5 year GIC at iTrade is now
*4.65%*


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## gardner (Feb 13, 2014)

gardner said:


> they are not offering retroactive increases


I spoke too soon. Although not advertised in their we pages, I just got a notice that my June 2 GIC was getting the June 8 rate of 4.45%.


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## scorpion_ca (Nov 3, 2014)

Oaken 5 for 5%. Will we see 5 for 6% by the end of the year?


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## AltaRed (Jun 8, 2009)

Oaken made an unusually high leap. One needs to wonder why they felt they needed to do that. Consumers flocking to alternative vendors for mortgages because they no longer qualify elsewhere? Gambling on getting ahead of the game by sacrificing NIM in the near term for bigger margins in a few months when they've locked in a ton of 5% money?


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## londoncalling (Sep 17, 2011)

With 1 year at around 4% and 5 year just reaching 5 I am inclined to think expectation is that after this fall we will not see much in way of hikes. That may be quite an optimistic view. I am still planning to hold shorter duration terms for the next 12 -15 months. This is more due to personal circumstance (mortgage renewal) than market timing.


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## james4beach (Nov 15, 2012)

scorpion_ca said:


> Oaken 5 for 5%


Is this our first sighting of 5.0% interest?

And wow, imagine what the mortgage rates must be if they are borrowing from us at 5%.


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## sags (May 15, 2010)

Happy days are here again for GIC savers.


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## AltaRed (Jun 8, 2009)

Not much NIM here Mortgage rates Barely 50bp at the moment (5.49% vs 5%)


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## Gator13 (Jan 5, 2020)

AltaRed said:


> Not much NIM here Mortgage rates Barely 50bp at the moment (5.49% vs 5%)


Interesting. I have never paid attention to this. Is this a typical spread?


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## scorpion_ca (Nov 3, 2014)

I wouldn't buy any GIC until Sep/Oct as I believe rates will be greater than what it is now.


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## birdman (Feb 12, 2013)

Gator13 said:


> Interesting. I have never paid attention to this. Is this a typical spread?


Typical spread is 1% to 1.5% but many other factors are involved. If I recall correctly the duration of a 5 yr fixed mtge is closer to 4 yrs than 5, maybe Oaken has a large mismatch and need to raise funds to cover it, the 5 yr bond rates also come into play as well as the futures market, and perhaps the F/I's lending demand higher rates and thus they can pay more for deposits. I'm not an expert on this and you are correct that on the surface the spread for residential mortgages at .50% make no sense.


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## peterk (May 16, 2010)

Just wanted to double check the math on this scenario.

Waiting 3 months in cash at 1.6%, vs. buying a 5-year right now at 4.7%

If you wait 3 months, then your 5-year needs to be 4.86% to break even. Maybe that's a no-brainer sometimes to wait, but you can see how if you keep delaying and delaying over and over again, it'll quickly snowball and all of sudden you've missed it and should've bought 12 months ago...


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## Covariance (Oct 20, 2020)

peterk said:


> View attachment 23325
> 
> 
> Just wanted to double check the math on this scenario.
> ...


Not exactly if you are only intending to buy a 5 year. A five year bought 3 months from now is a holding period of 5 years and 3 months. To compare against a 5 year bought today you also need a forecast for the 3 month rate that starts in 5 years. Alternatively you could evaluate a 3 month followed by a 4 year 9 months versus a 5 year bought today.


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## AltaRed (Jun 8, 2009)

Gator13 said:


> Interesting. I have never paid attention to this. Is this a typical spread?


It likely depends on which group of lenders one is talking about. The big banks mostly look at the spread between GOC5 bond that they buy to support mortgages. Currently that would be about 3.15% for GOC5 with lending for 5 year fixed mortgage term being 5-5.3% per Canada 5-Year Bond Yield | Rate, History & Impact | WOWA.ca. That is a NIM of about 2-2.2 percentage points which is more 'normal'. The big banks don't rely on GIC deposits nearly as much for mortgages. I imagine it is more a case of GIC deposits funding things like personal loans (LOC, Auto, etc) that carry higher lending rates.

Alternative lenders appear to rely far more on GIC deposits to fund mortgages and thus what I don't understand why Oaken/Home can do what they are doing at such thin margins.


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## peterk (May 16, 2010)

Covariance said:


> Not exactly if you are only intending to buy a 5 year. A five year bought 3 months from now is a holding period of 5 years and 3 months. To compare against a 5 year bought today you also need a forecast for the 3 month rate that starts in 5 years. Alternatively you could evaluate a 3 month followed by a 4 year 9 months versus a 5 year bought today.


My spreadsheet did a 3 month + a 4 year 9 month @ 5yr rates, to make it fair.

But the reality would be a 5 year purchased by a real person - Both alternative timelines would be out of sync forever (beyond the 5 year mark).


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## m3s (Apr 3, 2010)

sags said:


> Happy days are here again for GIC savers.


These are the worst days for GICs 🤦‍♂️

Anyone who already has GICs is locked into low rates and now there are better rates available

Happy days would be if you lock in rates before they drop


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## Beaver101 (Nov 14, 2011)

Multiple choice question:

Which of the following would you prefer to purchase?

a) A bitcoin that promises to pay you $100K for your $1K investment at the end of the year.
b) A dozen of (edible chicken) eggs on sale now for 99c.
c) A one year guaranteed (CDIC insured to $100K) GIC to provide you with a 4% return at end of the year.
d) Your own HWT as you're tired of paying its monthly rental fees.


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## m3s (Apr 3, 2010)

Beaver101 said:


> Multiple choice question:
> 
> Which of the following would you prefer to purchase?
> 
> ...


I already have all of the above 🤷‍♂️

I'll take option d for the rare use of its correctly


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## Beaver101 (Nov 14, 2011)

m3s said:


> I already have all of the above 🤷‍♂️


 ... really? So where do you buy your chicken eggs for 99c these days? Your neighbour's backyard?



> I'll take option d for the rare use of its correctly


 ... of course you would when option C) can buy several of those tanks, if not pay a decade or more of rental fees. And this is because my math is bad.


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## crgf1k (Aug 8, 2015)

I've never seen this before...inside CIBC Investor's Edge, CIBC 5yr GICs are the same rate as the top 3rd party ones from other banks (4.60%). Motive just raised the 6-10yr rates to 5.15% too. Hopefully competition heats up heading into the rate hike on July 13th.


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## james4beach (Nov 15, 2012)

crgf1k said:


> I've never seen this before...inside CIBC Investor's Edge, CIBC 5yr GICs are the same rate as the top 3rd party ones from other banks (4.60%). Motive just raised the 6-10yr rates to 5.15% too. Hopefully competition heats up heading into the rate hike on July 13th.


Yes CIBC has some very high rates these days. I noticed they were one of the top rates at Scotia iTrade as well so it's not just at CIBC IE.

And this is a good reason to use a brokerage to buy GICs, since different banks take turns offering the highest rates.


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## Retiredguy (Jul 24, 2013)

EQ Bank
1 yr - 4.15
5 yr - 4.85


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## gardner (Feb 13, 2014)

> EQ Bank


Their deposit rates are inching up, but still nothing like the 3% they launched with. Same with all the others. 1.65% seems to be the best deposit rate. I wonder when we'll see that back in the 2.5% or 3% area?


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## AltaRed (Jun 8, 2009)

Maybe never if their risk management processes don't value 'unstable' or 'fluid' liabilities. Demand deposits are a highly variable source of funds and those early rates may have been only the teaser to attract new customers to their operation and buying GICs. Anecdotally over the years, I have seen at least a few digital bank startups bulldoze their way into the space with disproportionately high HISA rates, only to slowly back away as soon as their business builds in other areas.


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## Covariance (Oct 20, 2020)

AltaRed said:


> Maybe never if their risk management processes don't value 'unstable' or 'fluid' liabilities. Demand deposits are a highly variable source of funds and those early rates may have been only the teaser to attract new customers to their operation and buying GICs. Anecdotally over the years, I have seen at least a few digital bank startups bulldoze their way into the space with disproportionately high HISA rates, only to slowly back away as soon as their business builds in other areas.


Also not the best for profits.


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## scorpion_ca (Nov 3, 2014)

Motive Savvy Savings rate is 2.2%.

Waiting for Simplii to start a new promo.


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## james4beach (Nov 15, 2012)

scorpion_ca said:


> Waiting for Simplii to start a new promo.


Yeah I'm shocked that we haven't seen an interest rate promo from simplii yet.

I'm keeping my extra cash at my credit union until Simplii comes through with a promo


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## crgf1k (Aug 8, 2015)

Duca credit union is another one of those online banks, and they're offering 3.10% in the savings account.


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## crgf1k (Aug 8, 2015)

AltaRed said:


> Maybe never if their risk management processes don't value 'unstable' or 'fluid' liabilities. Demand deposits are a highly variable source of funds and those early rates may have been only the teaser to attract new customers to their operation and buying GICs. Anecdotally over the years, I have seen at least a few digital bank startups bulldoze their way into the space with disproportionately high HISA rates, only to slowly back away as soon as their business builds in other areas.


Yes I have many of those accounts. When introductory rates ended after a few months, I'd move the money to the next one.


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## scorpion_ca (Nov 3, 2014)

james4beach said:


> Yeah I'm shocked that we haven't seen an interest rate promo from simplii yet.
> 
> I'm keeping my extra cash at my credit union until Simplii comes through with a promo


I was told by the agent of Simplii that they would be offering promo rates throughout the summer.


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## james4beach (Nov 15, 2012)

scorpion_ca said:


> I was told by the agent of Simplii that they would be offering promo rates throughout the summer.


Well they'd better hurry, because I can currently get 4.6% (and higher) in GICs, so I think my cash will go to the GIC ladder


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## james4beach (Nov 15, 2012)

I bought a 4.65% GIC today at iTrade for my ladder.

Looking at what's currently in the 5-year ladder (excluding this newest purchase) the stats on my existing GICs were
minimum = 1.20%
average = 2.31%
maximum = 3.35%

So there's no question the GICs available today blow away the old ones.


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## Raggedy Dandy (Mar 12, 2020)

james4beach said:


> I bought a 4.65% GIC today at iTrade for my ladder.
> 
> Looking at what's currently in the 5-year ladder (excluding this newest purchase) the stats on my existing GICs were
> minimum = 1.20%
> ...


I had a 5-yr one come due at the end of last week (bought when Home Trust went through their big meltdown 5-ish years ago and was trying to build their capital back up). I also added the last 5 year rung on my ladder at BMOIL on Friday with a Manulife GIC at 4.65. Now have the following ladder:

2023 - 3.00%
2024 - 2.76%
2025 - 2.85%
2026 - 3.81%
2027 - 4.65%

Average rate for the ladder (estimated annual income / principal) 3.62%. My equity holdings are yielding 3.95 (which includes dilution of uninvested cash), and overall portfolio yields 3.91% (again, including cash drag).


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## Mechanic (Oct 29, 2013)

I'm not a fan of GIC's but with rates climbing I may put some of my emergency fund in one. Fund has grown and the way I understand it, if I really needed the money I would just forfeit the interest.


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## cainvest (May 1, 2013)

Mechanic said:


> I'm not a fan of GIC's but with rates climbing I may put some of my emergency fund in one. Fund has grown and the way I understand it, if I really needed the money I would just forfeit the interest.


As long as you don't buy non-redeemable GICs you can cash them in. Otherwise you have to wait the full term to get your money (and interest) out.


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## londoncalling (Sep 17, 2011)

I am in the same situation as you are @Mechanic. I recently broke a 1 yr redeemable bought in November. The money was set aside as my emergency fund as well as some longer term savings. I rolled half of it into another 1 yr redeemable at 2% higher a few weeks back. I will likely do the same after the next hike. I have a GIC coming due later this fall. At that point I may collapse all terms and set up a new ladder with my emergency fund staying in a 1 year redeemable so that it can be accessed on a moments notice. I still have a hard time owning GICs as they do not provide a net real return in a rising rate environment but will provide a better return than cash.


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## Raggedy Dandy (Mar 12, 2020)

londoncalling said:


> I still have a hard time owning GICs as they do not provide a net real return in a rising rate environment but will provide a better return than cash.


Think of it as return OF capital, not return ON capital


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## londoncalling (Sep 17, 2011)

Yes indeed. Safety has a price. I view it as an insurance policy on my cash instead of an investment. Perhaps they should change the name from guaranteed investment certificate.


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## AltaRed (Jun 8, 2009)

My cash wedge in my (draw down) portfolio is Return OF Capital. Return ON Capital is of minimal interest (pun intended). It is large enough that I could have a portion of it in a one year GIC and I sometimes do 3 or 6 month GIC offerings by EQ Bank but only on a portion of the cash I won't need any time soon.


