# GIC rates?



## jargey3000 (Jan 25, 2011)

jumping from one thread to another here ...lol
1. where do you go to look for current GIC rate information/? ratehub? other?
2. "if" "you" were considering buying a 3-yr GIC now, - for a reg. acct -TFSA - "what" would you buy?


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## cainvest (May 1, 2013)

1> Look for rate info where you are buying (assuming existing accounts here) them from? 
2> Highest return GIC with at least an A rating.


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## AltaRed (Jun 8, 2009)

That is supposing one wants to look beyond the GIC rates offered by one's current discount brokerage where one currently has their registered account, and I think in Jargey's specific case, for a TFSA, wants to do a TFSA transfer. I'd never go chasing GIC rates in registered accounts and having to do formal transfers and incurring the transfer out costs to do so (~$150 for most brokerage companies).

The time for Jargey to have considered this for his TFSA was in December when he could have withdrawn (rather than transferred) from his current TFSA and re-contributed in January....losing less than one month being out of market.

GIC rates comparison chart is the current 'go to' for GIC rates...which may vary for registered accounts than what is posted here.


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## james4beach (Nov 15, 2012)

I'm considering buying a 5 year GIC myself, but I'm on the fence. I'll definitely buy one within the next couple of months, but I wonder about the timing, to capture the massive increase in bond yields happening right now.

Question to those who regularly watch GICs. Do you think GIC rates at the brokerages today have already moved, or do you think I'm better off waiting a few days (or weeks?) for the GIC rates to catch up?

According to my records, the 5 year, A-rated GICs are up 0.20% since December. Meanwhile, the 5 year government yield is up 0.50%.

Do you think we'll see that 50 basis point increase in GICs, after a delay? I'm scratching my head about why I'm only seeing 20 basis points more in GICs. How closely related do these tend to be?


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## AltaRed (Jun 8, 2009)

One would have to plot 5 yr GIC rates against GoC5 bond over a long period to see how much correlation there is. I think there is a loose correlation but not as much as one thinks. The bond market is more institutional than retail, and the GIC market is almost entirely retail. I think GoC5 could move more before dragging GICs higher.


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## james4beach (Nov 15, 2012)

AltaRed said:


> One would have to plot 5 yr GIC rates against GoC5 bond over a long period to see how much correlation there is. I think there is a loose correlation but not as much as one thinks. The bond market is more institutional than retail, and the GIC market is almost entirely retail. I think GoC5 could move more before dragging GICs higher.


Thanks! Maybe this relationship is not as direct as I thought.

It's rather surprising that for example, an A rated GIC yields at most around 1.25% whereas the 7 year government bond yields nearly the same. That makes me think GICs are a bad deal right now. Just going _two_ more years out, you can be in liquid government bonds at pretty much the same yield.


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## like_to_retire (Oct 9, 2016)

Is liquidity that important to you? Selling a bond subjects you to quite a beating.

ltr


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## MrMatt (Dec 21, 2011)

james4beach said:


> but I wonder about the timing, to capture the massive increase in bond yields happening right now.


You're asking if you should try to time the market.
The answer is almost always no.



> Question to those who regularly watch GICs. Do you think GIC rates at the brokerages today have already moved, or do you think I'm better off waiting a few days (or weeks?) for the GIC rates to catch up?


You could wait a few days, it sometimes takes a bit to shake things out, But realistically it's the start of March and the start of the week, I wouldn't wait too long.


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## james4beach (Nov 15, 2012)

like_to_retire said:


> Is liquidity that important to you? Selling a bond subjects you to quite a beating.


With government bonds, there is no liquidity problem at all. The Government of Canada bonds through iTrade (not sure about other brokers) are more liquid than many major TSX stocks.

So to me a 7 year govt bond is a perfectly good alternative to a 5 year GIC, if the yields are similar.


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## james4beach (Nov 15, 2012)

MrMatt said:


> You're asking if you should try to time the market.
> The answer is almost always no.


That's true but I think I've seen GIC yields react sluggishly (with a time delay) to bond market movements in the past. I wish I had tracked that more carefully so I could know if it's just my imagination or not.


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## james4beach (Nov 15, 2012)

I see that Outlook Financial reset their GIC rates yesterday. Some pretty high rates now.

5 year @ 1.60%


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## l1quidfinance (Mar 17, 2017)

james4beach said:


> I see that Outlook Financial reset their GIC rates yesterday. Some pretty high rates now.
> 
> 5 year @ 1.60%


How can we lock up money for 5 years at 1.6% and consider that to be a pretty high rate? There are plenty of instant access accounts out there paying 1.5%


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## AltaRed (Jun 8, 2009)

That depends on your view of where HISA rates are going. Comparison chart is littered with dozens and dozens of rate decreases this past year, albeit none since the end of December.


