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CIBC - 5 yr @ 3.25%
January 8, 2022
2:19 pm
Alexandra
British Columbia
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rqs said
Does anyone know (not assuming) whether CIBC would issue taxable interest receipt annually or just one for the entire interest at maturity?  

All banks send out t5 slips for GIC or any interest bearing accounts each year.
If your GIC is locked in for 5 years, you still have to report that years income whether or not you actually received it. If you had 5 GIC's in say CIBC earning income in 2020, then you probably will only get one t5 slip from them this year reflecting the total income from the 5 investments.

January 9, 2022
12:30 pm
Norman1
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KamWest said

It matters because the feds already announced rates are going up and if you lock in next year or the year after you will have a higher end rate. Just keep it at 1.25% in a standard account for the next year then watch the rates climb. The five year escalator can be beaten especially since the 3.288% will be nothing special in the next few years.

The issue is that you'll be earning 1.25% instead of 3.288% for the first year.

To make up for that, you'll need at least

4(1.03288/1.0125)*(1 + 0.03288)⁴ - 1 = 0.0380 = 3.80% per annum 

in the following four years to make up for it.

January 9, 2022
1:10 pm
Alexandre
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Norman1 said

The issue is that you'll be earning 1.25% instead of 3.288% for the first year.

To make up for that, you'll need at least 3.80% per annum in the following four years to make up for it.  

If rates do go up this year, we might see 5 yr GIC @ 4% or better, a year from now.

January 9, 2022
1:18 pm
Dean
Valhalla Mountains, British Columbia
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.
But don't forget that dirty word 'INFLATION'

And as we all know ... it's almost 5% now ❗ sf-confused

    Dean

sf-cool " Live Long And Prosper " sf-cool

January 9, 2022
1:59 pm
COIN
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Alexandre said

If rates do go up this year, we might see 5 yr GIC @ 4% or better, a year from now.  

So that means my GIC's that mature a year from now can be renewed at 4%. Sounds good.

January 9, 2022
2:51 pm
Loonie
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After the 2008 debacle, a similar group of prognosticators kept telling us that Recovery was just around the corner.
Every year, they told us the same thing.

I am wondering how many times they will tell us that interest rate rises are just around the corner. Some economists who are not in a position to do anything about it and don't work for central banks have been predicting it for a while already.

Just wondering...

January 9, 2022
3:37 pm
HermanH
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Just finished watching a TedTalk about making decisions with sub-optimal information; kind of like the current discussion over where interest rates might go.

3 ways to make better decisions -- by thinking like a computer

It's only 12 minutes.

January 10, 2022
8:58 am
gicjunkie
Ontario
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HermanH said
Just finished watching a TedTalk about making decisions with sub-optimal information; kind of like the current discussion over where interest rates might go.

3 ways to make better decisions -- by thinking like a computer

It's only 12 minutes.  

Enjoyed that. Thanks.

Regarding those "experts" who are predicting interest rate hikes - They've never been wrong, right? Seems like they have been more often wrong than right. How many times have those great prognosticators been turned on their ears by changing economic conditions? They may as well be in the business of predicting the weather. We know how often those forecasts come true.

As a friend of mine many years ago once told me. "the only certainty is uncertainty", plus death and taxes of course.

The only interest rates worth hanging your hats on at this time, are the interest rates which are now in effect. Dither at your own peril, but ladder well.

January 10, 2022
10:19 am
Bill
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Not just these experts but (and it's old news) apparently all the experts (if this article's not wrong!):
https://www.newscientist.com/article/dn7915-most-scientific-papers-are-probably-wrong/

It's something you realize as you get older, much better to rely on previous patterns/history to figure out what's coming, far as I'm concerned. I'm not sure we've ever had inflation without rates going up - ?

January 10, 2022
11:08 am
Koogie
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Bill said
It's something you realize as you get older, much better to rely on previous patterns/history to figure out what's coming, far as I'm concerned. I'm not sure we've ever had inflation without rates going up - ?  

If we are going to experience 1970s style Stagflation (which seems a decent bet) then as I recall interest rates do rise but not quickly enough to keep up with inflation. Then they have to jump (or are pushed) higher very quickly.

Mind you, the economy and central bank policies are different now than then but isn't that always a dangerous refrain... "it's different this time"

pro tip: it never is.

January 10, 2022
2:56 pm
Norman1
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COIN said

So that means my GIC's that mature a year from now can be renewed at 4%. Sounds good.

5-year 4% sounds good. But, I don't think that is likely in a year.