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## jargey3000 (Jan 25, 2011)

^^^ alta...you obviously must eat in different joints than I do...😜


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## AltaRed (Jun 8, 2009)

I edited that comment out as extraneous but generally yes, lunch for 2 would be $50+ and dinner is obviously more. A glass of proper wine (or a pint of craft beer) plus a decent charcuterie board and maybe another appie can't be had for less. Takeout for bringing home, .e.g. Subway, A&W, etc. is a different matter.


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## james4beach (Nov 15, 2012)

Raggedy Dandy said:


> 2023 - 3.00%
> 2024 - 2.76%
> 2025 - 2.85%
> 2026 - 3.81%
> ...


That's a pretty good looking ladder!


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## gardner (Feb 13, 2014)

Jun-2027 - 4.45
Oct-2026 - 2.20
Jun-2026 - 2.20
Oct-2025 - 2.00
Jun-2025 - 2.30
Oct-2024 - 2.85
Jun-2024 - 3.15
Oct-2023 - 3.60
Jun-2023 - 3.50
Oct-2022 - 3.25

Weighted average is 2.95%


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## Covariance (Oct 20, 2020)

Thanks to those for sharing their ladders. An interesting observation - following a ladder strategy significantly reduces volatility (of returns) while providing liquidity. Even the limited data above shows a wide range of 5 year rates people booked. Highest observations are more than double the lowest observations. Level loading across 5 (or more) delivers a much smoother ride.

Re:volatility. Often assumed that GIC's have no volatility as the rate is guaranteed. Which is true if one is only buying a single GIC that exactly matches their entire investment period. But a portfolio of GICs or a sequence of GICs over a longer investment period will have variation in the realized return, as measured across the entire investment period.


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## Raggedy Dandy (Mar 12, 2020)

gardner said:


> Jun-2027 - 4.45
> Oct-2026 - 2.20
> Jun-2026 - 2.20
> Oct-2025 - 2.00
> ...


I like this idea, splitting the year up. Don't know why it hasn't occurred to me before, and wish I'd seen this a week ago


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## james4beach (Nov 15, 2012)

Covariance said:


> An interesting observation - following a ladder strategy significantly reduces volatility (of returns) while providing liquidity.


Yes I really like GICs for this combination. There's no price volatility, compared to bonds, and still lots of liquidity. I'm spacing out my GICs quarterly, so every calendar quarter I have an amount I can access (liquid).

Getting the GIC ladder going does take discipline though. And it requires commitment to repeatedly buying GICs on a schedule, no matter how one feels about interest rates. As you can see from posts at CMF, people have been doing things like avoiding 5 year GICs (due to interest rate predictions) and refusing to commit to longer terms due to predictions on cash rates.

Many people avoided 5 year terms in the last couple years due to [what turned out to be correct] predictions about where rates were going. But now today they'd better be making accurate predictions as they try to time their re-entry into 5 year terms. Perhaps 5 year rates have now peaked? People love to guess at this stuff.

So it's a beautiful method, but I suspect it's harder than it looks in practice... for behavioural reasons. The mechanical, passive GIC approach is very straightforward.



Covariance said:


> Re:volatility. Often assumed that GIC's have no volatility as the rate is guaranteed. Which is true if one is only buying a single GIC that exactly matches their entire investment period. But a portfolio of GICs or a sequence of GICs over a longer investment period will have variation in the realized return, as measured across the entire investment period.


There's also the wrinkle that we are just fooling ourselves, when we say there is no volatility. In reality all of our GIC portfolios have been tanking in value as rates have soared. It's just that the broker doesn't show us accurate GIC price quotes, because there's no ability to trade them.

Institutions use the same trick with things like Private Equity and it's one reason foundations and pensions like PE. Fundamentally speaking there is a ton of equity volatility, but the PE firms hide this from the investor. So they only get one or two quotes a year, which makes them happy, because ignorance is bliss.


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## AltaRed (Jun 8, 2009)

Raggedy Dandy said:


> I like this idea, splitting the year up. Don't know why it hasn't occurred to me before, and wish I'd seen this a week ago


Depending on how much one wishes to have in a GIC ladder, a typical 5 year ladder will have about 10 GICs spaced ideally at 6 month maturity intervals but preciseness isn't as important as is having staggered maturities. Some folk with significant funds in GIC ladders use a 15 GIC or even 20 GIC strategy. I'd suggest 15 GICs is the limit for practical reasons, because: 1) It takes a lot of maintenance of course to be on top of maturities, and 2) diminishing value for variability in rates. A person choice though.

Over the years, I've only ever operated a 10 GIC/bond ladder feeling 6 month maturity intervals was good enough.


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## fryman (May 28, 2009)

I am anticipating the rate hike by BOC tomorrow will affect GIC rates...but when? Is it within hours? days? weeks? Specifically I have a DI account with RBC if that makes any difference.


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## crgf1k (Aug 8, 2015)

fryman said:


> I am anticipating the rate hike by BOC tomorrow will affect GIC rates...but when? Is it within hours? days? weeks? Specifically I have a DI account with RBC if that makes any difference.


It's always different. If I remember correctly, a couple of rate hikes ago the GIC rates went up the same day. However the last time, the rates barely moved then some slowly crept up a little over weeks, but not necessarily by the whole 0.5%. In 2019 the BOC rate was 0.25% higher than it is now, and I don't remember seeing GICs much higher than 3% back then...so that tells me that a 5% GIC now may have some of these rate hikes priced in already.


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## fryman (May 28, 2009)

Interesting...thank you for such detailed response! I guess thats partly why you dont "time" when you buy the GIC or any other investment...no way to know when its going up or down.


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## londoncalling (Sep 17, 2011)

It is likely the equity and bond market will respond more quickly than a change in GIC rates.


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## james4beach (Nov 15, 2012)

Beware, bond yields (like the 5 year government bond) may not necessarily increase when the Bank of Canada raises rates.

It's not a direct correlation. The bond yields will likely increase a bit with the rate hike, but it's not certain.


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## londoncalling (Sep 17, 2011)

james4beach said:


> Beware, bond yields (like the 5 year government bond) may not necessarily increase when the Bank of Canada raises rates.
> 
> It's not a direct correlation. The bond yields will likely increase a bit with the rate hike, but it's not certain.


I agree. To expand upon post 506, in my experience bond and equity markets are often quicker to adjust either up or down than GIC rates. Here is one explanation of the relationship between interest rates and the bond market









How Interest Rate Changes Affect Bond Prices | Ratehub.ca







www.ratehub.ca





I think the current shape of the yield curve indicates that inflation will remain near its current level in the short term with a quick recession. 





__





Canada Government Bonds - Yields Curve


Canada Government Bonds and Yields Curve. Updated charts and tables, agencies ratings, spread comparisons, current prices.




www.worldgovernmentbonds.com





Market timing does involve a lot of luck especially in the short term.


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## james4beach (Nov 15, 2012)

fryman said:


> I am anticipating the rate hike by BOC tomorrow will affect GIC rates...but when? Is it within hours? days? weeks? Specifically I have a DI account with RBC if that makes any difference.


Assuming bond prices actually drop after today's BoC action, I think the effect would show up in GIC prices in roughly 3 to 5 days.


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## Covariance (Oct 20, 2020)

Assuming one invests in a single GIC with a term longer than a year, but less than two years. Say 18 months, how do GICs compound interest? is it simple interest 548/365*the rate (r), or (1+r)^1.5 ? or something else?


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## like_to_retire (Oct 9, 2016)

Covariance said:


> Assuming one invests in a single GIC with a term longer than a year, but less than two years. Say 18 months, how do GICs compound interest? is it simple interest 548/365*the rate (r), or (1+r)^1.5 ? or something else?


They sell both simple and compound interest GIC's at TDDI once you select 2 year. Less than that they're simple interest.

ltr


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## james4beach (Nov 15, 2012)

I just want to point out that bond yields are virtually unchanged versus before the BoC rate hike.

So at the moment I don't see why GIC rates would increase. GIC rates come from the bond market, not the BoC's cash rate.


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## Gator13 (Jan 5, 2020)

I noticed Motive is offering 4.88% for a 5 year GIC and 5.15% for a 10 year GIC. Is anyone here signing up for a GIC term greater than 5 years?


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## cainvest (May 1, 2013)

Gator13 said:


> I noticed Motive is offering 4.88% for a 5 year GIC and 5.15% for a 10 year GIC. Is anyone here signing up for a GIC term greater than 5 years?


For such a small gain it is likely not worth it. Plus I believe CDIC insurance stops at 5 year GIC terms but I'm not sure if that has changed.


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## like_to_retire (Oct 9, 2016)

Gator13 said:


> Is anyone here signing up for a GIC term greater than 5 years?


Nope.

ltr


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## cardhu (May 26, 2009)

Covariance said:


> Assuming one invests in a single GIC with a term longer than a year, but less than two years. Say 18 months, how do GICs compound interest? is it simple interest 548/365*the rate (r), or (1+r)^1.5 ? or something else?


I’ve never heard of a GIC that applies simple interest for a period of more than 12 months. The normal practice is to assign a payment date at some point within the 18 month period, at which accrued interest would be paid/reinvested (a.k.a. compounded), in much the same way that it is for 3, 4 or 5 year GIC. 

As to where they assign that date, it can be handled different ways … my MIL was rather suggestible when it came to advice given by “the lovely girl” behind the counter at the bank … a.k.a., the teller … so she ended up with a handful of 15, 18, or 21 month GICs in the last 10 years of her life. In ALL of those cases, the interest was compounded, but the method varied. In some cases, the compounding occurred 12 months after the start date, and in other cases, it occurred 12 months before the end date.


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## GGuy (Mar 21, 2018)

james4beach said:


> I just want to point out that bond yields are virtually unchanged versus before the BoC rate hike.
> 
> So at the moment I don't see why GIC rates would increase. GIC rates come from the bond market, not the BoC's cash rate.


Well that didn't take long. I just received an email from Steinbach Credit Union....

"To align with yesterday’s Bank of Canada rate announcement, we’ve increased our rates so you can get the most from your savings."

12-month *4.00%**
24-month *4.20%**
36-month *4.50%**
48-month *4.75%**
60-month *5.00%** 

*Rate subject to change without notice. GIC minimum deposit: $500. Tiered rates available on Regular Savings and GICs. 

I expected an increase in GIC rates and sure they can go down just as quickly but IMHO they will increase again with the next BoC rate increase. Sometimes procrastination is your friend. Looking at doing something soon now.


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## scorpion_ca (Nov 3, 2014)

All are offering 5 for 5%.


EQ BankJul 164.304.604.704.755.00Peoples Trust*Jul 164.304.604.704.755.00AcceleRate FinancialJul 164.104.254.504.755.00Hubert FinancialJul 164.104.254.504.755.00Oaken FinancialJul 164.054.504.604.655.00


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## james4beach (Nov 15, 2012)

Well there we go! It's now possible to get a totally safe, government-backed 5% return.

There's a very good chance that these 5 year GICs could outperform stocks over the next few years.


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## cainvest (May 1, 2013)

james4beach said:


> There's a very good chance that these 5 year GICs could outperform stocks over the next few years.


Fixed -> There's a so-so chance that these 5 year GICs could outperform some stocks over the next few years.


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> There's a very good chance that these 5 year GICs could outperform stocks over the next few years.


Depends what kind of stocks you buy. I don't think I've seen a 5-year period where SCV stocks underperformed a 5-year GIC after a -15% drop in stocks.


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## Synergy (Mar 18, 2013)

MrBlackhill said:


> Depends what kind of stocks you buy. I don't think I've since a 5-year period where SCV stocks underperformed a 5-year GIC after a -15% drop in stocks.


Don't forgot to take into account taxation, at least for those investing in non-registered accounts. Interest income is is a good way to fund Trudeau's sock fetish!


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## GGuy (Mar 21, 2018)

Anybody ever use Market Linked GIC's ?

Scanning the GIC's available at TD Waterhouse, I'm seeing an interesting one with guaranteed min/max return of 6.300% - 15.000% with 3 year term and no risk to principal. Sure an index fund may outperform this but for fixed income this seems good.


TD CDN BANKS 3YR S&P/TSX Bank Index

Gtd Min - Max Return (Total)
6.300% - 15.000%

EDIT - Of course that is Total return so although there is upside potential you are only guaranteed 2.0584% per annum. 

1 Actual return is 2.0584% per annum, compounded annually, payable at maturity (equivalent to 6.30% total return)

2 Equivalent to the total return over the term of the investment (i.e. not an annualized rate)


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## Synergy (Mar 18, 2013)

GGuy said:


> Anybody ever use Market Linked GIC's ?
> 
> Scanning the GIC's available at TD Waterhouse, I'm seeing an interesting one with guaranteed min/max return of 6.300% - 15.000% with 3 year term and no risk to principal. Sure an index fund may outperform this but for fixed income this seems good.


Why would you consider this when a 1-3 yr GIC is paying 4-4.5%, That would be a total return of 12+% over a 3 year period, not including compounding. Very little benefit for the risk, IMO.