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> 5 year @ 1.60%


My parents have put their money in GICs their whole life, but I must admit I totally don't get the point of locking money for 5 years at 1.6% when you can purposely decide by yourself to "lock in" money for 5 years in a All Weather / Permanent / Gyroscopic Investing Desert portfolio that has never returned below 3% in a 5-year rolling window over the past 50 years. All you need to know is how to use a computer.


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## james4beach (Nov 15, 2012)

MrBlackhill said:


> My parents have put their money in GICs their whole life, but I must admit I totally don't get the point of locking money for 5 years at 1.6% when you can purposely decide by yourself to "lock in" money for 5 years in a All Wealther / Permanent / Gyroscopic Investing Desert portfolio that has never returned below 3% in a 5-year rolling window over the past 50 years. All you need to know is how to use a computer.


I realized the same thing a few years ago and ever since then, I've invested all my excess cash directly into my Permanent Portfolio for exactly this reason.

That being said, I still buy GICs for a ladder as part of the fixed income component of my Permanent Portfolio. My 50% "bond" weight of my portfolio holds a mix of XBB, GICs, and individual government bonds.


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## james4beach (Nov 15, 2012)

@MrBlackhill this touches on a point I've tried to make earlier (which has been controversial) that in portfolio design, the whole is _greater_ than the sum of its parts.

"The parts" = GICs and bonds. Remember that XBB holds ludicrous things like govt bonds yielding 0.2%
... Also remember that XIC holds ludicrously bad things like MEG Energy
... you can lose a ton of sleep about all these parts! So many horrible, horrible investments.

"The whole" = the overall portfolio, something like 60/40, or PP, or whatever.

Everyone is always stuck on the 'parts'. Look at the endless questions and agonizing over this or that GIC or bond, trying to time the bond market. Or people agonize about the TSX index, complaining about how it's flawed and chronically underperforms the S&P 500 (not true by the way).

*But the important result is the whole*. You're never going to love everything inside the whole portfolio. I would argue that you need to focus on the portfolio and its metrics. Forget about the performance of 'the parts'. Chart the performance of the whole. Analyze that, its risk and reward metrics.

In other words, take a plug-and-play approach. Use index ETFs or sub-portfolios (which is what I do) _towards_ constructing the whole. But make sure your focus is always on the whole.

My life changed completely when I started taking this view, about 6 or 7 years ago. A totally new way at looking at my investments.


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## l1quidfinance (Mar 17, 2017)

AltaRed said:


> That depends on your view of where HISA rates are going. Comparison chart is littered with dozens and dozens of rate decreases this past year, albeit none since the end of December.


This is true but my main point is that I just can't see any value in locking up money for this length of time at such dismal rates. It may take a bit more effort to move money around different HISA offerings or chase specials with Tangerine. Also if you feel the rates are going down then take a bond fund. At least then you can get the cap gain. If rates go up. No harm as long as you purchase the correct duration for your time horizon and the cap loss is irrelevant as you were planning to lock up for 5 years anyway so all said and done you should have hit the correct rate of return by time you need the cash. 

That's my take anyway.


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## jargey3000 (Jan 25, 2011)

james4beach said:


> I see that Outlook Financial reset their GIC rates yesterday. Some pretty high rates now.
> 
> 5 year @ 1.60%


anyone old enough to remember locking in a 5yr GIC at like, 16% !?


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## like_to_retire (Oct 9, 2016)

l1quidfinance said:


> This is true but my main point is that I just can't see any value in locking up money for this length of time at such dismal rates. It may take a bit more effort to move money around different HISA offerings or chase specials with Tangerine. Also if you feel the rates are going down then take a bond fund. At least then you can get the cap gain. If rates go up. No harm as long as you purchase the correct duration for your time horizon and the cap loss is irrelevant as you were planning to lock up for 5 years anyway so all said and done you should have hit the correct rate of return by time you need the cash.


Why go to all that trouble when fixed income is only there to preserve capital. You can decide what percentage the fixed income represents and then put near zero effort into it with a ladder of GIC's or bonds at your broker. 

Far better to put that effort into the equity portion of your portfolio. The reward is so much greater.

Different HISA rates, different GIC rates, and people scrapping around moving fixed income here and there - what a waste of time.

ltr


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## l1quidfinance (Mar 17, 2017)

like_to_retire said:


> Why go to all that trouble when fixed income is only there to preserve capital. You can decide what percentage the fixed income represents and then put near zero effort into it with a ladder of GIC's or bonds at your broker.
> 
> Far better to put that effort into the equity portion of your portfolio. The reward is so much greater.
> 
> ...


