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4% 1yr GIC - should I lock in or wait some more?
July 31, 2022
10:57 am
HermanH
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Agit, since you disagree, what is your 'canary/coal mine' test?

July 31, 2022
11:12 am
AR
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agit,
"push rates to 3.5%-4.00% at year’s end." How much higher in terms of gics?

I plead ignorance, "CB rate will go to 3.5% by Dec 2022 and stay @3.5% until the end 2023" What is the rate now?

"CIBC is offering 5 years for 5%." Are the other banks doing the same?

Thanks.

July 31, 2022
11:21 am
HermanH
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5-yr rates for:

2.70% Scotia
3.50% RBC
4.30% BMO
4.55% TD

July 31, 2022
11:29 am
AltaRed
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Not sure where you got those rates. On Scotia iTrade, BNS, BMO and RBC are all 4.6% for 5 year. They don't have CIBC nor TD in their offerings either because they don't want too or TD and CIBC don't want to broker these through Scotia iTrade.

Added: BMO Investorline carries BMO and RBC 5 year at 4.6% too.

July 31, 2022
11:31 am
HermanH
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Found those rates here:

https://whatbank.ca/gics/

July 31, 2022
11:40 am
AR
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For what it matters, Outlook and Eq have switched positions on the gic chart,July 31/22. 5 yr at 5% same but some of the other rates differ as to what was in that position on the chart.

July 31, 2022
11:41 am
AltaRed
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Herman, the site obviously does not poll brokers then, only directly from the 'banks' themselves. It is incomplete.

July 31, 2022
11:50 am
AR
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AR said
For what it matters, Outlook and Eq have switched positions on the gic chart,July 31/22. 5 yr at 5% same but some of the other rates differ as to what was in that position on the chart.  

Um, To clarify, "5 yr at 5% same" applies to the new Outlook position, not new Eq position. Sorry.
At least I can still add in order to post. I go now.

July 31, 2022
12:07 pm
HermanH
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AltaRed said
Herman, the site obviously does not poll brokers then, only directly from the 'banks' themselves. It is incomplete.  

True, but until I started visiting this forum, I did not even know the existence of brokers. I would have simply called banks to see their best rate offers.

July 31, 2022
1:09 pm
Loonie
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Many of us have no interest in opening a brokerage account with iTrade or whomever. The same rates ought to be available direct to customer, perhaps with a higher minimum than that route usually requires.

July 31, 2022
3:19 pm
AltaRed
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I am not suggesting folks should have an interest in opening a brokerage account. Only that sometimes better rates from the same institution are available through alternative channels. Just like Oaken rates direct to consumer are better than Home Trust rates are via the brokerage channel.

It depends on where an FI wants to market its products and what they need to offer to compete with others in that particular market. To each their own.

It is pretty clear 4.5-5% is the current competitive rate for 5 year GICs either through digital 'banks' or via brokers.

July 31, 2022
4:13 pm
canadian.100
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Loonie said
Many of us have no interest in opening a brokerage account with iTrade or whomever. The same rates ought to be available direct to customer, perhaps with a higher minimum than that route usually requires.  

Why should the same rates necessarily be available direct to customer? Did you ever compare the price of an identical grocery item at say Loblaws, Sobeys, Metro, Walmart? The price for the same item is usually different at each retailer - and can even be on sale at one and not at another - so why should this be any different - same wholesaler/supplier/FI but different retailers selling the same item.
Actually the minimum purchase for a GIC at iTrade is pretty low - $1000 for some, $2500 for some, $5000 for some depending on issuer. Guess that is a perk/incentive for iTrade (or similar brokerage) customers.

July 31, 2022
10:07 pm
Loonie
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You ask, why should it be the same for direct customers.
I ask, why shouldn't it be the same or better?

If all I want is a pound of butter, i can go to No Frills and pay less for it. If all I want is a GIC, I will get a worse deal at the No Frills equivalent, direct to customer than at the Loblaw-equivalent brokerage.

I guess the brokerages are worried about how they will hang onto the dollars that have left and will be flowing out of other markets as we move into recession, so they have negotiated some favourable rates. I don't think it's just a matter of what the issuers are offering.