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## nathan79 (Feb 21, 2011)

I would just go with EQ Bank 3 yr @ 4.7%. That works out to a 14.773% guaranteed compound return, so you're not really losing out even if the TD GIC hit it's theoretical maximum (pretty unlikely).


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## Covariance (Oct 20, 2020)

GGuy said:


> Anybody ever use Market Linked GIC's ?
> 
> Scanning the GIC's available at TD Waterhouse, I'm seeing an interesting one with guaranteed min/max return of 6.300% - 15.000% with 3 year term and no risk to principal. Sure an index fund may outperform this but for fixed income this seems good.
> 
> ...


No as the returns are less than other alternatives. You can create your own if you really want this return profile by buying a GIC and options on the reference index. You will note the annual guaranteed return is lower than a comparable term GIC. Part of the difference goes to funding the options and the rest is their fees.


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## cainvest (May 1, 2013)

GGuy said:


> Anybody ever use Market Linked GIC's ?


I did in the '90s when those first came out ... worked out well. In today's market with so many products available and potential bearish returns looming, I'd pass.


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## james4beach (Nov 15, 2012)

cainvest said:


> I did in the '90s when those first came out ... worked out well. In today's market with so many products available and potential bearish returns looming, I'd pass.


Yeah the terms of these have gotten worse. Notice both the minimum guaranteed returns stink, and in many cases the maximum return is also limited to a feeble return.

They usually conceal this by giving cumulative total returns, so you have to annualize it yourself by raising to the power of (1/years)


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## GGuy (Mar 21, 2018)

james4beach said:


> Yeah the terms of these have gotten worse. Notice both the minimum guaranteed returns stink, and in many cases the maximum return is also limited to a feeble return.
> 
> They usually conceal this by giving cumulative total returns, so you have to annualize it yourself by raising to the power of (1/years)


Yes, sticking to standard GIC's for now.

Concealing is not overstating how they advertise these things. At first glance they look great but you need to read the notes to understand what the true annual return rates are. Granted most would read the detail before investing but I think the webpage is too misleading. Not sure if the cut and paste works ...

*TD Canadian Banks GIC*


*Term**Guaranteed Minimum Interest Return**Maximum Return*3 years*6.30%4**15.00%*35 years*11.00%*5*30.00%*3
Market Growth GICs held in Registered (RSP, TFSA, RIF, RESP) or Non-registered accounts have the same rate.
Invest in a GIC


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## GGuy (Mar 21, 2018)

Just received a new email from Steinbach Credit Union. The 1,2 and 3 year GIC rates increased today.
(Sorry, it didn't paste well.)

*Our rates have increased! Earn 4.25%* with a 12-month GIC*

GIC (GIC* / RRSP / RRIF / TFSA)

12-month
Less than $100K
4.25%

$100K - $249,999
4.30%

$250K** and over
4.35%
24-month
Less than $100K
4.40%

$100K - $249,999
4.45%

$250K** and over
4.50%
36-month
Less than $100K
4.60%

$100K - $249,999
4.65%

$250K** and over
4.70%
48-month
Less than $100K
4.75%

$100K - $249,999
4.80%

$250K** and over
4.85%
60-month
Less than $100K
5.00%

$100K - $249,999
5.05%

$250K** and over
5.10%

TFSA* (variable)

2.65%


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## james4beach (Nov 15, 2012)

Scotiabank has posted some amazing GIC rates for short terms

14 months: 4.40%
2 years: 4.10%
3 years: 4.40%

Also, Outlook Financial just increased the 5 year rate to *5.00%*


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## james4beach (Nov 15, 2012)

I think today's GIC rates are good. Over the last 9 years, I have tracked the best yield on a 5 year Big Five GIC versus the 10 year Government of Canada bond. The chart is below, as a spread in basis points.

I know those aren't equivalent things, but in my own fixed income ladder, these are the two main things I buy: either a 5 year GIC or a 10 year (approx) government bond. Any time I'm adding money to my ladder, I compare and see which yields more. Sometimes the spread is very low, in which case I buy government bonds since there's no advantage of the GIC. Other times, like today, the GICs show a massive advantage.

For example back in 2013 the spread was about nil. The 5 year GIC had about the same yield as the 10 year government bond.
Today, the 5 year (Big Five) GIC yields 4.60% versus 10 year bond yield 2.60% for a whopping 200 point spread, the highest in my records.


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## nathan79 (Feb 21, 2011)

The short term rates are getting really good. A week ago, I purchased a 20K GIC from Tangerine for 9 months (for next year's taxes). The rate was 3.5%, which was very competitive. Now they're offering 4.25% for the same term.


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## Synergy (Mar 18, 2013)

^ Tangerine is also offering 4.5% on 1 year term. Pretty competitive.


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## scorpion_ca (Nov 3, 2014)

EQ dropped 5% to 4.8% for its 5 year GIC. Is it the first drop of many to come in the near future?


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## AltaRed (Jun 8, 2009)

scorpion_ca said:


> EQ dropped 5% to 4.8% for its 5 year GIC. Is it the first drop of many to come in the near future?


It could be expected with the drop in GoC5 bond yields. 200bp is an extraordinary gap between GoC5 and 5 year GIC rates. Besides, I suspect more and more mortgagors are not willing to lock into 5.5+% 5 year fixed term mortgages IF they believe inflation can be beat down in about 2 years. If I was facing a renewal at this point, I might opt for a 3 year fixed term.

Don't be surprised in 3-5 year GIC rates flatten out entirely, or even for 4-5 year rates to invert. It might be unprecedented in modern times but I suspect we may have seen this movie in the '70s or early '80s (my guess only - I am too lazy to validate that thought).


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## james4beach (Nov 15, 2012)

scorpion_ca said:


> Is it the first drop of many to come in the near future?


I also saw Scotia GIC rates drop slightly, from 4.65% down to 4.60% but that's within noise.

But currently these GIC rates are super high, compared to government bonds (AltaRed mentioned 5 year bonds and my chart shows historical relationship to 10 year bonds).


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## james4beach (Nov 15, 2012)

I'm worried that GIC rates may have already peaked.

Or do people think they are still going higher? Keep in mind there are now 5 year GICs out there at 5.0% while the government 5 year bond yields just 3.24%


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## Covariance (Oct 20, 2020)

james4beach said:


> I'm worried that GIC rates may have already peaked.
> 
> Or do people think they are still going higher? Keep in mind there are now 5 year GICs out there at 5.0% while the government 5 year bond yields just 3.24%


I expect lesser maturities to increase. Not sure about the 5.


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## GGuy (Mar 21, 2018)

james4beach said:


> I'm worried that GIC rates may have already peaked.
> 
> Or do people think they are still going higher? Keep in mind there are now 5 year GICs out there at 5.0% while the government 5 year bond yields just 3.24%


IMHO - I think they go higher before they go lower. Especially after next rate hike. Having said that, I'm buying more soon.


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## Freedom2022 (Oct 14, 2021)

I just found out RBC offers cashable GIC: 2.5 % for one year.


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## gardner (Feb 13, 2014)

Home Trust/Oaken now pays 3% on savings. I'm not sure how long it will last, but I will likely clean out most of my EQBank savings over to Oaken for a few months.


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## Freedom2022 (Oct 14, 2021)

I inquired further about RBC cashable GIC. They said that the GIC that are sold before they mature are sold on a secondary GIC market, so the price may be less than what initially bought.


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## james4beach (Nov 15, 2012)

Freedom2022 said:


> I inquired further about RBC cashable GIC. They said that the GIC that are sold before they mature are sold on a secondary GIC market, so the price may be less than what initially bought.


Wow that's very interesting, thanks for sharing. I didn't know any GICs could be sold on a secondary market.

Considering it's RBC and I've seen them provide awful bond trading prices, my guess would be that it isn't a true "secondary market" but rather RBC itself buying the GIC back, and I suspect they'd provide an awful price for it. Or if not an awful price, they'll stealthily take a giant fee while doing the trade.


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## GGuy (Mar 21, 2018)

Just noticed that Niverville Credit Union in Manitoba is offering a 5 Year GIC at 5.050%

First one I've seen anywhere (in Manitoba) over 5%.

Someone at another bank here told me off the record they expect their GIC rates to go up after the next rate hike in September. Just their opinion.


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## scorpion_ca (Nov 3, 2014)

GGuy said:


> Just noticed that Niverville Credit Union in Manitoba is offering a 5 Year GIC at 5.050%
> 
> First one I've seen anywhere over 5%.
> 
> Someone at another bank here told me off the record they expect their GIC rates to go up after the next rate hike in September. Just their opinion.


At least nine institutions are offering 5years GIC for 5% or more.









GIC rates comparison chart


This chart summarizes 1- to 5-year Canadian non-redeemable, non-registered, annually compounding GIC rates for the financial institutions. Rates are updated every day at 9:05am Pacific / 12:05pm Eastern. See also our savings account comparison chart. To be included in the GIC chart,...




www.highinterestsavings.ca


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## GGuy (Mar 21, 2018)

scorpion_ca said:


> At least nine institutions are offering 5years GIC for 5% or more.
> 
> 
> 
> ...


Thanks. Niverville CU is first in Manitoba.


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## hfp75 (Mar 15, 2018)

These GIC rates are great ! the next BoC hike (0.75%) should put us in the 5.75% for a 5 year zone.


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## Freedom2022 (Oct 14, 2021)

Inflation is still high. B of C will keep rising rate.
At this point in time, I'd rather deposit in short term (one year or less).


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## hfp75 (Mar 15, 2018)

Timing the longer duration buy requires watching inflation and the economy.....


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## londoncalling (Sep 17, 2011)

Freedom2022 said:


> Inflation is still high. B of C will keep rising rate.
> At this point in time, I'd rather deposit in short term (one year or less).


I am still only buying 1 year and 1 year redeemable. I would consider locking in a small amount after the next hike but will wait and see where my mood takes me. Mortgage renewal fall of 2023. May decide to pay off the remainder instead of invest in equities. Don't plan to purchase anything longer term unless the 5 year is high single or low double digits. Curious to see what the September announcement will bring.


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## james4beach (Nov 15, 2012)

hfp75 said:


> These GIC rates are great ! the next BoC hike (0.75%) should put us in the 5.75% for a 5 year zone.


I agree, these rates are great. But we don't know if the GIC rates will go up further with the next BoC hike. Only time will tell.

We might be entering a period where GICs could outperform stocks for the next few years. It wouldn't surprise me at all, since we already are talking about 5% returns without risk. I always buy 5 year GICs to get the most term premium. My next purchase will be mid Sept and then another one mid Dec.

The reason I never buy under 5 years is simple: my ladder is full, so I don't need any earlier maturities. And 5 year GICs [nearly always] have the highest yield. So if my choice is between earning 4.4% or 4.9% yield on each $, I'd of course pick the 4.9%. It's really unlikely that I will perfectly time any "pivot" on the rate hike cycle, so I just assume I cannot predict interest rates... and take the higher yield each time.

Consider that even stock investments like XIN (an old MSCI EAFE fund) returned just 3.7% since inception 21 years ago!
And here we're talking about 5%, quite possibly higher, without any volatility at all.


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## Covariance (Oct 20, 2020)

hfp75 said:


> These GIC rates are great ! the next BoC hike (0.75%) should put us in the 5.75% for a 5 year zone.


The term premium and overnight rate are negatively correlated. Or in other words the difference between the 5 and short term decreases as the short term goes up. That’s not to say the 5 may not increase. However, it is unlikely to increase by the amount of the increase of the short term.


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## hfp75 (Mar 15, 2018)

Correct but it can….


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## dubmac (Jan 9, 2011)

Most economists are suggesting that the impact of rising rates impacts the market 18-24 months after the rates begin their increase. Rates started to rise in March 2022, suggesting the economy will be slowed (recession?) during the next 2 years into 2024. 
I currently have 20K to put into a ladder and am more inclined to put it into a 2 yr GIC rather than a 5 for the reason quoted above. (Perhaps even a 1 yr GIC...not sure yet), but I do not see 5 yr as a good fit as it is too long, and too far out.

this article G&M was a good read today - may be behind a paywall








An eight-pack of dos and don’ts for surviving and profiting in a world of rising interest rates


Don’t sweat your falling net worth or get sucked in by rate bonuses. Instead, get your money out of big bank savings accounts and consider a one-year GIC




www.theglobeandmail.com


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## james4beach (Nov 15, 2012)

Has anyone seen any uptick in 5 year GIC rates? I didn't notice any increase.


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## scorpion_ca (Nov 3, 2014)

james4beach said:


> Has anyone seen any uptick in 5 year GIC rates? I didn't notice any increase.


I noticed Motive Financial has dropped its 5 years GIC from 5% to 4.85% this week.


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## james4beach (Nov 15, 2012)

scorpion_ca said:


> I noticed Motive Financial has dropped its 5 years GIC from 5% to 4.85% this week.


Yikes. Outlook Financial is still at 5%.