Quite simply opportunity cost of having funds ready to deploy. Also I did note that bonds make more sense. Just simply the GICS in my opinion are currently a waste of time. Also agree far better to have the money in the equity portion.


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## Ponderling (Mar 1, 2013)

Yes, I can recall GIC rates of over 10%. Hell I remember canada savings bonds (yes I know, really a savings certificate) with a coupon rate of 12% in my Christmas stocking one year. ( Parents has sister in individual coaching level of figure skating and me in scouts , so I would get a few hundred in CSB for later scout gear and trip funding as a way for them to 'even the score'. )

I have locked up money for 5 years in a GIC. Kids RESP was approaching getting tapped, and while maw104 had done a great job getting the growth in the resp I was not going to have all in the market and risk a down turn when it was time to draw on the funds. So a ladder of 5, 4, 3 2, and 1 year GIC made up half of the funds. This was with Itrade, but I was able to find and hold a better rate from Canadian Western Bank when I started this 6 years ago.


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## james4beach (Nov 15, 2012)

MrMatt said:


> You could wait a few days, it sometimes takes a bit to shake things out, But realistically it's the start of March and the start of the week, I wouldn't wait too long.


To keep my ladder on track, I bought a Manulife 5 year GIC at 1.25%

My GIC & bond ladder now looks like this (only showing < 10 years) and I'm working on making this spacing steadier, roughly 3 month intervals.










Yes I know there are higher rates from credit unions and lower grade banks, but I'm using what I can find at my brokerage, with A ratings and I like Manulife's financial strength (pdf).

That being said, if anyone feels like "timing interest rates" a bit, I suspect that if you wait a couple more days, these 5 year GIC rates should tick up a few basis points.

I hope interest rates soar, because my next ladder purchases are coming up later this year and I really hope to find juicier yields. Rising interest rates are good for fixed income portfolios.


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## Eclectic12 (Oct 20, 2010)

jargey3000 said:


> anyone old enough to remember locking in a 5yr GIC at like, 16% !?


Old enough but don't remember this rate.

I was all over putting as much money and more than I could afford into the '81 CSB that paid 19.5%.


Cheers


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## Money172375 (Jun 29, 2018)

I don’t buy GICs....even if I did, I’d have a hard time going 5 years at these rates. I understand why some do though.
When I was working, I can’t tell you how many GICs I rolled over for 30 day terms......year after year after year. Like pulling teeth. Have you considered a ladder? Have you considered putting 10% in a low risk MF? Have you considered putting the earned interest into equities?


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## james4beach (Nov 15, 2012)

Eclectic12 said:


> I was all over putting as much money and more than I could afford into the '81 CSB that paid 19.5%.


The inflation rate in 1981 was 13% and was trending up strongly at the time, so the market probably had an inflation forecast of something like 16% to 20% for the following years (maybe even higher) ... this was a great buy, but still, was only something like 3% real return

That's important to remember because it only looks really awesome in hindsight, since inflation went down -- dramatically. That was not something you could predict at the time.

GICs today have about 0% to 1% real return, which is not as terrible as it seems at first glance. Yeah it's definitely a lower real return than past years in GICs, but not dramatically different.

I track my own GIC buys going back many years. Seven years ago, I bought a GIC @ 2.7% which sounds great, but inflation was 2%. The real return was 0.7%. That's only a wee bit higher than the real return on GICs today. Almost no difference versus 7 years ago.

As for XBB, the last time I looked, the yield to maturity was 1.6% which is a 0.6% real return.

Real return on XBB today = real return on a 2.7% GIC from seven years ago


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## Eclectic12 (Oct 20, 2010)

Maybe .... but I can recall several respected sources saying it was a mistake that the gov't had no method to fix, before the campaign started.
The '78 series was 9.5%, '79 was 12%, '80 was 11.5% and '82 was back to 12%.

And if the market was forecasting it ... why weren't the other FIs anywhere close?
Part of th e"good deal" was that other FIs were significantly lower for all of their GIC offerings.


Cheers


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## MrBlackhill (Jun 10, 2020)

https://www.mackenzieinvestments.com/content/dam/mackenzie/en/insights/mi-investor-101-gic-real-returns-en.pdf













https://srsinc.com/wp-content/uploads/PDF/Real%20Rate%20of%20Return%20BW.pdf


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## james4beach (Nov 15, 2012)

Eclectic12 said:


> And if the market was forecasting it ... why weren't the other FIs anywhere close?
> Part of th e"good deal" was that other FIs were significantly lower for all of their GIC offerings.


Ah interesting, maybe I misunderstood. So the CSB rates were far above GICs at the time?