It has been a long time since GIC's have paid 4%+ per annum. Last time was in 2009.

Scotiabank is aggressively forecasting 100 basis points of increase in Bank of Canada rates this year from 0.25% to 1.25%. That still doesn't undo those three cuts of 50 basis points each in 2020.

January 10, 2022
4:58 pm
Loonie
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Those of us who use 'outlier' FIs will probably do a bit better.
Some of us are still getting 4% on a 4 yr GIC right now even though the official story may say that hasn't happened since 2009.

January 10, 2022
5:03 pm
julio
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To get 4% 5Y GICs, I believe that it is sufficient for the main FIs to offer sub3% and then "marginal" FIs will offer at least 4%. For example GanaraskaCU was offering 4% 5Y in April 2018, which I still enjoy. Thanks to this site, we have the necessary info on interest rate moves. Thank you to all.

January 11, 2022
5:51 am
canadian.100
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julio said
To get 4% 5Y GICs, I believe that it is sufficient for the main FIs to offer sub3% and then "marginal" FIs will offer at least 4%. For example GanaraskaCU was offering 4% 5Y in April 2018, which I still enjoy. Thanks to this site, we have the necessary info on interest rate moves. Thank you to all.  

I would not count on Ganaraska CU for anything special - if these are their current rates for GICs.

TERM DEPOSITS FIXED
1 YEAR 0.25%
2 YEAR 0.35%
3 YEAR 0.85%
4 YEAR 0.90%
5 YEAR 0.95%

January 11, 2022
10:42 am
Norman1
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canadian.100 said

I would not count on Ganaraska CU for anything special - if these are their current rates for GICs.

Looks like Ganaraska doesn't want funds right now. Sunova CU, Hubert's in-branch parent, doesn't seem to be in the same mood:

TERM Ganaraska
CU
Royal Bank
(Posted)
Sunova
CU
1 YEAR 0.25% 0.60% 1.40%
2 YEAR 0.35% 1.00% 1.50%
3 YEAR 0.85% 1.25% 1.85%
4 YEAR 0.90% 1.50% 1.70%
5 YEAR 0.95% 1.75% 3.00%
January 11, 2022
11:02 am
Norman1
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julio said
To get 4% 5Y GICs, I believe that it is sufficient for the main FIs to offer sub3% and then "marginal" FIs will offer at least 4%. For example GanaraskaCU was offering 4% 5Y in April 2018, which I still enjoy. Thanks to this site, we have the necessary info on interest rate moves. Thank you to all.

One can't rely on finding a distant outlier like Ganaraska CU. Around that time, Oaken and EQ Bank were paying 3.6% for 5 year money. Hubert was paying 3.5%. So, Ganaraska was paying 0.4% to 0.5% more than the likes of Hubert, EQ Bank, and Oaken.

For the risk, the potential reward is also not that much more than the 3.288% from the CIBC GIC after the funds have spent a year at 1.25%:

51.0125 * 1.04⁴ - 1 = 0.0344 = 3.44% per annum 

January 11, 2022
12:10 pm
Loonie
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The value of an increased rate of 40 to 70 points really depends on how much money you put in and how long the term. It could easily amount to several thousand dollars. One needs to do the math for one's particular situation.

January 11, 2022
2:22 pm
savemoresaveoften
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Loonie said
The value of an increased rate of 40 to 70 points really depends on how much money you put in and how long the term. It could easily amount to several thousand dollars. One needs to do the math for one's particular situation.  

Both Loonie and Norman nailed it. most said "better to wait" but not really qualifying/quantifying if "waiting" is indeed "better"....

January 11, 2022
11:54 pm
RetirEd
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I will reiterate: with any compounding "escalator" deposit, one has to calculate the total paid back at the END of the term. There's no simple way to judge the "average" rate spec - it's meaningless. If there is compounding, there will be less to compound in the early years of an escalator.
RetirEd

January 12, 2022
10:29 am
Norman1
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The 3.2882% per annum effective average that CIBC quotes does accurately reflect what one will get:

CIBC Escalating Rate GIC (5 year)
Investment
amount
Year 1 Year 2 Year 3 Year 4 Year 5 Effective
yield
$500 to $999,999 1.000% 2.250% 3.500% 4.250% 5.500% 3.2882%

(1+0.01)*(1+0.0225)*(1+0.035)*(1+0.0425)*(1+0.055) = 1.17558372
(1+0.032882)5 = 1.17558367

One will end up with the same as a non-escalating 3.2882% five-year GIC.

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