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## AMABILE (Apr 3, 2009)

I just bought a 1 yr GIC for 4.50% @ EQ Bank


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## AltaRed (Jun 8, 2009)

FWIW, I will make a WAG that over the next 10 days or so, we will see 1 year GIC rates move up 15-35bp and 5 year rates remain essentially frozen. 

I don't see much more given prime lending rate at 5.45% and most mortgage rates hovering in a very tight range of 5.1-5.4% range per Ratehub today. If anything, there will be continued downward pressure on 5 year GIC rates. NIM is running extremely tight.


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## Covariance (Oct 20, 2020)

AltaRed said:


> FWIW, I will make a WAG that over the next 10 days or so, we will see 1 year GIC rates move up 15-35bp and 5 year rates remain essentially frozen.
> 
> I don't see much more given prime lending rate at 5.45% and most mortgage rates hovering in a very tight range of 5.1-5.4% range per Ratehub today. If anything, there will be continued downward pressure on 5 year GIC rates. NIM is running extremely tight.


As a proxy I started tracking the offered TD GIC rate series across the curve. The 1Y moved up 10bps after the recent BOC hike. @james4beach the 5 year at the end of August was 4.6%, which is where it is this morning.


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## londoncalling (Sep 17, 2011)

I have a couple of 1 yr redeemables that I plan to rollover in the next couple weeks. I may even lock them into 1 or 2 year terms. I still have another 1 year redeemable bought in July which will likely sit until the end of the year. This is based on my belief that BOC and Fed rates will be muted compared to the hikes seen already this year.


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## james4beach (Nov 15, 2012)

Covariance said:


> As a proxy I started tracking the offered TD GIC rate series across the curve. The 1Y moved up 10bps after the recent BOC hike. @james4beach the 5 year at the end of August was 4.6%, which is where it is this morning.


Interesting. Yeah, I don't think the 5 year has moved at iTrade either.


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## dubmac (Jan 9, 2011)

AltaRed said:


> FWIW, I will make a WAG that over the next 10 days or so, we will see 1 year GIC rates move up 15-35bp


Nice post Alta.
I'll raise your bid.
I'll wait until Sept 20th before I buy my 1 yr GIC. Currently, the rate is 4.26 on itrade. Let's see if it moves up 15-35 bpts


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## james4beach (Nov 15, 2012)

dubmac said:


> I'll wait until Sept 20th before I buy my 1 yr GIC. Currently, the rate is 4.26 on itrade. Let's see if it moves up 15-35 bpts


I'm curious why you aren't going for the 5 year GIC. Why not get the higher yield (grabbing the term premium)?

In an earlier post you gave an estimated time to recession but that kind of forecast is can't be done accurately. So much can change month to month, I don't see how it's possible to predict any future interest rates. If inflation remains persistent then the central banks might keep hiking for a long time. If inflation cools off, the rate hikes could stop entirely.

To me it just feels like complete uncertainty, so I'd rather benefit from the term premium and always buy 5 year GICs. We *can't* predict futures interest rates, but we can see -- and grab -- the term premium.

One single surprise can change everything. Maybe the European war ends. Maybe China stops lockdowns. Or maybe the Russians use a nuke in Ukraine. Maybe the Chinese economic collapse spirals into a global disaster.

(iTrade's 1-year GICs may be 4.26% but the 5 year is 4.60% and I'm sure it will hit at least 4.65% in the coming days, that's 39 basis points more)


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## cainvest (May 1, 2013)

james4beach said:


> I'm curious why you aren't going for the 5 year GIC. Why not get the higher yield (grabbing the term premium)?


Many reasons to go 1 yr vs 5 yr ... depends on what the money is going to be used for and at what time frame in the future. Also, unless you're putting in a very large amount into a single GIC a 25 bp difference isn't really much to worry about.


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## Covariance (Oct 20, 2020)

james4beach said:


> Interesting. Yeah, I don't think the 5 year has moved at iTrade either.


I expect the middle and longer range of the treasury curve will resume moving up later this fall, assuming inflation doesn’t collapse. The simple reason is higher, longer on the front will drive up the back. How the bond market translates to GICs is an open question for me.


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## james4beach (Nov 15, 2012)

Covariance said:


> assuming inflation doesn’t collapse


US inflation just came in *very* high. There seems to be a pattern here, where analysts keep having optimistic projections of inflation easing, but it doesn't.

I have no reason to think inflation is going to ease off within the next few months. Hopefully GIC rates nudge a bit higher.


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## Raggedy Dandy (Mar 12, 2020)

Simplii has a 1 year at 4.5%, which is just shy of 0.25% better than the highest I'm seeing in the 1-year list at BMOIL.


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## jargey3000 (Jan 25, 2011)

dubmac said:


> Nice post Alta.
> I'll raise your bid.
> I'll wait until Sept 20th before I buy my 1 yr GIC. Currently, the rate is 4.26 on itrade. Let's see if it moves up 15-35 bpts


 what's the significance of Sept 20th?


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## AltaRed (Jun 8, 2009)

The US Fed makes its next rate announcement at the Sept 20-21 meeting, and whether we like it or not, so much of our life is tied to the US economy, what happens to US bond yields affects us too.

Add: Today's release of inflation numbers out of the US will almost certainly result in a US 75 bp rate increase on Sept 20-21. Bond yields will move higher at least at the short end of the curve


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## Covariance (Oct 20, 2020)

james4beach said:


> US inflation just came in *very* high. There seems to be a pattern here, where analysts keep having optimistic projections of inflation easing, but it doesn't.
> 
> I have no reason to think inflation is going to ease off within the next few months. Hopefully GIC rates nudge a bit higher.


For sure, that's the pattern. The buy the dip crowd needs to capitulate and then the next bull will run.


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## Covariance (Oct 20, 2020)

AltaRed said:


> The US Fed makes its next rate announcement at the Sept 20-21 meeting, and whether we like it or not, so much of our life is tied to the US economy, what happens to US bond yields affects us too.
> 
> Add: Today's release of inflation numbers out of the US will almost certainly result in a US 75 bp rate increase on Sept 20-21. Bond yields will move higher at least at the short end of the curve


One more surprise first maybe, but yes 75 was always going to be it.


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## sags (May 15, 2010)

Bonds and mortgages have already gone up on the news. A 30 year fixed rate mortgage is now over 6%.


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## dubmac (Jan 9, 2011)

james4beach said:


> I'm curious why you aren't going for the 5 year GIC. Why not get the higher yield (grabbing the term premium)?
> 
> (iTrade's 1-year GICs may be 4.26% but the 5-year is 4.60% and I'm sure it will hit at least 4.65% in the coming days, that's 39 basis points more)


One reason is taxes. This GIC will be in a non-reg account, and the interest generated will be taxed more (than dividends). Another reason is that there is not a big separation between 1 and 5 yr rates. I may go 2 yr, but nothing above that. Ideally, I like to have cash to buy good quality dividend earners & I suspect the market stay rather muted for the next 1-2 years. If GIC rates are high next year, then I'll renew the GIC. If not, I have the cash to work with.


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## scorpion_ca (Nov 3, 2014)

Covariance said:


> One more surprise first maybe, but yes 75 was always going to be it.


"*Nomura expects Fed to raise interest rates by a full percentage point next week*"


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## jargey3000 (Jan 25, 2011)

AltaRed said:


> The US Fed makes its next rate announcement at the Sept 20-21 meeting, and whether we like it or not, so much of our life is tied to the US economy, what happens to US bond yields affects us too.
> 
> Add: Today's release of inflation numbers out of the US will almost certainly result in a US 75 bp rate increase on Sept 20-21. Bond yields will move higher at least at the short end of the curve


if that does happen- 75bp increase- on the 20th/21st, how soon after will we see it reflected in posted Can. GIC rates?


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## AltaRed (Jun 8, 2009)

It should have no effect on CAD GIC rates. Our CAD GIC rates are a function of BoC overnight rate, the Cdn bond yield curve, funding needs and peer-to-peer competition. A US Fed increase will likely affect USD GIC and USD HISA rates. It is a virtual guarantee to affect brokerage ISA USD rates.

If there is a 75bp increase this week, look for the brokerage USD ISAs moving from about 2.2% to about 2.8%. TD may be first out of the gate as is often typical followed (or lead) by RBC and then the likes of Scotia, CIBC and BMO will follow within about a week thereafter.

Edit: punctuation


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## Covariance (Oct 20, 2020)

Agree with @AltaRed and add that we might see some movement on Canadian yields on the 6th, and for sure after the next Bank of Canada rate decision on October 26th.


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## james4beach (Nov 15, 2012)

I have a few metrics I watch, looking at the spread of 5 year GIC rates versus other fixed income.

From my viewpoint the 5 year GIC rates look pretty high today. As mentioned above, until further BoC rate hikes, I'm not sure these GIC rates are going to move much more.


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## james4beach (Nov 15, 2012)

Several discount brokerages currently have many big six bank 5 year GICs at 4.60%

Those rates haven't changed for over three weeks now. As @Covariance mentioned earlier, the rate was the same at the end of August as well. I was hoping to see a slight nudge but there hasn't been any change.

I had to buy one for my ladder, so I got a 5 year GIC from Royal Bank at 4.60%

If you are able to jump around between institutions though, you can also get 5.0% from Outlook Financial


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## Covariance (Oct 20, 2020)

For the time being at least Central Banks around the works are incentivicing savers. Rates across the fixed income spectrum are getting better, and better.


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## james4beach (Nov 15, 2012)

Thought I'd share a rate I saw through Scotiabank, the regular banking segment (doesn't require a brokerage). Might be of interest to people who don't want to lock in money for 5 years.

14 months @ 4.40%
3 years @ 4.60%






GIC Interest rates | Scotiabank Canada


View current/latest interest rates for cashable, non-redeemable, accelerated, laddered and stock-indexed guaranteed investment certificates (GIC).




www.scotiabank.com


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## james4beach (Nov 15, 2012)

Seeing a slight uptick in my brokerage.

CIBC's 5 year has increased to 4.65%
which pulls slightly ahead of the other big banks


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## james4beach (Nov 15, 2012)

Another tick higher

Scotia 5 years is 4.70%


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## james4beach (Nov 15, 2012)

Scotia 5 year GIC has increased to 4.75%

Nice pace of increases over the last three weeks. Also pretty amazing to see the big banks being competitive. Scotia actually pays higher interest than EQ Bank.


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## nathan79 (Feb 21, 2011)

james4beach said:


> Also pretty amazing to see the big banks being competitive. Scotia actually pays higher interest than EQ Bank.


A lot of the online banks have extremely poor offerings lately. Same for HISAs.


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## AltaRed (Jun 8, 2009)

They are likely facing headwinds in their lending book. There is no point attracting more deposits if they cannot lend enough (more) at sufficient margin.


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## londoncalling (Sep 17, 2011)

Unfortunately, if lenders can't lend savers are again punished. The B of C rate is what the financial institute borrows money. Banks won't loan or take deposits at a loss. It will take some time for the system to soak up all the money that was created across the globe. Inflation and market corrections as painful as both are, help to absorb some of that excess capital.


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## AltaRed (Jun 8, 2009)

I should have observed/opined in my post #588 that smaller digital banks and CUs don't have the same breadth of lending as do the major banks. IOW, a regional CU isn't going to lend $200M to a major corporation like a big bank would. So there is likely a bit of an anomaly currently going on where the big bank GIC offerings are now more competitive with the digital banks/CUs that tend to lend to retail consumers and small business. This latter lending is likely facing far more headwinds at current rates than that of multi-billion dollar corporations.


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## james4beach (Nov 15, 2012)

Canadian Tire Bank pulls ahead with a 5 year @ 4.91%


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## AlwaysMissingTheBoat (8 mo ago)

james4beach said:


> Canadian Tire Bank pulls ahead with a 5 year @ 4.91%


Does it come with a rim job?

I'll see myself out...


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## nathan79 (Feb 21, 2011)

Tangerine is offereing 4.85% on 1 year and 5.2% on 5 year.


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## MrBlackhill (Jun 10, 2020)

nathan79 said:


> Tangerine is offereing 4.85% on 1 year and 5.2% on 5 year.


And interestingly 5% for 1.5 years but 4.7% for 2 years, lol. And 4.8% for 4 years, lol.


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## james4beach (Nov 15, 2012)

nathan79 said:


> Tangerine is offereing 4.85% on 1 year and 5.2% on 5 year.


Wow interesting, that's awfully good for a 5 year.


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## Beaver101 (Nov 14, 2011)

Wow, the banks can't even wait til tomorrow Wed. October 26, 2022 for their boss, the BOC to jack up their rates. 

I'm now seeing a one year of 4.80%, and 5.02% at my discount brokerage. I think 6% is within reach by year end.


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## james4beach (Nov 15, 2012)

I don't know about 6%. Anything is possible but these rates have been moving slowly after they got above 4.5% and just because the BoC raises, doesn't mean the bond (and GIC) rates will follow.

