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EQ 1 year GIC is 3.45%
May 20, 2022
8:08 pm
HermanH
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The long-term GIC rates might not be much greater because of the expectations of the bank. In my interpretation, the flat nature of the GIC rates after 3-yrs (each additional year only increases about 0.05%) means that the financial industry expects a significant downturn or decrease in interest rates within 3 years and do not want to pay more for the longer term GICs than absolutely necessary.

Watching the rates increase significantly over these last few weeks/months and expect the same (but in the other direction) at the 30-month mark.

May 21, 2022
4:38 am
savemoresaveoften
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MattS said
I guess I’m asking why is it not possible BOC could go to 3 but gic rates could again only be a percent more?!  

That is exactly what will happen when the BoC is perceived to be done raising rates any further.
Read up on flattening / steepening of the yield curve to get the idea. That is how the financial market works. Always has, always will. There is no such things as "this time it is different" 🙂

May 21, 2022
7:07 am
agit
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Central bankers in Canada, the United States and elsewhere they left interest rates too low for too long to fuel economic growth.

"High inflation is ‘transitory but not short-lived,’ says BoC governor Tiff Macklem" source CBC

"Former Bank of Canada governor Stephen Poloz says government spending and stimulus are not to blame for increased inflation" source BNN

"Federal Reserve calls inflation "transitory" as it keeps interest rates near zero' source CBS

Central bankers most important job is to keep inflation low they failed.

Now they have a big problem in their hand and the idea of raising rate to slow down etc.... out of the windows and the horse has left the barn.

Stagflation soon to be in control and the only way out is to increase interest rates way to high too fast to reduced inflation, and will sent the economy into a recession. the 1979 dé·jà vu when Federal Reserve Chair Paul Volcker shock and raised the Fed funds rate to its highest point in history in order to end inflation

May 21, 2022
8:43 am
MattS
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Hello all.. just wanted to say thank you for taking a minute and providing a response . It’s informative and appreciated.. I am very conflicted about waiting too long before locking in..

May 21, 2022
11:56 am
HermanH
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Yes, everyone has that Fear Of Missing Out. You are not alone.

May 21, 2022
12:30 pm
Loonie
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"Transitory but not short term". Thanks for the laugh.

By this understanding, every living thing on this planet is "transitory", ourselves included. Translation: it will end, but no necessarily in your lifetime.

No worries , folks. Eventually it will end! Heck, it's all short term in the context of the history of the planet...

May 21, 2022
8:01 pm
RetirEd
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That's why we hedge. I took half this year's ladder in long GIC as soon as I saw the first inverted yields appear briefly in March. The rest will wait until August. At least I can count (somewhat) on not being wrong both times.

No crystal ball here.
RetirEd

RetirEd

May 21, 2022
8:32 pm
Loonie
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That's fair.
I think it depends on what sort of risk you can take. We are not dependent on our GIC income at all, so can afford interest rate risk. Compared to other kinds of investment risk, it's minor.
If I were younger, I might put some into the Motive ten year GIC at 4.55 but my odds of still being here in ten years are statistically, about 50:50. I'd probably be better off with an annuity if I'm going to tie up the money and only get the interest.

May 22, 2022
12:18 am
HermanH
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Of course, you could make my blunder. I bought some 2.88% 5-yr GIC from WealthOne when they came out in Sept. Live and learn. (and sob.) sf-cry

Anyone else care to share their blunders?

May 22, 2022
8:39 am
turquoise
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HermanH said
Of course, you could make my blunder. I bought some 2.88% 5-yr GIC from WealthOne when they came out in Sept. Live and learn. (and sob.) sf-cry

Anyone else care to share their blunders?  

Don't feel bad Herman, that's just life. I bought 4-year GICs at 2.5% last summer. At the time, it was the best option for me.

Right now, I'm just grateful that I have these kinds of regrets. Many other people are in much worse shape -- like those who put an unconditional offer on a house, but subsequently weren't approved for the full price by their lender. Now, they're losing their deposit + getting sued for the difference between what they promised to pay vs. what the seller is now going to get (don't anyone worry, the Realtors are still getting paid of course sf-wink)

I'm not saying that I feel better by thinking of people who are worse off (that's not really a healthy life hack), but this is one of those times where I'll gladly accept this type of regret.

So cheer up - your funds are 100% safe and growing every day.

May 22, 2022
9:22 am
Alexandra
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HermanH said
Of course, you could make my blunder. I bought some 2.88% 5-yr GIC from WealthOne when they came out in Sept. Live and learn. (and sob.) sf-cry

Anyone else care to share their blunders?  

Agreed, don't feel badly. 2.88 sounds like a dream. I also a ($25K) 5yr GIC in Jan 2021 from Wealth One @1.9%.....gulp. And another one....I bought a 10 yr Motive @2.5%. But on the other hand I bought a lot from Coast Capital @ 4%.

You have to hedge your bets for sure. Like Loonie, hopefully, having fairly good genes and in good health, I'll make it another 15 yrs but wish to lock in for long periods any longer as don't want a huge headache for my daughter, who lives in another city to clean up when it finally happens.