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## OneSeat (Apr 15, 2020)

james4beach said:


> To keep my ladder on track, I bought a Manulife 5 year GIC at* < 1.25% >*
> Yes I know there are higher rates from credit unions and lower grade banks, but I'm using
> what I can find at my brokerage, with A ratings and I like Manulife's financial strength (pdf).


BMO-IL 5 year is currently * 1.59%*
Manitoba Credit Union -* 1.70%*
Why would you accept such a low rate as *1.25%?*

I read your rationale about security etc but how much of that write-up you referenced is just well chosen words? Big profitable organisations spend a lot of money on that sort of thing and like to appeal to people who in all things in life just like to "buy the best". Is it in fact worth it?

I'd love to hear more from experts on the subject because I'm temped to go for the higher %s - is that wise or not? They both stress full insurance - one Federal - one provincial.


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## james4beach (Nov 15, 2012)

OneSeat said:


> BMO-IL 5 year is currently * 1.59%*
> Manitoba Credit Union -* 1.70%*
> Why would you accept such a low rate as *1.25%?*


I looked at what was available at my discount broker. Who is the issuer for the 1.59% GIC that you mentioned here? I doubt it is BMO.

In this earlier post you can see, more or less, the list that I saw at my brokerage (same rates at iTrade and TDDI). That screen shot is from a few days ago and the rates were higher today.

The highest rate I saw was similar to what you wrote, 1.59%. I decided against these low grade issuers such as Home Trust, Equitable Bank, and instead went for the higher grade issuers. The interest rate for those are lower.

You asked why I accepted the lower rate, so I'm telling you. I'm not comfortable buying GICs from Home Trust etc. I would do it if the yields were much higher, but the rates are so similar that it wasn't enough to entice me into those low grade issuers.

And yes they are all eligible for CDIC protection.


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## james4beach (Nov 15, 2012)

Quick additional note: one of the things central banks aim to do with low interest rates (these near-zero rates) is to "chase" money into riskier investments.

The policy is meant to influence you into _taking more risk than you normally would_. Being aware of that, I am very careful and deliberate about the risks I take.

I am not the kind of person who "chases yield" or tries to squeeze out an extra 0.3% return. I had the same view going into the 2008 crisis and I'm very glad I did.

Here's another way I can state it. During the 2008 crisis, when everything was crashing and burning, I never once said to myself: "I wish I had bought a GIC from a sketchier lender for an extra 0.3% yield"


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## Covariance (Oct 20, 2020)

jargey3000 said:


> jumping from one thread to another here ...lol
> 1. where do you go to look for current GIC rate information/? ratehub? other?
> 2. "if" "you" were considering buying a 3-yr GIC now, - for a reg. acct -TFSA - "what" would you buy?


If the only choice was to invest with GICs, I would ladder it out. A 1, 2, and 3 year of equal size or possibly six equally sized at 6, 12, 18, 24 months etc. The amount to invest and specific rates across maturities would dictate whether to go 3 or 6 legs. Why ladder? Rates are volatile and the curve is less than stable. Take a lower rate on shorter maturities but have the option to reinvest at higher levels as each leg matures. The weighted average yield is lower at the outset but could easily beat a three year if rates move up.


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## OneSeat (Apr 15, 2020)

james4beach said:


> Who is the issuer for the *1.59%* GIC that you mentioned here? I doubt it is BMO.


As I said - 
- BMO - - - - - - - - - - *1.59% *
- Hubert, Manitoba - *1.70%
* - I think they are both reliable (Grade A if you like)

BMO has been raising their rates for the last few weeks/months
Hubert has just lowered theirs to 1.7.

You mentioned Grade A banks - is there such a list available for all to see - or is that just a colloquialism?

I agree 1.25% to 1.70% might only be, say, $45 per year - but that still means you can take your wife or friend out for dinner once a year instead of just you on your own.


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## AltaRed (Jun 8, 2009)

James, BMO IL this evening does not have any BMO issued 5 year compound GICs at 1.6%. BMO issued GICs are 1.16%. Their highest rate for 5 year compound is 1.56% at each of Equitable Bank and Home Equity Bank with one foreign bank 5 year Annual Pay at 1.57%.

I have no issue with ANY CDIC insured GIC even with BBB rated Equitable Bank. There is no need to stay with A rated banks. Seriously.

@One Seat: Most of the GIC offerings at discount brokerages that are worthy of buying are in the BBB or BBB+ category You have to look up the credit rating of each issuer to see what it is. Few financial institutions are A or better.


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## OneSeat (Apr 15, 2020)

Yes - I was talking about GICs listed on the BMO-IL website - not necessarily issued directly by BMO - but I assume they do carry BMO approval. Yes their interest rates have moved down slightly since yesterday.

Alta - where do you look-up bank ratings? I tried and could not find any. Are these DBRS ratings?
I did try to find info on the DBRS website but it was hopeless - I searched on one of the banks you mentioned and got 62,546 responses - and on the first 10 pages or so there was no mention of that bank.