I'll be buying another GIC in December, so I hope rates are much higher.


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## james4beach (Nov 15, 2012)

My discount brokerage is now showing plenty of 5 year GICs over 5%

5.07% - Home Equity Bank
5.05% - Canadian Western Bank
5.01% - Manulife

And here's an interesting one, a 1 year deposit at 5% at some credit union. I guess that's not too different than what @nathan79 mentioned earlier, but still kind of shocking to see 5% for one year!


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## nathan79 (Feb 21, 2011)

I wonder if EQ will finally increase their rates.


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## james4beach (Nov 15, 2012)

Major milestone! The first Big Five Bank over 5%

Scotiabank (at iTrade but not TDDI) now has a 5 year @ 5.10%


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## AltaRed (Jun 8, 2009)

BMOIL has a number of GICs, 2, 3, 4, and 5 year terms over 5% (5.02-5.1%) from a number of issuers including BMO companies.


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## dubmac (Jan 9, 2011)

same with Scotiabank.


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## james4beach (Nov 15, 2012)

AltaRed said:


> BMOIL has a number of GICs, 2, 3, 4, and 5 year terms over 5% (5.02-5.1%) from a number of issuers including BMO companies.


Ah thanks for clarifying that. What an amazing time. Tons of GICs over 5% available today.

Cash and GICs are the champs of 2022.


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## Raggedy Dandy (Mar 12, 2020)

AltaRed said:


> BMOIL has a number of GICs, 2, 3, 4, and 5 year terms over 5% (5.02-5.1%) from a number of issuers including BMO companies.


 They even have a 1 year at 4.98, and another at 4.94.


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## AltaRed (Jun 8, 2009)

Raggedy Dandy said:


> They even have a 1 year at 4.98, and another at 4.94.


Most of the big bank brokerages are competitive with their GIC offerings. We have accounts with BMO IL, Scotia iTrade and RBC DI and they are relatively equal. The biggest differences between the 3 are what their in-house companies are offering, e.g. BNS at iTrade, BMO at BMOIL, etc.


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## cainvest (May 1, 2013)

james4beach said:


> Cash and GICs are the champs of 2022.


If only they provided a positive real return then they would be real champs, maybe in time they will.
Dividends would be as well then ...


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## MrBlackhill (Jun 10, 2020)

There are no champ asset class in 2022, only champ sectors.


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## james4beach (Nov 15, 2012)

Today I bought a 5 year Scotia GIC @ 5.10%

It's the highest rate in my ladder. Feels really nice to finally have something over 5%. Here's what my ladder looks like, with quarterly purchases (I guess a bit more frequent, more like four per year). Unfortunately I still have a lot of low yielding GICs and it will take years for them to mature out.


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## Covariance (Oct 20, 2020)

james4beach said:


> Today I bought a 5 year Scotia GIC @ 5.10%
> 
> It's the highest rate in my ladder. Feels really nice to finally have something over 5%. Here's what my ladder looks like, with quarterly purchases (I guess a bit more frequent, more like four per year). Unfortunately I still have a lot of low yielding GICs and it will take years for them to mature out.
> View attachment 23837


As a matter of interest, what are the cashflows? Are they a bullet payment at the end or is there periodic interest payments and if so at what interval?


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## james4beach (Nov 15, 2012)

Covariance said:


> As a matter of interest, what are the cashflows? Are they a bullet payment at the end or is there periodic interest payments and if so at what interval?


All of mine are annual compounding GICs with no annual payout. Interest is accrued once a year and added to the ongoing balance, continues to earn at the same interest rate. At the end of the term there is a payment of principal + all interest accrued since the start.

However, iTrade also lets you buy the same GICs without compounding. If you strongly believe that interest rates will be rising for many years to come, then you'd probably want to buy that. So with those annual payout GICs, each year you'd get the interest for that one year paid out in cash. At the end of the term, you'd only receive principal back and only the final (single) year's interest.

Perhaps if someone is retired and living off the portfolio, the annual payout option is preferable? I would love to hear opinions on that. As a habit, I always buy the compounding option which does not pay out annually.

Mathematically, is there an advantage between the annual payout vs compounding options? @Covariance or @AltaRed may know


*Edited to add*: there's a practical reason I buy the compounding ones. You can see how many GICs there are in my ladder, so I always have something maturing anyway and that provides me enough liquidity. If I had them all paying out annual interest, then my account would have tiny amounts of cash popping up constantly. I figured that would be cash drag. I try to keep all my money invested all the time, but when I do a deposit/withdrawal, I record it in a spreadsheet as a cashflow in or out. So my preference is to do occasional, _large withdrawal_ cashflows and I'm happy to let $ compound to get a single end payment.


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## scorpion_ca (Nov 3, 2014)

Bought the following GIC this year. 20k each. This will be used for my mortgage payment. 

2 Y - 5.15%
3 Y - 5.1%
5 Y - 5.0%
5 Y - 5.2%


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## AltaRed (Jun 8, 2009)

The value (or not) of annual compounding is that you get interest compounded on principal +accrued interest to date. It is to your advantage if interest rates are declining but just the opposite if interest rates are increasing and could re-invest annual interest into a better performing alternative. It mostly comes down to convenience and/or need for regular cash flow. Retirees likely prefer the annual interest payouts in most cases.


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## Covariance (Oct 20, 2020)

james4beach said:


> All of mine are annual compounding GICs with no annual payout. Interest is accrued once a year and added to the ongoing balance, continues to earn at the same interest rate. At the end of the term there is a payment of principal + all interest accrued since the start.
> 
> However, iTrade also lets you buy the same GICs without compounding. If you strongly believe that interest rates will be rising for many years to come, then you'd probably want to buy that. So with those annual payout GICs, each year you'd get the interest for that one year paid out in cash. At the end of the term, you'd only receive principal back and only the final (single) year's interest.
> 
> ...


thanks for the additional colour. The only thing I would add on the math is a portfolio of annual pays in a ladder, all else being equal, will have higher volatility of returns than a portfolio of bullets.


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## Beaver101 (Nov 14, 2011)

5.15% for a one-year. That 6% for year end looks quite achieveable. Come-on, bring it on!


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## Retired Peasant (Apr 22, 2013)

In non-registered accounts, one has to pay the tax on the interest earned, whether received or accrued. Some people like to receive the annual payout, to pay the tax.


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## AltaRed (Jun 8, 2009)

Retired Peasant said:


> In non-registered accounts, one has to pay the tax on the interest earned, whether received or accrued. Some people like to receive the annual payout, to pay the tax.


The same reason not to have strip bonds in a non-registered portfolio.


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## Eclectic21 (Jun 25, 2021)

james4beach said:


> ... Perhaps if someone is retired and living off the portfolio, the annual payout option is preferable? I would love to hear opinions on that. As a habit, I always buy the compounding option which does not pay out annually.


Income versus expenses likely factors into this choice.

Where the GIC interest is not needed for living expenses or taxes, it may be better to keep the money working. Where one might have a need for the interest for these or other issues, I can see preferring semi-annual or annual payments.

I suspect your other income makes the compounding option more attractive to you. Similar to my non-registered dividend income on it's own means I'm good with compounding for the foreseeable future.


Cheers


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## SamR (Oct 9, 2021)

GIC rates going up has caught my attention for a loved one who is on a fixed income, and renting. Would it be a good idea to max out on GICs within her TFSAs and the rest of her portfolio in something like VRIF? She's 83 and is paying an"advisor" at 1% for mediocre returns that are probably to risky for her. Her capital went done over the past several months. She would get some income from the Vanguard product that's fairly secure and claims 4% dividend returns (I think it draws from capital when 4% isn't achieved) and some guarantees with the GICs. Seems sensible or am I overlooking and simplifying things?

Thoughts? Thanks.


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## Synergy (Mar 18, 2013)

SamR said:


> GIC rates going up has caught my attention for a loved one who is on a fixed income, and renting. Would it be a good idea to max out on GICs within her TFSAs and the rest of her portfolio in something like VRIF? She's 83 and is paying an"advisor" at 1% for mediocre returns that are probably to risky for her. Her capital went done over the past several months. She would get some income from the Vanguard product that's fairly secure and claims 4% dividend returns (I think it draws from capital when 4% isn't achieved) and some guarantees with the GICs. Seems sensible or am I overlooking and simplifying things?
> 
> Thoughts? Thanks.


Depends on many factors. I find it best not to meddle with family / friend finances. 1% isn't all that bad for someone that is not able or willing to manage their own finances.


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## james4beach (Nov 15, 2012)

I'm astounded that 1 year GICs pay 5.1%


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## SamR (Oct 9, 2021)

Synergy said:


> Depends on many factors. I find it best not to meddle with family / friend finances. 1% isn't all that bad for someone that is not able or willing to manage their own finances.


It's my mom. She is asking for the help and I am designated power of attorney. Just want to know if that combination of investments is safe and can generate some more income for her.


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## SamR (Oct 9, 2021)

james4beach said:


> I'm astounded that 1 year GICs pay 5.1%



I remember many years ago when they were quite a bit higher than 5%... I think double digits but I may be wrong. In those days investing was probably a lot simpler... many average people parked their money in GICs. The world was a simpler place! The folks all had detached homes in suburbia and little or no mortgage... Sometimes I really feel like our standard of living has been deeply eroded - either that or we just spend way too much and expect too much today!


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## SamR (Oct 9, 2021)

I am thinking that outside the GICs (TFSA) she could invest the balance of her portfolio in one of the following: VRIF, VCIP, XINC, or ZMI.


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## Synergy (Mar 18, 2013)

SamR said:


> It's my mom. She is asking for the help and I am designated power of attorney. Just want to know if that combination of investments is safe and can generate some more income for her.


Based on the information provided your plan seems sensible. The TFSA would be a good place for her GIC's - tax effecient, guaranteed, etc. Depending on her total income per year, the dividends she receives outside her registered investments could be taxed at a very favorable rate. You take on a little bit more risk but are rewarded by more favorable taxation. Inspect the yield to get a sense of what they are paying out - eligible dividend, return on capital, etc. If there are other beneficiaries you may want to keep them in the loop on your recomendations, etc.


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## SamR (Oct 9, 2021)

Synergy said:


> Based on the information provided your plan seems sensible. The TFSA would be a good place for her GIC's - tax effecient, guaranteed, etc. Depending on her total income per year, the dividends she receives outside her registered investments could be taxed at a very favorable rate. You take on a little bit more risk but are rewarded by more favorable taxation. Inspect the yield to get a sense of what they are paying out - eligible dividend, return on capital, etc. If there are other beneficiaries you may want to keep them in the loop on your recomendations, etc.


Her income is otherwise quite low - OAS, CPP. But she's careful and frugal now that she's in this situation. I think the VRIF is the most attractive. Aims to achieve a 4% monthly dividend. I think it dips into capital if it can't achieve this through what it is invested in - correct me if I am wrong. CCP has a good overview of it and some of the others I listed but its from 2020. VRIF is pretty new. I'd like to get some opinions from those invested in it before I jump in. Even it it its drawing from capital, she's 83 - this is what people do when they reach their 80s. I suppose the GIC would add that extra security and preserve some capital. Given her age, I don't think I'd advise her to do a laddered GIC. Wouldn't it be more prudent to just go with a 1yr GIC at 5.1% (maybe even more by the New Year?) - she could need the money beyond that. Or is it better to divide up the $88,000 TFSA allotment into 3 to 5 GICs (laddered? Not sure about that. I am with Questrade for my own investments and I think that they offer some advice. May just do that.. Thanks!

And yes, the other beneficiaries are in the loop.


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## Covariance (Oct 20, 2020)

SamR said:


> Aims to achieve a 4% monthly dividend. I think it dips into capital if it can't achieve this through what it is invested in - correct me if I am wrong. CCP has a good overview of it and some of the others I listed but its from 2020. VRIF is pretty new. I'd like to get some opinions from those invested in it before I jump in. Even it it its drawing from capital, she's 83 - this is what people do when they reach their 80s. I suppose the GIC would add that extra security and preserve some capital. Given her age, I don't think I'd advise her to do a laddered GIC. Wouldn't it be more prudent to just go with a 1yr GIC at 5.1% (maybe even more by the New Year?) - she could need the money beyond that. Or is it better to divide up the $88,000 TFSA allotment into 3 to 5 GICs (laddered? Not sure about that. I am with Questrade for my own investments and I think that they offer some advice. May just do that.. Thanks!


VRIF has a place, and many are proponents because of its simplicity and low cost (relative to an advisor solution). I'm not an advocate, essentially for the reasons that are manifesting this year. I would rather be in the drivers seat on use of capital to fund liquidity needs, and look to use passive products with rock bottom prices when following a passive strategy.