In any event, there are lots of choices out there and those who don't want an iTrade account etc with attendant fees and account minimums can take their money somewhere else. For anyone who, for some reason, really wants to deal with one of these banks and doesn't want or need a brokerage account, I suggest negotiating the rate at a branch. Most people on this forum appear to be well beyond the $1000-$5000 GIC range. Bring evidence of brokerage rates.

July 31, 2022
10:17 pm
Loonie
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I imagine Dean could find us an image to flag the well behaved competitive GIC providers (socks pulled up) and the bad guys (socks falling down) - subject to change. sf-laugh

August 1, 2022
6:48 am
AltaRed
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Loonie said

I guess the brokerages are worried about how they will hang onto the dollars that have left and will be flowing out of other markets as we move into recession, so they have negotiated some favourable rates. I don't think it's just a matter of what the issuers are offering.

In any event, there are lots of choices out there and those who don't want an iTrade account etc with attendant fees and account minimums can take their money somewhere else. For anyone who, for some reason, really wants to deal with one of these banks and doesn't want or need a brokerage account, I suggest negotiating the rate at a branch. Most people on this forum appear to be well beyond the $1000-$5000 GIC range. Bring evidence of brokerage rates.  

Discount stock brokerages like TD Direct Investing or Scotia iTrade are order takers. Their GIC offerings (and rates) are what the issuers want to list there, subject to the brokerage willing* to carry that product. The negotiation behind the scenes is the commission the brokerage wants/needs to receive from the issuer to carry the GIC. It is all pretty simple. The brokerages have no input into the published interest rate of the GIC the issuer wants to pay, but it is pretty obvious many issuers want to be competitive with what the other issuers are also offering. Hence my example in post #64 of 4.6% for 5 years.

They really don't care much about the GIC business. They exist for stock and bond investors. GICs appear to be a sideline for completeness, perhaps at the insistence of customers. Some independents don't even offer GICs on their platforms.

There is no reason to denigrate the DIY stock brokerages for their lists of GIC offerings. Sometimes the issuer rates are higher on the brokerage platform than customer direct as in current times. Most often, they are lower by 15-30bp because of the underlying commission being paid by the issuer to the brokerage to carry them on their platform. For example, on Scotia iTrade right now, Home Trust 5 year is 4.55% and Equitable Bank is 4.50%, somewhat less than what Oaken Financial and EQ Bank are currently offering direct to customer. The primary benefit via a discount brokerage is one-stop shopping.

Account minimums for zero account fees are pretty low at discount brokerages. Any Googling for "2022 review of Canadian discount brokers" will provide hits for sources of summary information, e.g. by Rob Carrick of G&M, MoneySense, etc, etc. Some have account minimums at $25k (total across all accounts), some at $15k (total across all accounts), some independents perhaps zero though I have not researched it. There are virtually no hurdles (barriers) to entry these days if that is what one wants. Buying GICs through a discount brokerage is just another platform/opportunity to do so.

* Brokerages obviously vet who they are willing to carry in their listings for their own reputation. Generally, all issuers must be CDIC insured and of investment grade quality. At least some of the discount brokerages took Home Trust GICs off their offerings during the Home Capital crisis in 2017 and only brought them back in months or maybe a year or so later. I don't recall exactly.

August 1, 2022
9:09 am
Loonie
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I have not seen any verifiable info that tells me that there is no negotiation over GIC rates at the discount brokerages. Any dickering over commission is going to be related to what the GIC costs them anyway.

If the banks didn't want GIC money, they wouldn't be going out of their way to sell GICs, at a higher rates, and with a commission to brokerages owned by other banks. I have heard this story so many times, that they don't really ant your money, as if they are doing you some sort of favour to accept it. They want it when they want it and when they are willing to pay for it, period.

It's not at all obvious that they want to be competitive. Their own banks don't even compete with their brokerage rates. As an aside, I am finding the word 'competitive' increasingly meaningless these days. An FI manager's "competitive" can be a customer's "unacceptable".