You mention CDIC insured as a "qualification". Are you in fact excluding banks that are provincially insured?

Thanks - OneSeat.


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## AltaRed (Jun 8, 2009)

BMO IL does not 'approve' the GIC issuers on their site but they do check to be sure the issuers are CDIC insured, or state otherwise, e.g. they explicitly state VanCity is not CDIC insurer but is insured under BC Credit Union umbrella. And I suspect they don't carry issuers with less than investment grade credit ratings (they don't carry Home Trust for example which has not fully recovered to a solid BBB credit rating for all their debt).

You have to Google for FI credit ratings but it is not hard if, for example, you google "TD debt credit rating" The first link I get is from TD Investor Relations itself listing the credit ratings for its various types of debt. Another example: "Equitable Bank credit rating" and one gets a number of links, e.g. BBB for long term debt and BBB- for subordinated (unsecured) debt. No, they are not easy to get. One has to fish for them. I am not aware of anyone actually rating Credit Unions...mostly because most, if not all, do not issue bond debt.

To my knowledge there are no provincially insured banks, only credit unions. I don't deal with credit unions and have no comment on same. I stick with CDIC insured institutions and I don't care much about credit ratings as long as my GIC is CDIC insured.

Added: FWIW, Scotia iTrade does list the credit ratings of institutions for which it carries GICs in almost all cases. In a few, they say N/R (not rated) and one of them is Canadian Tire Bank, but of course if one is to seek out the credit rating of Canadian Tire itself, one will find it is investment grade. The lowest rated GIC issuer (for which it lists credit ratings) is Home Trust at BBBL. It is a very handy to have that information at one's fingertips.


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## Covariance (Oct 20, 2020)

Further to my answer above to the original question of "What 3 year GIC would you buy?" More specifics on the ladder;

Looking at the rate card there is a 10 basis point difference between a 3year and 1year. IE 0.1%. 
Therefore the 1/2/3 year ladder gives up .05% (5 basis points), relative to investing in a single 3year. In return for the slightly lower average rate one gets the opportunity to reinvest at higher rates at year 1 and 2, or liquidity to deploy elsewhere.


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## james4beach (Nov 15, 2012)

AltaRed said:


> Added: FWIW, Scotia iTrade does list the credit ratings of institutions for which it carries GICs in almost all cases. In a few, they say N/R (not rated) and one of them is Canadian Tire Bank, but of course if one is to seek out the credit rating of Canadian Tire itself, one will find it is investment grade. The lowest rated GIC issuer (for which it lists credit ratings) is Home Trust at BBBL. It is a very handy to have that information at one's fingertips.


I do like that iTrade lists the credit ratings.



OneSeat said:


> You mentioned Grade A banks - is there such a list available for all to see - or is that just a colloquialism?


These ratings aren't fictional things. They are based on financial health of these companies, almost always with good rationales. Googling a bit, you can often find analysis from the credit rating firms that give an overview of the business and things that weighed into their ratings. Those specialized mortgage-focused lenders like Home Trust have lower ratings. Here's the Home Trust report from DBRS. You'll find useful notes in there, for example, a reminder that they specialize in Alt-A mortgages to potentially problematic borrowers who have trouble getting mortgages elsewhere, and the mortgages are uninsured.

I agree with @AltaRed that as long as your deposit is CDIC insured, you should be safe in any case. Even if Home Trust collapses, you will be made whole.

However, I don't want that kind of stress in my life. My GIC ladder and government bonds are my *super safe portfolio*. These are the holdings that I never want to lose any sleep at night, and Home Trust (and Equitable Trust) are the kinds of things that would make me worried, if we get into a market panic.

That's why I avoid them. It's because I want to avoid stress and I don't care about squeezing out a wee bit, imperceptible amount of extra yield.



OneSeat said:


> I agree 1.25% to 1.70% might only be, say, $45 per year - but that still means you can take your wife or friend out for dinner once a year instead of just you on your own.


I think the choice at the time I bought was something like 1.25% to 1.57% but yes. It would generate some extra money.

But I'll tell you what makes it even easier for me to take my wife or friend out to dinner. I have an easier time spending money when I'm not worrying that an economic collapse is about to create huge headaches and losses for me ... the comfort of having a safe portfolio, where I don't have to worry about Alt-A mortgages blowing up, is worth MUCH more to me than an extra $45 a year.


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## OneSeat (Apr 15, 2020)

Alta and James - thank you both for your experienced responses - mucho appreciado.