Not sure what the gap is between guaranteed income from pension, etc and living expenses. IE how much cash (liquidity) is needed to pull from the portfolio each year. A straight forward solution is to present value the funding need for living expenses for each of the next two or three years into individual GICs that mature in the year required. The remainder of the portfolio (excess and above that funding the GICs) can be optimized for risk/reward that makes sense for her/you. This return seeking portfolio could be constructed from the same underlying components that VRIF uses, ie low cost index equity and bond ETFs. At the end of each year you would pull out the cash from the return seeking portfolio to hedge the year further living expenses, rebalance it and let it grow.


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## Eclectic21 (Jun 25, 2021)

SamR said:


> I remember many years ago when they were quite a bit higher than 5%... I think double digits but I may be wrong. In those days investing was probably a lot simpler... many average people parked their money in GICs. The world was a simpler place!


Yes ... prior to 1972, there was no capital gains taxes on things like stocks or real estate.

Then half of it was taxed, then more than half was taxed, then three quarters of it was taxed and then back to half it being taxed.

As for GICs, I can remember when they were double digits and some of the FIs collapsed, throwing the GICs into limbo for a while. CDIC was much slower then at dealing with the collapse.

Of course, keep in mind that when interest rates were really high, mortgage rates were over 20%. 




SamR said:


> ... The folks all had detached homes in suburbia and little or no mortgage ...


All? 

My cousin has never owned a detached home, just a condo. It was about fifty/fifty in the 1990's for my co-workers to be buying a townhouse or semi versus a fully detached home (despite being outside the GVA or GTA). 

Reportedly, in 1971 the percentage of Canadians owning their home was 60%. Steady increases followed until 2011's percentage of almost 70%. The 2021 percentage seems to be over 65% and some sources think the 2022 number is going to be over 70%.









Canada's homeownership rate is declining while renting is on the rise


Canada's homeownership rate declined to 66.5% after peaking in 2011 at 69%, according to a Statistics Canada release. Read more.




financialpost.com






Cheers


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## nathan79 (Feb 21, 2011)

Eclectic21 said:


> The 2021 percentage seems to be over 65% and some sources think the 2022 number is going to be over 70%.
> 
> 
> 
> ...


How are you coming up with 70%?

The article says the peak was in 2011 and it's been dropping ever since, even though the RE industry is telling us that everyone is buying houses (but what would you expect them to say?).

I've been watching the market closely and hardly anything is selling around here. Not many people are becoming homeowners these days.

The first comment on the article sums up the basic truth of the matter...



> A typical C$300k house in 2011/12 is listed for C$1.2mil today.
> 
> That's a 300% increase over ~ten years, or about 15% average per year.
> 
> ...


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## SamR (Oct 9, 2021)

Eclectic21 said:


> Yes ... prior to 1972, there was no capital gains taxes on things like stocks or real estate.
> 
> Then half of it was taxed, then more than half was taxed, then three quarters of it was taxed and then back to half it being taxed.
> 
> ...


Home ownership higher now? Maybe statistically... but amongst my parents generation - they killed their mortgages a lot quicker than people today. My dad and mom bought their first home 1 yr after they got married - in their early 20s and they lived in Toronto inner city - how many people can buy a home today in the early 20s in inner city Toronto? They had been living in this country for only a few short years, by the way. Came here with nothing from Europe after the ravages of war. Yes, I know it's hard to compare. But they weren't drowning in debt and lived a decent lifestyle. Today we have a lot more people with Uber money, but a lot more just scraping by living a pay cheque away from insolvency in many cases. A few years before he had passed, my dad did a rough calculation of how many months/years it took to come up with a down payment then vs today.. not even close. 

Anyhow, got off topic! Thanks for the help.


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## james4beach (Nov 15, 2012)

GIC rates (at my discount broker) have actually dropped a bit recently. There aren't so many over 5% any more.


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## AltaRed (Jun 8, 2009)

That is to be expected. 5 year bond yields are also down.


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## Thal81 (Sep 5, 2017)

Yeppers. The bond yield curve is significatly lower accross the board than it was 1 month ago. I think the pandulum has started to swing the other way for interest rates. The fixed income people always seem to know something that the rest of the market doesn't.


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## AltaRed (Jun 8, 2009)

They don't really know but it is what they believe at the moment. I suspect GoC5 yield will be volatile for awhile until the inflation crystal ball becomes less cloudy.


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## AMABILE (Apr 3, 2009)

5.05% 1 yr GIC @ EQ Bank
5.10% 1 yr GIC @ Tangerine


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## dubmac (Jan 9, 2011)

@scotiabank i-trade
5.13% 1 yr (CWB)
5.07% 5 yr (CWB)
Bit of a dilemma if you think rates will drop, then go 5 yr. If you think rates will increase - go 1 yr. I'm choosing 1 yr.


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## james4beach (Nov 15, 2012)

dubmac said:


> @scotiabank i-trade
> 5.13% 1 yr (CWB)
> 5.07% 5 yr (CWB)
> Bit of a dilemma if you think rates will drop, then go 5 yr. If you think rates will increase - go 1 yr. I'm choosing 1 yr.


Those CWB rates are good. You're not concerned about interest rates dropping?


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## dubmac (Jan 9, 2011)

Not sure concerned is the right word.
If rates drop, then the wider market will likely respond with interest-rate-sensitive stocks improving in price, (I would think), and there will be reasons to move out of GIC's. If rates stay high, or the same as they are, then it would make sense to just but the 1 or 2 yr GIC and pocket the interest.


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## dime (Jun 20, 2013)

Either way, its impressive. Its about time! Finally risk adverse investors can lock in some cash at rates yielding over 5%, nearly risk free. Savers have been punished by rate repression for far too long. 
Just wish I had more room in the TFSA to buy more GICs right now.


dubmac said:


> @scotiabank i-trade
> 5.13% 1 yr (CWB)
> 5.07% 5 yr (CWB)
> Bit of a dilemma if you think rates will drop, then go 5 yr. If you think rates will increase - go 1 yr. I'm choosing 1 yr.


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## james4beach (Nov 15, 2012)

dime said:


> Just wish I had more room in the TFSA to buy more GICs right now.


It can be OK to keep GICs in taxable accounts as well. Think from the perspective of total tax savings, not just the tax rate. GICs in a taxable account have a high tax rate, but they also have low returns. In comparison, stock indexes are expected to have much higher returns over the long term resulting in larger balances that are taxed. It might be better to shelter the stocks from taxes.

Example with $10,000 invested, for a person at 40% marginal tax rate, a very rough calculation

*If $10,000 of stocks is in a taxable account*: assuming a 8% annual return, the [one year] capital gain is $800, so at 1/2 inclusion rate (which might increase one day) the resulting taxes are $160. As the stocks grow aggressively over the years the tax bill keeps increasing!

*If $10,000 of GICs are in the taxable account*: assume 4% annual return. The single year interest is $400 resulting in the same $160 tax bill. But note that GICs won't grow as aggressively over the years, so many years down the line, the tax bill from the GICs could actually be lower than the tax bill from stocks.


So let's say a person is deciding what to do with $10,000 of TFSA space. I think you could go either way. Personally I would rather put the stocks into the TFSA and leave the GICs in the taxable account.


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## MrMatt (Dec 21, 2011)

james4beach said:


> It can be OK to keep GICs in taxable accounts as well. Think from the perspective of total tax savings, not just the tax rate. GICs in a taxable account have a high tax rate, but they also have low returns. In comparison, stock indexes are expected to have much higher returns over the long term resulting in larger balances that are taxed. It might be better to shelter the stocks from taxes.
> 
> Example with $10,000 invested, for a person at 40% marginal tax rate, a very rough calculation
> 
> ...


I agree that the high return items belong in registered plans, but I don't like your example.

Case 1, you end up with $640 after tax
Case 2, you end up with $240 after tax



It gets even crazier if you buy a dividend stock like BNS yielding 5.5-6% right now.


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## Covariance (Oct 20, 2020)

In a total return world it all comes back to the expected return over the holding period. If the holding period is a year or 10 years the asset decision should be different. Then again if it's a passive strategy it should be programatic. People get in trouble when they don't follow the thought through plan they create, and fall prey to emotions and other influences.


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## james4beach (Nov 15, 2012)

These 1 year GIC rates are just amazing. I don't need them for my ladder but could be very useful for someone with short term storage needs.

1 year GIC rates, at TDDI
Equitable: 5.12%
Laurentian: 5.08%
Scotiabank: 5.05%
TD Bank: 5.05%


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## Mechanic (Oct 29, 2013)

EQ Bank has 5.10% for 1 year and 2 year GIC's


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## AltaRed (Jun 8, 2009)

EQ Bank is just the retail direct to client division of Equitable Bank in broker/nominee name.


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## hfp75 (Mar 15, 2018)

Seems like shorter GICs get better rates via a broker and the longer 5 yr end is better via direct purchase from bank/CU. From my reading it looks like there is at least another 1% expected in rate hikes over the next few months if not even more. These 5% rates at the 1-5yr will look low in 3 months..... 

When you think of securing 5% for 5 years on a $10,000 investment that is a great commitment from the lender! Remeber the 1.5% for 5 yrs that we were discussing not all that long ago ?

I think you will see 6% GIC rates soon.


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## AltaRed (Jun 8, 2009)

The longer 5 year end may look better via direct purchase because, as I understand it, commission to brokers for a 5 year GIC may be 5 times that of a 1 year GIC, e.g. as much as 1.25% of face value rather than just 25bp for a 1 year GIC.

I doubt we will see 6% GICs, especially not at the long end when GoC5 bond yields don't surge another 100 bp or so.


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## james4beach (Nov 15, 2012)

The last time I looked at iTrade, all of the longer term GIC rates had fallen below 5%

Bond market yields (interest rates) have also been plummeting in the last few weeks.


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## like_to_retire (Oct 9, 2016)

james4beach said:


> The last time I looked at iTrade, all of the longer term GIC rates had fallen below 5%


Yeah, I always seem to have a 5 year GIC coming due in the next month on one of my ladders, so I regularly look at my TD Direct GIC rates, and for sure in the last few weeks the 5 year rates have dropped somewhat below 5%. This 6% dream seems out of reach.

ltr


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## james4beach (Nov 15, 2012)

like_to_retire said:


> Yeah, I always seem to have a 5 year GIC coming due in the next month on one of my ladders, so I regularly look at my TD Direct GIC rates, and for sure in the last few weeks the 5 year rates have dropped somewhat below 5%. This 6% dream seems out of reach.


I've been nervous this whole time that these higher interest rates won't last. What worries me is that while the central banks haven't changed their approaches that much (they're still hiking!) the bond market interest rates have plummeted.

Look at how XSB & XBB rallied in November, that's a tremendous drop in yields, and that impacts GICs too. Why are these bond market yields falling so much?


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## Covariance (Oct 20, 2020)

Consensus is that inflation has peaked, and we should expect disinflation from here. Obviously from a too high level but lagging effect of monetary tightening and additional increases are expected to further the fight. Thus bonds have stabilized, from longer tenors inward on the curve.

whether this expectation turns out to be premature or accurate remains to be seen. In the event it’s premature you can expect to see some of those bond yields move back up. We’re data point to data point from here on in.


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## james4beach (Nov 15, 2012)

I currently expect inflation to remain persistent at around 5% for several years.

In my view, central banks have not yet tightened policy enough to really fight inflation, and I don't have confidence that they will tighten conditions enough.


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## Covariance (Oct 20, 2020)

Are you short? That scenario will crush equities and bonds.


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## james4beach (Nov 15, 2012)

Covariance said:


> Are you short? That scenario will crush equities and bonds.


I don't have high conviction, so I don't trade on these kinds of expectations.

But 5% inflation would not necessarily crush equities and bonds. For example if inflation is stable at 5% and if the central bank doesn't aggressively fight it, I could see a scenario with negative real interest rates, which stocks would likely be happy with. Something like 5% inflation and a 4% fed policy rate would still be loose monetary policy and I suspect we're going in that direction.


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## Covariance (Oct 20, 2020)

james4beach said:


> I don't have high conviction, so I don't trade on these kinds of expectations.
> 
> But 5% inflation would not necessarily crush equities and bonds. For example if inflation is stable at 5% and if the central bank doesn't aggressively fight it, I could see a scenario with negative real interest rates, which stocks would likely be happy with. Something like 5% inflation and a 4% fed policy rate would still be loose monetary policy and I suspect we're going in that direction.


Hypothetical - sure. Any inflation target is fine if everyone agrees that's the target. But that's not our world.


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## james4beach (Nov 15, 2012)

Covariance said:


> Hypothetical - sure. Any inflation target is fine if everyone agrees that's the target. But that's not our world.


Do you feel like they are still aiming for 2% inflation?

I will be extremely impressed if they get back down to 2% inflation. Maybe I'm underestimating their commitment.


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## Covariance (Oct 20, 2020)

james4beach said:


> Do you feel like they are still aiming for 2% inflation?
> 
> I will be extremely impressed if they get back down to 2% inflation. Maybe I'm underestimating their commitment.


Yes I believe they do have that as their target. And are committed to getting there. Whether they are successful or not is another matter.