The brokerage fees i have encountered have been primarily in trying to extract funds from registered accounts. Someone else here wanted to advise me that you could buy brokerage GICs in amounts of $5K and under. You can't do this without a fee unless you have a much larger minimum in the account. And it needs to be significantly more than the minimum if you are involved in riskier investments, to allow for drops in market value.

I'm not surprised they wouldn't carry Oaken GICs during the crisis. I did very well buying them directly at that time, keeping investments within CDIC limits. 3.5% for five years was an excellent rate at that time, and stood me well as rates plummeted in the subsequent years.

Norman1 remarked, I think as early as January of this year, that it was strange that CIBC, at least, was offering leading GIC rates at the time. I believed, and still do, that they were stockpiling for higher loan rates soon to come. But there is something still going on with these rates that is odd. It may suggest that even higher rates are coming soon, but I am unsure of that right now.

August 1, 2022
9:24 am
Bill
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I love big bank discount brokerages, main reason I've been able to garner my wealth so well, decades of all sorts of minimal-fee transactions (never paid a penny in account or other fees) I otherwise could/would not have done, gics played almost zero role in my use of discount brokers and that's likely typical of their clients. Those who are virtually 100% in gics, probably not worth opening a brokerage account.

Maybe big banks and their brokerages are worried about hanging on to dollars, but I've read they're awash in deposits due to lack of consumer spending due to pandemic, etc, e.g. TD is happy to offer almost zero rate in their HISA these days.

August 1, 2022
9:41 am
Bill
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Account fees have never been an issue for me, e.g. TD Dir Inv has no account fees if the household together has at least $15k total counting all household's TD Dir Inv accounts together. If you're under that then, yes, a brokerage account maybe is not where you should be.

Similarly if a $150 transfer fee for a registered account is material to your decision then again maybe a brokerage account is not the best place. The very few times I've done a transfer that cost a fee I've requested and received reimbursement by the receiving institution.

August 1, 2022
9:43 am
AltaRed
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You may be confusing a GIC broker with DIY discount stock brokerages, because the posted rates at the discount brokerages, which is what I have been talking about, are the rates. Take them or leave them. The discount brokerage does not set GIC rates offered by the issuer. They just provide the platform to buy and hold the GICs. I looked at BMO Investorline, RBC Direct Investing and Scotia iTrade this morning. They all post 4.6% for 5 year big bank GICs plus a few others like Versa Bank. I don't know why that is hard to understand. All 3 of those discount brokerages have a list of 20 or more issuers on their websites this morning, some of them of course being the multiple entities of a big bank.

I find it surprising the big banks are offering so much for GICs since their primary cost of capital such as GoC 5 year bonds is generally so much less (about 3% these days). It defies explanation.

All 3 discount brokerages I am familiar with have issuers with offerings as low as $1k and at the same rate as any other higher denomination. Some minimums are as high as $5k. I believe it has always been that way as long as I've been with discount brokerages (over 20 years).

Oaken Financial doesn't offer GICs through discount brokerages. That is left to Home Trust and it is fact at least some brokerages dropped Home Trust during their capital crisis because their credit rating fell below investment grade, i.e. BB+ or lower. It is not surprising they wouldn't want to be associated with a potentially failing company.

There are no fees to buy and sell GICs within discount brokerages. There are always fees to transfer assets out however, and in the case of registered accounts, also fees to transfer cash out. That is not surprising either. Most people remain with their discount brokerages for many, many years for a host of reasons, including where they hold all/most of their investment assets. As Bill said, most receiving institutions will cover those fees depending on what is being transferred.

As Bill said, discount brokerages are not for everyone but they are a big part of investment portfolios for a great number of investors.

August 1, 2022
10:08 am
AR
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AR said
agit,
"push rates to 3.5%-4.00% at year’s end." How much higher in terms of gics?

I plead ignorance, "CB rate will go to 3.5% by Dec 2022 and stay @3.5% until the end 2023" What is the rate now?

"CIBC is offering 5 years for 5%." Are the other banks doing the same?

Thanks.  

"...July 13, 2022...The Target Overnight Rate will increase by 1.00 percentage points to 2.50%." https://wowa.ca/bank-of-canada-interest-rate
In terms of gics, maybe 1% higher, maybe not.

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