Brief comments
- maybe I need to improve my googling - could not get the any useful results on DBRS ratings
- but I did like Alta's finale - OK as long as they are CDIC insured
- open question to anyone - is how different is Manitoba's GIC insurance to CDIC? 
- James - interesting monologue on investment results vs security
- - - but I can't relate this to many other posts you have made on investing in general
- - - let's face it risk vs results is fundamental - otherwise there'd be no markets
- - - and - I bet your GIC income is way more than $45 !!!!! (OK - I quoted $45 first.)


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## AltaRed (Jun 8, 2009)

There has been much debate and much written about Credit Union guarantees vs CDIC guarantees, and there are entire threads on this subject. 

There is likely nothing to fear about provincial credit union insurance guarantees as long as the insurance fund has enough reserve to pay out defaults to depositors, e.g. not too many, or too large, defaults in a short period. Provincial governments in some cases provide a backstop against an insurance fund insolvency and may do that for reputational purposes anyway, but perhaps only for residents of that province. One argument might be... why would the Manitoba government be prepared to dig into taxpayer pockets to pay out depositors in other provinces? Could be political suicide.

In any event, the risk would appear to be very small and not material relative to CDIC insurance. 

FWIW though, a few large credit unions have gone federal allowing them to be CDIC insured.


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## james4beach (Nov 15, 2012)

OneSeat said:


> James - interesting monologue on investment results vs security
> - - but I can't relate this to many other posts you have made on investing in general


My portfolio has three segments: stocks, gold, fixed income.

I want the fixed income segment to be safe and stress-free, and I don't chase after extra returns in fixed income. On the other hand, stocks & gold are both wild and volatile things. In these segments, I am happy taking risk and getting extra return. These are the areas with strong returns anyway. So I take my risks on the stock side, but I want my fixed income to be very safe.

In the stock segment, I even own a few very aggressive growth stocks. This might surprise you, considering what I wrote about GIC safety earlier. But these are in different segments.

I want the safe part to be safe, and the risky part to be risky.

This is also why I would never own any "junk bonds". Some people add things like junk bonds to their fixed income portfolio to get higher yields but it doesn't fit my style of investing.


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> Ah interesting, maybe I misunderstood. So the CSB rates were far above GICs at the time?


Mom was checking GIC rates constantly so when she said it was higher, I believed her. 
It's too long ago for me to remember the store front boards listing the range of rates.

*Edit: *RateHub.ca has the '80 five year GIC rate at 12.3%, the '81 rate at 15.4% and the '82 rate at 13.7%.

Don't forget that CSBs were typically sold in Sept, where the bond started in Nov. Lots of water under the bridge by that time.

Just in case you wanted to see what it was like.










Cheers


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## james4beach (Nov 15, 2012)

Eclectic12 said:


> Just in case you wanted to see what it was like.


Wow, that's really something.

So here's a question for you. Let's say inflation got out of control, and the inflation rate becomes 14% and is going up by several percent every year. I mean that gasoline, grocery items, and home essentials are all increasing by double digit % each year like they were in the 70s and 80s.

If that happened, you would again be able to find fixed income at rates like what you had here, 19.5%. Maybe not CSB but there would be some kind of fixed income at similar rates.

Would that be better than what we've had in the last few years?


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## james4beach (Nov 15, 2012)

For those looking to buy fixed income today, or rolling over at maturity, here is something to consider:

The yield to maturity for XBB is now 1.67% which is higher than any GIC available today, even higher than the Home Trust & Equitable stuff.

(Though of course, this requires a ~ 10 year time horizon)


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## OneSeat (Apr 15, 2020)

We think alike - well partially!



james4beach said:


> The yield to maturity for XBB is now 1.67% which is higher than any GIC available today.
> ( - - - requires a ~10 year time horizon)


1. I just added to my GIC ladder with a fully insured GIC offering 1.70% after only 5 years.
2. I put a bigger sum into a short term bond fund offering 2.07% current yield


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## GreatLaker (Mar 23, 2014)

MrBlackhill said:


> View attachment 21384
> 
> 
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> https://www.mackenzieinvestments.com/content/dam/mackenzie/en/insights/mi-investor-101-gic-real-returns-en.pdf


That's an interesting chart showing how bad 1 year GICs are after tax, and why longer term ladders make sense. Back in 2018 I bought a CWB GIC with a rate of 3.42%. Ahhh, those were the good old days!

But I can just see a financial advisor from a bank or investment company putting that chart in front of an unsuspecting client and using it to convince them to invest in a mutual fund with a 2.5% MER. Or a tech fund, or a high yield bond fund. 

And one concern with GICs is that some people will get sold a 5 year GIC, then when it matures rates have dropped and they don't want to invest a lower rate so they sit on it in cash for years. I know two investors that happened to.