FWIW I also believe this is a before and after. In other words if it was as simple as undoing and mean reverting we would be seeing different conditions than those experienced in the latter part of this year.


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## AltaRed (Jun 8, 2009)

james4beach said:


> I don't have high conviction, so I don't trade on these kinds of expectations.
> 
> But 5% inflation would not necessarily crush equities and bonds. For example if inflation is stable at 5% and if the central bank doesn't aggressively fight it, I could see a scenario with negative real interest rates, which stocks would likely be happy with. Something like 5% inflation and a 4% fed policy rate would still be loose monetary policy and I suspect we're going in that direction.


4% federal rate is more like 6% prime rate and that is a headwind to 5% inflation.


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## Covariance (Oct 20, 2020)

We are there now. Fed is 4 at their wicket, and core PCE print this morning was 5%.


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## james4beach (Nov 15, 2012)

Covariance said:


> We are there now. Fed is 4 at their wicket, and core PCE print this morning was 5%.


I don't think it's restrictive enough. The US 5 year is 3.7% and 10 year is 3.5%. Those are benchmarks for a lot of corporate borrowing, and even with corporate spreads that's still very cheap credit in a 5% inflation environment.

Plus, inflation isn't 5%, it's more like 8%.

So what we currently have are corporate borrowing (see LQD) at only 5.3% with inflation at, let's call it, 5% to 8%. That's easy money = loose financial conditions = inflationary.

Companies are borrowing money at 5.3% today. That's free money at _negative 2%_ real interest rate. Even if you are optimistic and think inflation is only 5% that's still free money at zero real yield.


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## Covariance (Oct 20, 2020)

US Core PCE inflation was printed this morning at 5%. You can look it up. I don't make these things up James.


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## AltaRed (Jun 8, 2009)

Covariance said:


> We are there now. Fed is 4 at their wicket, and core PCE print this morning was 5%.


And prime rate is actually 7%. Just looked it up so the prime to overnight rate spread is circa 3%.

Added: I see that BBB corporate bond yields have fallen to about 5.8% from 6.5% in Oct. That might be right with inflation rolling over but also may be premature.


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## james4beach (Nov 15, 2012)

AltaRed said:


> And prime rate is actually 7%. Just looked it up so the prime to overnight rate spread is circa 3%.
> 
> Added: I see that BBB corporate bond yields have fallen to about 5.8% from 6.5% in Oct. That might be right with inflation rolling over but also may be premature.


Prime rate may be higher, but a lot of corporate borrowing is at 5 and 10 years. Shorter term corporates as per BSV are only 4.8%. You can't really call 4.8% interest rates for corporate loans "tight" in this environment... that's reflecting loose monetary conditions.

4.8% loans in an 8% inflation environment! Nobody would call that "tight" financial conditions.



Covariance said:


> US Core PCE inflation was printed this morning at 5%. You can look it up. I don't make these things up James.


I know you're not making it up, but the *core* inflation measure is different than the total inflation measure. Core PCE excludes food and energy.

Overall inflation is of course much higher than the core's 5%.

There's nothing exciting about this core PCI print. Two months ago, Core PCE was reported at 4.9%. Are you aware of that? The Core PCE is still rising at the same rate today as it was several months ago.

That's not a slowdown in the pace of inflation. It's persistent inflation. Take a look at the history of Core PCE numbers this year to see what I mean, in case you think there's been a decline.


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## james4beach (Nov 15, 2012)

Here is the history of Core PCE releases (one year changes)

July: 4.7%
Aug: 4.9%
Sep: 5.2%
Oct: 5.0%

And here's the longer history.

Note again these are core measures, not the overall US inflation rate. They're useful as a stable measure (excluding volatile components) but it does not mean inflation has come down to 5%. The overall inflation rate is around 7% to 8%.

Core PCE annual % changes, below, shows us that inflation has been quite steady through most of this year. It has not come down yet.


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## Covariance (Oct 20, 2020)

James; I follow core because the Fed uses core.

Everyone cares about headline, but for anticipation of monetary policy action, the metric is core. The Fed knows their rates (monetary policy) impact the domestic economy which shows up in core. Headline includes food and energy with prices set internationally, and that's why they strip it out.

Your graph is consistent and reinforces my comments in post 650. The market looks at this, in the context of what the Fed is watching, and sees a peak at a too high level. And as rate increases lag (take time to impact inflation) plus more increases to come they anticipate this chart will start to trend down (disinflation).

Finally, as I write this, on a new day, we have another important data point - average hourly earnings printed this morning - the market is selling off because it is not so sure of that trend anymore. Labour is an input to production. Higher wages - higher prices of goods and services produced from labour inputs. Maybe we don't trend down or so quickly trend down.


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## james4beach (Nov 15, 2012)

Covariance said:


> James; I follow core because the Fed uses core.
> 
> Everyone cares about headline, but for anticipation of monetary policy action, the metric is core.


I do realize the Fed watches core. I was just emphasizing the point that inflation (as per core) is quite persistent and has not come down. In fact Powell directly mentioned this in his last talk a couple days ago, mentioning that [core] inflation today is as high as it was a year ago, and not declining.

There is no sign of inflation coming down yet. So we're probably still in a 7% to 8% inflation world.


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## james4beach (Nov 15, 2012)

Today I noticed that Scotia iTrade has 6 month GICs at 4.05% which might be a good option for short term storage.

On the other hand, the DYN6004 (cash ISA) at iTrade earns 4.25%

The best yields right now are 1 year GICs @ 5.05%


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## OneSeat (Apr 15, 2020)

james4beach said:


> .....Scotia iTrade has 6 month GICs at 4.05% ........................HUBERT = 4.65%
> ............ DYN6004 (cash ISA) at iTrade earns 4.25% ............1 MONTH= 4.45%
> ..................best yields right now are 1 year GICs @ 5.05%......OAKEN = 5.25%


- see my notes above - lots of changes happening - and not all consistent.


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## AltaRed (Jun 8, 2009)

Most of us prefer consolidation of our holdings at discount brokerages for convenience which is what James is quoting, rather than rate hopping among the shrubbery, but I agree there is something for everyone.

The FI that is hot this week is down the list next week.


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## james4beach (Nov 15, 2012)

OneSeat said:


> - see my notes above - lots of changes happening - and not all consistent.


Thanks, interesting notes. And yes if one is willing to look at many different banks, there are options out there.

For example you can still get a 5 year GIC @ 5.0% at Outlook Financial (credit union), probably just because they are very slow to update their rates.


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## OneSeat (Apr 15, 2020)

james4beach said:


> .................if one is willing to look at many different banks, there are options out there.


Actually I only look at my bank, Oaken, Hubert. Plus whatever you mention 🤣
Switching between my three is very quick and easy.


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## AltaRed (Jun 8, 2009)

That is a matter of random luck, at the moment, from the institutions you currently have accounts with. From Canadian High Interest Savings Accounts the highest rates for either of HISAs or GICs hops around from institution to institution week to week, or month to month. I suspect there are other FIs nowhere to be seen where a higher rate can be found. Indeed, there are still ~200 or so credit unions (ex Quebec) one could research for best rates.


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## GGuy (Mar 21, 2018)

AltaRed said:


> That is a matter of random luck, at the moment, from the institutions you currently have accounts with. From Canadian High Interest Savings Accounts the highest rates for either of HISAs or GICs hops around from institution to institution week to week, or month to month. I suspect there are other FIs nowhere to be seen where a higher rate can be found. Indeed, there are still ~200 or so credit unions (ex Quebec) one could research for best rates.


Agree. So far I only use Oaken and Steinbach Credit Union which typically gives me access to very competitive rates and I don't want to chase rates and manage more accounts elsewhere.

Bought another 5 Year GIC at 5% at Steinbach Credit Union last week. 

Called Oaken, they said their longer term rates were going to come down (and I see today the 5 year is at 4.5%). I expect others will follow.
Steinbach gives no information on where their rates are going except to say they will have some GIC rate specials in the new year.


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## GGuy (Mar 21, 2018)

OneSeat said:


> - see my notes above - lots of changes happening - and not all consistent.


Thanks for posting, these are good rates for parking cash. Just posted I don't want to chase GIC rates beyond Steinbach Credit Union and Oaken but for parking cash the DYN6004 (cash ISA) at iTrade earning 4.25% is significantly better than.Oaken is at 3.4%, Steinbach at 3.35% and at TD the TDB8150 is at 3.80%.


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## james4beach (Nov 15, 2012)

GGuy said:


> for parking cash the DYN6004 (cash ISA) at iTrade earning 4.25% is significantly better than


Yeah frankly this is an amazing rate for cash. I even looked at using t-bills directly for lrage amounts, but DYN6004 works out better.


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## james4beach (Nov 15, 2012)

These GIC rates have become very strange lately. I almost always buy 5 year GICs to maintain my ladder, but now there is severe inversion even among GICs, with later years paying progressively less interest.

I wonder how long this will last. For the first time I can remember, I have stopped buying 5 years out and am instead buying the short terms (even 1 year) with much better yields.


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## OneSeat (Apr 15, 2020)

Oh J4B - I love it when you come out with very positive action. Trouble is I never know whether to do the same as you or the exact opposite 

So I did a 12 month survey of your recommendations - took me about 3 seconds - 50% of your positives turned out negative and 50% of negatives turned out positive - hmmm 

But my thumb stuck on the shift key when typing your nickname - came out as J$B


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## Covariance (Oct 20, 2020)

james4beach said:


> These GIC rates have become very strange lately. I almost always buy 5 year GICs to maintain my ladder, but now there is severe inversion even among GICs, with later years paying progressively less interest.
> 
> I wonder how long this will last. For the first time I can remember, I have stopped buying 5 years out and am instead buying the short terms (even 1 year) with much better yields.


Just all related to the severe and extended duration of the inversion we are now in. 10Y/2Y, 10Y/3mo it's one of the most severe inversions in history. 

How long will it last? Be careful with your strategy. If you're locked up for a year you may miss the long end lock in opportunity.


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## james4beach (Nov 15, 2012)

Covariance said:


> Just all related to the severe and extended duration of the inversion we are now in. 10Y/2Y, 10Y/3mo it's one of the most severe inversions in history.
> 
> How long will it last? Be careful with your strategy. If you're locked up for a year you may miss the long end lock in opportunity.


I will continue filling in the 5 years as my ladder moves along. Currently I am trying to "stuff' some extra money into the GIC ladder, so I have some freedom about where to put it. But you're right, to maintain the ladder I should continue with the 5 year purchases.

I've bought GICs during previous yield curve inversions, but it's very rare for there to be such a huge difference in GIC rates. During previous inversions, the GIC yields were pretty similar across the curve. In those situations I still bought the 5 year since it didn't make much of a difference.

I'm just surprised by how severe *this* GIC rate inversion has become.

(Currently, I also suspect that the bond market is wrong, but I know that's a dangerous thing to say.)


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## sags (May 15, 2010)

Peter Schiff's latest blog discusses bonds in the US. He also talks about the returns on a 60/40 portfolio as being the worst since the 1930s amid the Great Depression.

Episode 864 @ Peter Schiff (schiffradio.com)


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## Money172375 (Jun 29, 2018)

james4beach said:


> These GIC rates have become very strange lately. I almost always buy 5 year GICs to maintain my ladder, but now there is severe inversion even among GICs, with later years paying progressively less interest.
> 
> I wonder how long this will last. For the first time I can remember, I have stopped buying 5 years out and am instead buying the short terms (even 1 year) with much better yields.


Feels a little like timing the market. I agree with your approach….but, what if the current 5 year rates look attractive 3 years from now? You will have missed out.


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## Covariance (Oct 20, 2020)

james4beach said:


> (Currently, I also suspect that the bond market is wrong, but I know that's a dangerous thing to say.)


I'd be interested to know what you think it is wrong about.


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## james4beach (Nov 15, 2012)

Money172375 said:


> Feels a little like timing the market. I agree with your approach….but, what if the current 5 year rates look attractive 3 years from now? You will have missed out.


Very true and thanks for this reminder. I agree that one should stay on a 5 year ladder plan, because it's very hard to predict interest rates.


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## james4beach (Nov 15, 2012)

Covariance said:


> I'd be interested to know what you think it is wrong about.


I'll use US/Fed numbers to explain what I meant, though I think it extends to Canada as well (BoC & Fed policy is almost always closely aligned)

The current Fed funds rate is 4.25% and Quantitative Tightening just started; there are still many bonds to unload from their balance sheet. The Federal Reserve officials are saying -- very clearly -- that they will keep increasing the policy rate, with many Fed officials saying they expect to get near 5.3% (as I recall). They also say that they will keep policy tight as long as inflation is above the 2% target.

So they're telling us that the overnight/cash rate will be going to 5.0% and likely beyond over the next year or so. There is no indication that CPI (or Core PCE, which the Fed likes to use) has come down anywhere near the target level.