May 22, 2022
5:45 pm
MattS
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You should start looking for good rates from insurance companies as they allow a beneficiary on non registered money and when the day comes they will release funds regardless of maturity dates direct to your beneficiary by passing probate too…

May 22, 2022
8:17 pm
AndreyG
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We should also consider that keeping funds in cash waiting for better rates de-values the investments. I tracked maximum GIC rates as provided by GIC Wealth and calculated what my 'equivalent' rate will be if I wait and buy at later time at higher rate. It stays almost constant at 2.9%. See attached plot.
Interesting eh?1-1.jpg

May 22, 2022
9:30 pm
turquoise
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AndreyG said
We should also consider that keeping funds in cash waiting for better rates de-values the investments.  

That's a great point. I'm too dumb to create a spreadsheet that would precisely calculate the opportunity cost of keeping funds in a HISA vs. buying a GIC.

For the past several years, whenever a GIC matured or I had cash savings, instead of trying to time the market, I've subscribed to the "get the best 5-year rate possible" approach. Generally, it has worked (and a few times worked very well -- especially during that 6ish month window before Covid).

But now, this is the first time when I am keeping as much in cash as possible. The bigger the gap between the best I can get on a HISA (right now about 2.5%) and a 5-year GIC, the harder it is for me to be patient.

May 22, 2022
10:37 pm
Loonie
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A lot depends on the term you are planning to buy. If you are waiting to buy a one year term, you might as well get on with it now, but if you are waiting to buy five years or longer, the loss experienced by waiting will be spread over longer term and not be as significant. Indeed, there may be a gain.

May 23, 2022
2:06 am
HermanH
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Alexandra said Agreed, don't feel badly. 2.88 sounds like a dream. I also a ($25K) 5yr GIC in Jan 2021 from Wealth One @1.9%.....gulp. And another one....I bought a 10 yr Motive @2.5%. But on the other hand I bought a lot from Coast Capital @ 4%.

turquoise said Don't feel bad Herman, that's just life. I bought 4-year GICs at 2.5% last summer. At the time, it was the best option for me.

Looks like misery loves company. sf-wink

I expected rates to take much longer to rise, instead of the rapid pace in which they did. I thought that getting 'decent' rates for 6-months to 1-year earlier would largely be equivalent if the rates rose past the 2.88% annual rate over yrs 2-5. Boy, was I mistaken. Losing out on 6K/year or 30K over the 5-yr life is annoying, because there is a constant daily reminder of my folly.

The whole experience has given me reverse-FoMO. I will probably hold onto my maturing GICs and not re-purchase until after the crest of rising rates. It will likely be too long, but "once burned, twice shy." Serves me right for not being able to sit on my damn hands and just be patient.

May 23, 2022
5:32 am
savemoresaveoften
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Loonie said
A lot depends on the term you are planning to buy. If you are waiting to buy a one year term, you might as well get on with it now, but if you are waiting to buy five years or longer, the loss experienced by waiting will be spread over longer term and not be as significant. Indeed, there may be a gain.  

Exactly my strategy too.

It makes it an even easier decision when one was not invited to the HISA special rate promo. Lock 25-50% of the funds in 1 year, may even into some 2 years, then sit on the rest. There will be ample opportunity to lock to a longer term at a bigger rate. Rate won’t just collapse overbite while one is sleeping. Even locking in when rates coming down will be less painful than when rates still rising.

In my mind, the pace of GIC rates rising over next 6 months won’t be as fast and furious as past 3 months.

May 23, 2022
6:23 pm
AllanB
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There was a push on this forum to ladder 5yr no matter what yield just keep rolling over. FIs like to parrot 5yr fixed mortgages and term deposits I guess to match their liabilities. My 5s are yielding 3+ with 2-3yrs to go, still I feel a bit misled.

May 23, 2022
6:50 pm
turquoise
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AllanB said
There was a push on this forum to ladder 5yr no matter what yield just keep rolling over. FIs like to parrot 5yr fixed mortgages and term deposits I guess to match their liabilities. My 5s are yielding 3+ with 2-3yrs to go, still I feel a bit misled.  

Yea, it's funny how perceptions change so quickly. This time last year, I was breathing a sigh of relief that I had some 5 year GICs that weren't maturing until 2024 and 2025. Now, I wish they would mature tomorrow sf-laugh

Still, if this is my biggest investment complaint (and it is), I'll take this 10 times out of 10. There are a whole lot of people in this country who can't even balance a checkbook but thought it would be "easy and fun" to be a residential real estate speculator, and who are going to get caught in the vice grip.

May 23, 2022
7:15 pm
lifeonanisland
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turquoise said

Yea, it's funny how perceptions change so quickly. This time last year, I was breathing a sigh of relief that I had some 5 year GICs that weren't maturing until 2024 and 2025. Now, I wish they would mature tomorrow sf-laugh

Still, if this is my biggest investment complaint (and it is), I'll take this 10 times out of 10. There are a whole lot of people in this country who can't even balance a checkbook but thought it would be "easy and fun" to be a residential real estate speculator, and who are going to get caught in the vice grip.  

Pain is coming; of that there is little doubt.

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