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## GreatLaker (Mar 23, 2014)

I will buy GICs through my discount broker for any CDIC approved issuer. I won't go over $100k principal for any one issuer, although with interest they may go slightly over $100k.

I have two 5-year ladders (in different accounts) that both mature around the end of Nov. One small tactic I use to lower risk is I never buy two GICs maturing at the same time from the same issuer. That way if one issuer is insolvent and needs CDIC protection, causing a delay accessing the funds while it is sorted out, the GIC from the other issuer should pay on maturity.

I would not say I am risk averse. Rather I have planned carefully to minimize risk in the safe part of my portfolio.


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## james4beach (Nov 15, 2012)

OneSeat said:


> 1. I just added to my GIC ladder with a fully insured GIC offering 1.70% after only 5 years.
> 2. I put a bigger sum into a short term bond fund offering 2.07% current yield


1.70% is a good find! Even my credit union only has 1.60%

I don't think any short term bond funds give 2.07% yield, unless you're talking about the distribution yield. That doesn't really mean much, since the share price is just going to drop. Just beware, you're not making 2.07% on that.


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## gingymarathoner (Oct 1, 2020)

I wanted to thank everyone contributing to this thread - it has addressed many of the things I have been pondering.


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> ... Wow, that's really something. {19.5% CSB in 1980} ...


With the comments on rising inflation at the time, I am guessing that the CSB could be cashed at any time is being forgotten.
Several points over what a five year GIC would pay and flexibility made it a no-brainer for me at the time.




james4beach said:


> ... So here's a question for you. Let's say inflation got out of control, and the inflation rate becomes 14% and is going up by several percent every year. I mean that gasoline, grocery items, and home essentials are all increasing by double digit % each year like they were in the 70s and 80s.


Hmmm ... I can recall bumps and bruises instead of the steady stream you are describing. I'd have to check though as my parents comments were the main reason to notice.

The gas part also looks suspect considering the Canadian gov't controlled oil and gas prices, setting them below world prices for most, if not all of that time period.
This market was far more chaotic back then. A NYT article from '83 talks about how 87% of Canada's oil production being at the domestic price (i.e. below the world price). About 11% being converted to the world price that the remainder already had.

Then was more like two gas markets where those east of the Ottawa valley, had prices increasing because of the imported oil while those west had the domestic price that wasn't increasing (or not as much).




james4beach said:


> ... If that happened, you would again be able to find fixed income at rates like what you had here, 19.5%. Maybe not CSB but there would be some kind of fixed income at similar rates. Would that be better than what we've had in the last few years?


Does this mean inflation beats the other factors you have previously talked about as artificially depressing interest products?

FWIW ... I'll need to think about it.

Cheers


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## james4beach (Nov 15, 2012)

Interesting, now I'm finally (after some delay) seeing various 5 year GIC rates move higher, e.g.
Manulife Bank @ 1.50%
Scotia & RBC @ 1.30%

Also interesting is Canada Housing Trust (which is government, AAA) maturing in 7 years @ 1.57%
Or Canada Housing Trust maturing in 7.5 years, late 2028, @ 1.67%

Seems to me that these GIC rates have to go higher still to compete. Not sure why I would buy an illiquid GIC at say 1.6% when just going a couple years further out, I can get a AAA-rated, risk free, *liquid* government bond at 1.67%

Support your national housing bubble... buy Canada Housing Trust bonds


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## gingymarathoner (Oct 1, 2020)

james4beach said:


> Interesting, now I'm finally (after some delay) seeing various 5 year GIC rates move higher, e.g.
> Manulife Bank @ 1.50%
> Scotia & RBC @ 1.30%
> 
> ...


Interesting. Can you explain why a GIC purchased from a AAA provider (ie. Canada Housing) is a significant advantage over a company like Oaken (HomeBank/HomeTrust)? I understand that there's a slightly higher chance of failure but with CDIC protection and the still relative unlikeliness of failure, why in your opinion, is the AAA rating a big factor?


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## AltaRed (Jun 8, 2009)

It is rather important in the bond market. There is no CDIC safety net for Canada Housing Trust bonds.

P.S. I agree that with CDIC coverage, a BBB- or BB+ loser like Oaken/Home Trust is okay. I have a Home Trust GIC in my RRIF I think.


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## agent99 (Sep 11, 2013)

That chart for real return of GICs is interesting. They say source is Bank of Canada. Did anyone check or know what the basis was? What GIC rates did they use? Rates vary quite a bit among issuers. And what tax rate did they use? GICs could be in registered accounts where tax would only be paid on withdrawal when rates could be different.

Regardless, the chart does confirm what some of us have been saying. GICs may be a safe place to store some savings, but they are more than often a losing proposition on a real return basis. I try to get a real return of 1% based on a guess of the inflation rate over the term of the GIC. Not buying any right now!