But what does the bond market think?

2 year US bond: 4.5%
5 year US bond: 3.9%

The bond market (at 2 years) does not believe the Fed officials who are saying they will get policy rates to near 5.3%. If the bond market believed the Fed, the 2 year would be more like 5.5%.

And look at that 5 year bond rate: *the bond market thinks that the cash rate over the next 5 years will (annualize) to less than 3.9%*. Since the current policy rate is heading to 5%, the bond market is pricing in very significant interest rate cuts over the next 5 years.

What makes people think that interest rates are going to be slashed within the next 5 years? I think the bond market is wrong about this. There's no sign that CPI or Core PCE is anywhere close to the inflation target rate. It doesn't matter that inflation is down slightly or has "peaked". That's almost irrelevant: inflation is still way higher than the policy rate.

The bond market thinks that the Fed & BoC are going to cut interest rates dramatically within the next 2-3 years. I disagree.


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## AltaRed (Jun 8, 2009)

I don't think much of superlatives such as "slashed". None of that is going to happen and no one that I am reading is suggesting that will happen. I do believe we will see rates start to roll over sometime late in 2023 or more likely into 2024 but they will most likely be subtle 25bp or so at a time.

As we know, the collective thinking of the bond market is what it is any given time. That collective thinking can change tomorrow since we know the bond yield curve moves around on a regular basis as has been posted on this forum every few months or so. It reacts the same way a herd of buffalo on the Savannah reacts to its environment - to and fro but always forward. None of us should react significantly to any of the shifts. I think it is simply fair to say, central bank rates will eventually come down to some normalized level of perhaps 2.5% (give or take) over some period of time, potentially resulting in a somewhat normalized 3-3.5% for 5 year GICs. Put that into one's projections and enjoy life's journey.


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## james4beach (Nov 15, 2012)

AltaRed, I agree with some of what you wrote.

But what makes everyone think that rate "normalization" means rates back near 2.5%? That's *not* a historically normal policy rate. I think there is recency bias here, post-2008 and I do not agree with you that rates are sure to head back towards 2%.

Before the 2008 crisis, *normal policy rates were more like 4.5% to 5.0%* as can be seen in this chart of Fed policy rates back to 1990. Maybe we are simply "normalizing" back to this world? The North American economy is very strong, the labour market is healthy, many have retired and gotten out of the way.

Those Fed rates even touched 6% and 7% in the past. I think it's perfectly possible that this may happen in the coming years.


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## Covariance (Oct 20, 2020)

james4beach said:


> I'll use US/Fed numbers to explain what I meant, though I think it extends to Canada as well (BoC & Fed policy is almost always closely aligned)
> 
> 
> What makes people think that interest rates are going to be slashed within the next 5 years? I think the bond market is wrong about this. There's no sign that CPI or Core PCE is anywhere close to the inflation target rate. It doesn't matter that inflation is down slightly or has "peaked". That's almost irrelevant: inflation is still way higher than the policy rate.
> ...


Thanks for the elaboration. Sounds like your expectation is the bond market has the inflation forecast wrong. What makes you think this?


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## james4beach (Nov 15, 2012)

Covariance said:


> Sounds like your expectation is the bond market has the inflation forecast wrong. What makes you think this?


Because there is no sign of inflation being anywhere close to the target rate, and Core PCE (the more important measure from a policy perspective) is stubbornly high, also nowhere close to target. Even if these inflation measures were to hit the inflation target rate, I think the Fed would still leave rates high a bit longer, just to make sure inflation is extinguished. Their reputation is at stake as there is waning public confidence in the Federal Reserve and a lot of anger for letting inflation get this high. Just imagine what kind of turmoil would happen if the Fed cuts rates again and inflation comes roaring back, exactly as it did in the 1970s/1980s.

But the bond market is pretty smart, so it's very possible I'm missing something.

A question for you: do you really think the Federal Reserve is going to cut interest rates this year? The bond and derivative markets currently expect rate cuts in 2023.

And if you do think the Fed will cut rates this year, what would make them do that?


(two Fed officials will speak on Monday and Tuesday by the way)


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## Covariance (Oct 20, 2020)

james4beach said:


> Because there is no sign of inflation being anywhere close to the target rate, and Core PCE (the more important measure from a policy perspective) is stubbornly high, also nowhere close to target. Even if these inflation measures were to hit the inflation target rate, I think the Fed would still leave rates high a bit longer, just to make sure inflation is extinguished. Their reputation is at stake as there is waning public confidence in the Federal Reserve and a lot of anger for letting inflation get this high. Just imagine what kind of turmoil would happen if the Fed cuts rates again and inflation comes roaring back, exactly as it did in the 1970s/1980s.
> 
> But the bond market is pretty smart, so it's very possible I'm missing something.
> 
> ...


Not clear to me when they will start to cut. I just assume they will when the recession or inflation drop becomes clear. They don’t know themselves and have said so themselves. They’ll leave it up until the jobs done (or so they say).

Bond market: looking at OAS spreads we can see that a soft landing or mild recession are expected. And that will take care of inflation.

I wouldn’t get hung up on the policy rate as a predictorof expected returns. It’s not an investor rate. We need to look at bills, bonds and credit.


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## nathan79 (Feb 21, 2011)

Hopefully they will leave rates somewhere between 4% and 5%. That's a pretty healthy level that incentivizes smart allocation of capital, unlike the mess they've created since 2008.

Simply reaching target inflation isn't a valid reason to cut.


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## AltaRed (Jun 8, 2009)

They will cut if inflation gets close to 2% because the risk of deflation is far more damaging (a death spiral) to an economy than slightly positive inflation. That is why central bank rates were as low as they were in the past decade. Inflation was dangerously close to approaching 1% or lower at times.

The more relevant point now though is with the costs of the green transition, de-globalization of trade and thus more inefficiencies in the system. it is unlikely that inflation will collapse so much as to go back to near zero interest rates. Let's hope for some normalization that is more reminiscent of 15-25 years ago or so, providing a better balance of meaningful cost to credit while maintaining some inflation.


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## james4beach (Nov 15, 2012)

AltaRed said:


> They will cut if inflation gets close to 2% because the risk of deflation is far more damaging (a death spiral) to an economy than slightly positive inflation.


I agree they will reduce rates if inflation gets close to 2% and stabilizes there, but it will take a while before policy makers can be confident that inflation is stable. They won't come to the conclusion that inflation is stable, after just 6 months of a good reading. And we don't yet have even a single CPI reading, or Core PCE, reading that's close to normal.

The derivatives market is already pricing in rate cuts for late this year[*], and I think the bond/derivative market is wrong about that. A single print of say 2.5% CPI inflation is not enough to cut rates. I think the Federal Reserve intends to hold rates where they are until a series of CPI prints gives confidence that inflation has been contained.

Additionally, the Fed rate cuts aren't having the intended effect on markets. Notice how bullish the market is, and traders have been reducing bond yields, so they are actually easing financial conditions. Higher stock prices are also another form of easing financial conditions because of the wealth effect. So the Federal Reserve is frustrated that the market is fighting them.

*The Fed is trying to tighten financial conditions*, but the market is simultaneously easing financial conditions, which nullifies some of the Fed's effect. The Federal Reserve might have to be even more hawkish in response, perhaps increasing the pace of quantitative tightening. Maybe they'll even have to raise rates more to counteract the financial easing from excessively optimistic markets.


[*] this was mentioned on the Bloomberg program, Real Yield, and they were referencing the Fed funds futures market which apparently is pricing in Fed rate cuts in late 2023


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## AltaRed (Jun 8, 2009)

It is an interesting discussion but I am somewhat indifferent to this from a practical/personal perspective. The nuances of whether interest rates are 4-5% in 2024 versus 2-3% in 2024 won't really move the needle in my overall plan. I can't do much about it either way so I will stick handle through whatever comes my way as it comes my way.


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## james4beach (Nov 15, 2012)

Some exogenous shock or surprise may change all of this anyway, so who knows what's going to happen.


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## londoncalling (Sep 17, 2011)

james4beach said:


> Additionally, the Fed rate cuts aren't having the intended effect on markets. Notice how bullish the market is, and traders have been reducing bond yields, so they are actually easing financial conditions. Higher stock prices are also another form of easing financial conditions because of the wealth effect. So the Federal Reserve is frustrated that the market is fighting them.
> 
> *The Fed is trying to tighten financial conditions*, but the market is simultaneously easing financial conditions, which nullifies some of the Fed's effect. The Federal Reserve might have to be even more hawkish in response, perhaps increasing the pace of quantitative tightening. Maybe they'll even have to raise rates more to counteract the financial easing from excessively optimistic markets.


I thought the Fed was trying to curb inflation for the average consumer. The average consumer pays little attention to market action and those that benefit from the wealth effect do not feel the impacts of inflation as greatly as wage slaves. Perhaps those in drawdown are more affected by market direction based on time premium. However, I don't expect many to change their spending habits based on the recent Fed meetings. The rate decisions going forward will be data dependent and primarily inflation specific. I do agree that sustained market optimism may lead us to believe that the worst is over. I am not sure why I feel like we need to be punished further (higher unemployment etc.) Perhaps we are tricking ourselves as company earnings haven't went into a tailspin. Inflation will raise nominal earnings. We need to dig a bit deeper these days to determine profit and growth. 

I am still leaning towards shorter term duration. The spread between short and longer duration GICs is not worth keeping money tied up. However, my GICs are limited to emergency savings and mortgage retirement. By fall there should be more clarity on rate direction. I do find interest rate policy to be more exciting than it has been in 15 years. However, I would be content with a longer term rates remaining flat. Once people get used to the concept of interest they may get their finances in order. If we experience the crazy double digit interest rates of yesteryear it will be quite the rollercoaster ride.


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## james4beach (Nov 15, 2012)

londoncalling said:


> I am still leaning towards shorter term duration. The spread between short and longer duration GICs is not worth keeping money tied up.


The danger is that the BoC might start cutting rates at some point. So imagine the possibility that in a couple years, we find ourselves back to 2% interest rates as the Bank of Canada desperately attempts to re-inflate housing.

In that situation (which I agree is possible) today's 5 year GICs at 4.5% would be a great deal.


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## Covariance (Oct 20, 2020)

Once it gets to restrictive level and inflation disappears, or there is a recession it’s axiomatic they will cut. When, not if.

After that, it remains to be seen what the neutral level will be in nominal terms. But I expect they will at least try to aim for a real rate of 0.5%


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## hfp75 (Mar 15, 2018)

I think global deflation has taken a sucker punch and inflation will be sticky at 3-4%. Which in and of itself isn't the end of the world but will chew off the purchasing value of the net dollar. Over the next 5-15 years we will be redefining what the acceptable nominal inflation rate is and what our accepted new reactionary plan will be for the new normal.

I might be crazzy but it sounds like the world is gradually heating up and If we square up with China all the cheapo crap they send us will be displaced to their less cheapo countries for production and costs will start climbing. As well the Carbon tax, like it or NOT, is indeed inflationary & over the next few years, the tax rate as currently subscribed to in Canada, will start doubling annually. It will start having impact. Ironically, we are one of the very few places with such a scheme and thus I am interested if our inflation rate delineates from the G8 - specifically the USA in 5 years due this new consumption tax.

It will be interesting if other countries ditch the idea or get on board with it. For if we are one of the few doing it, we are being punished unjustly. The Liberal impact on our economy is stifling and this unilateral tax could harbour inflation pressures.


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## sags (May 15, 2010)

Watched some CNBC overnight coverage of Europe and Asia the other night, and they are all talking about the new green economy they are transitioning to.

It didn't sound like Canada is a lone island in that regard. Some other countries are already feeling a greater impact of climate change than Canada.

Doing something costs money. Doing nothing costs more.......is the prevailing sentiment in those countries.

Personally I think it is too late. The point of no return was crossed and we will suffer some damage.

The prudent option at this point is to reduce the use of fossil fuels and collect the carbon taxes to fund the mitigation costs and give the earth the time it needs to recover from our stupidity. It may take a long time.


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## Italicum (Feb 10, 2017)

When it comes to carbon tax and the greening of the economy Europe is way ahead of us and the US. They are not budging even while facing the energy markets tsunami brought about by the war. Even their central banks are including the fostering of a transition to a green economy as part of their mandate, something Powell yesterday said the Feds can’t do as they can’t risk their independence as it is not in their statute (i.e. he said that if they Move in a direction that is not explicitly in laws of the land the Feds would risk an attack on their independence. Very valid point in such a divided nation and a democracy weakened by events of the last couple of years)


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## Italicum (Feb 10, 2017)

When the german chancellor met Trudeau in august, as part of a his country’s strategy to continue a transition to a green economy (and a retooling of its massive industry), he invited future imports of hydrogen from Canada….but not any hydrogen (read blue). It has to be green hydrogen. Remarkable for a country presently living an attack on its energy security (and yes, they did make tragic mistakes in the past they are now suffering from)


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