EQ 3.05% for 2yr GIC | EQ Bank | Discussion forum

Great rate. But in the back of my mind, I'm thinking, "This is what these rates are without any more bumps by Bank of Canada and Fed. What will rates be when central banks raise base rates by another 2 percent later this year?" And I'm also curious about the 2 year window...does EQ and other banks think we're going to be deep in recession in two or three years, and rates dropping by then? Are they relying on the troubling bond yield inversions?

Alexandra said
Finally, EQ has 2 year GIC @3.05%!!  

may come in hand when my 3mth matures 🙂

Love it, Dean!

Equitable Bank and the many other banks are not interest rate speculators. Instead, they make their profit on the spread between their deposit rates and their loan rates.

canadian.100 shared the insight Scotiabank staff provided into what all that GIC money is being used to fund:

… I know the staff there well and asked them about the 5yr 3.15% GIC rate which is fairly extensive right now for the Big 6. They reminded me that Commercial Mortgages range from approx 4.50% to 8.50% depending on whether the mortgages are conventional or CMHC, how much equity by purchaser, other factors etc.

Industrial real estate is hot right now according to Morguard:

Industrial assets had record-low inventory levels across Canada in 2021. The national industrial availability rate reported a low of 2.3 per cent at the end of the first half of 2021 with even lower rates in Vancouver, Toronto, and Montreal. Warehouses, logistics and e-commerce businesses continued expanding at a relatively rapid rate, continuing the trend seen since mid-2020. As leasing demand continues to outpace supply, tenants may have difficulty finding available industrial space in 2022 despite an anticipated pickup in construction activity. The strong leasing outlook will continue to attract investment capital to the sector, resulting in record or near-record high transaction closing volume in the coming year.

Once Equitable Bank, Concentra Bank, or CIBC lends that five-year GIC money out through a five-year commercial mortgage for a fixed 4½% to 8½%, it doesn't matter what interest rates do in the meantime.

Alexandra said
Finally, EQ has 2 year GIC @3.05%!!  

Interestingly, their 3-mo went fro 2.05 to 2.0 ...

canadian.100 said

In conversation with an advisor at one of the FIs this morning, the person told me that their opinion is that short term rates will likely come down a bit, while longer term rates will stay higher. Short term rates do seem to be stagnant compared to the increases particularly in 3 yr, 4yr, 5 yr GICs. The FIs are definitely pushing the 5 year GIC. So the decrease at EQ for the 3 month GIC is not surprising.  

Assume the advisor refers to short term rates being 2y and under, there is zero chance 1y and 2y rates are coming down much if at all. With BoC doing multiple clips of 50bps, no one will lock in to a 1y or longer for less. Both the Fed and the BoC are not saying they may, they are in fact "warning the world" they will. Of course if some new world event provides a systematic shock, then all that is said / predicted is out the window, including them NOT going 50.
Do agree FIs will push 1y and under into longer terms, via dropping the rates on those short rates.

I don't see one year terms declining. The rate for it at GICWealth has gone up twice in the last week, now at 2.93

Specific rates for specific terms will always vary somewhat, depending on what the FI's needs are and what prospects it has for future. We've seen numerous times where, when one term's rate increases another declines at the same FI.

Office real estate is a different category than industrial real estate.

Industrial buildings are not filled with cubicles. Those include warehouses, distribution centres, and food processing plants. The workers in those buildings can't work from home.

Workers in a car assembly plant, for example, can't take a few car frames home and spot weld them in their basement!

Companies will have a rude awaking with working-from-home. IBM did a few years ago as described in The Atlantic: When Working From Home Doesn’t Work.

HermanH said
And the 5-yr rate at 3.45 even beats all the brokers!  

I am always a sucker for a good 5 year rate, alas, still no joint GICs!

Jim Sherat said

yeah, that's a pet peeve of mine too.
however, with TFSA short term GICs for my wife and myself, maturing this week, and over 3% for 2 thru 5 year terms, this may be the time to re-build our 'ladder' strategy ? Tempting for sure, and always felt if I can get north of 3%, don't be greedy ... jump in.  

A lot of us prefer joint GIC 's. For that reason, I'm keeping our EQ GIC position on the short side, i.e. 3-12 months.