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## james4beach (Nov 15, 2012)

gingymarathoner said:


> Interesting. Can you explain why a GIC purchased from a AAA provider (ie. Canada Housing) is a significant advantage over a company like Oaken (HomeBank/HomeTrust)? I understand that there's a slightly higher chance of failure but with CDIC protection and the still relative unlikeliness of failure, why in your opinion, is the AAA rating a big factor?


The 1.67% yielding bond I mentioned is a federal government bond, so it has zero risk, and is liquid. You can sell it any time. Sorry I should have clarified, this is a bond, not a GIC.

The 5 year GICs are locked in and can't be sold. And far as I know, they actually have lower yields than the super safe government bond. IMO that makes them a bad deal compared to the government bond.

There's no problem with the GICs (and I recently bought one myself), I'm just pointing out that the government bond is *very* attractively priced. Slightly longer term than a 5 year GIC, but with a _higher_ yield, liquid and can be sold, and it's backed by the government.


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## gardner (Feb 13, 2014)

HT/Oaken has 1.8% for 5y. I have a tranche coming up in April and I am crossing my fingers for another little bump in rates.



gingymarathoner said:


> Can you explain why a GIC purchased from a AAA provider (ie. Canada Housing) is a significant advantage over a company like Oaken (HomeBank/HomeTrust)?


For those that keep their GICs inside a broker, you have to deal with what the broker's options are. TDDI offers a range of GIC providers, but mostly AAA providers. If you're using registered money, then dealing with the broker's options is easy and rate chasing at different providers is extremely tedious. Even for non-registered holdings, rate chasing at different providers is something many don't care to bother with. I keep a 10-way GIC ladder at Oaken and rates would have to be pretty lop-sided for me to add another institution to the mix.


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## gingymarathoner (Oct 1, 2020)

james4beach said:


> The 1.67% yielding bond I mentioned is a federal government bond, so it has zero risk, and is liquid. You can sell it any time. Sorry I should have clarified, this is a bond, not a GIC.


I see. In thinking about my experience with bonds, I believe I have only ever held Canadian Savings Bonds (which I always held to maturity). Therefore, I think I made the erroneous assumption that bonds and Gics are essentially identical. I think I understand now the added liquidity of holding bonds over GICs. 

I hold the large bulk of my investments at Questrade. I've attached their current bond bulletin. It's 36 pages but I don't see any offering of Canadian government bonds - are these not offered at all brokerages? How does one find a list of available AAA rated bonds?

Thanks.


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## like_to_retire (Oct 9, 2016)

gingymarathoner said:


> I think I understand now the added liquidity of holding bonds over GICs.


You have to be sure you're comparing apples and oranges. When it comes to risk, even though AAA GoC bonds sound much better than a GIC from some online bank, they are essentially equal risk if the GIC is CDIC insured.

So the difference between a 5 year AAA GoC bond and a 5 year GIC is liquidity, and there's a price for that. You have to establish what you're willing to pay for liquidity and also ask whether you really feel you'll be needing to sell that bond, because you'll take a bit of a haircut if you do - there's a spread. 

Either way, I see a 2026 AAA GoC bond yield around 0.95%, where an online bank 2026 GIC is around 1.7%. Is liquidity worth that spread to you?

ltr


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## gingymarathoner (Oct 1, 2020)

like_to_retire said:


> Either way, I see a 2026 AAA GoC bond yield around 0.95%, where an online bank 2026 GIC is around 1.7%. Is liquidity worth that spread to you?


Right now, I'm leaning towards moving our HISA Simplii funds into an 18 month GIC (or 2) at Oaken. They are offering a 1.6% rate. I really like Oaken for several reasons - online setup is easy, they respond in a timely manner to inquiries and investors can qualify for $100K in CDIC protected investments each at Home Bank and Home Trust (it's like 2 institutions in 1). I know Canadian Tire has a 1.8% HISA but the account opening is difficult and given that I already have accounts at Simplii, EQ and Oaken, I'm not keen to add another.


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## gardner (Feb 13, 2014)

gardner said:


> I am crossing my fingers for another little bump in rates.


Speak of the devil! I got a notice that Oaken has upped the rate to 2.10%/5yrs


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## james4beach (Nov 15, 2012)

gardner said:


> Speak of the devil! I got a notice that Oaken has upped the rate to 2.10%/5yrs


Impressive. My credit union's 5 year rate is only 1.60%

I phoned Simplii the other day to get help with a transfer. The agent asked why I was transferring cash out and I said ... well your savings account now only pays 0.1%. Am I supposed to just sit here and accept that when I can easily get 1.1% at my credit union?

Kind of a slap in the face to call it a "High Interest Savings Account" and pay 0.1%


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