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GIC Rates Increase
August 4, 2022
7:00 am
dougjp
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GR said
1 yr. GIC increased to 4.50% (matching Tangerine).  

Interesting. Just renewed a 15 month today @ 4.5% for that same term. The rate has been 4.5% and didn't change today (yet).

I was told a GIC's terms can be changed up to 10 days after, ie; if rates go up subsequently. Could be interesting info in a rising rate market.

The one thing that unites all human beings is that, deep
down inside, we ALL believe that we are above-average drivers.

August 4, 2022
7:16 am
COIN
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Looking at the GIC chart the gap between 1 year and 5 years is only around 50bp in many, maybe most institutions.

August 4, 2022
7:27 am
AltaRed
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COIN said
Looking at the GIC chart the gap between 1 year and 5 years is only around 50bp in many, maybe most institutions.  

That may decline to about 0-20bp by end of September. With declining GoC5 bond yields and another BoC rate increase in September, the bond yield curve could be severely inverted.

Technically, the GIC rate curve could go inverted too though I don't believe it has happened in recent times. Perhaps it did in the circa 1980-1981 period.

Added: It is already inverted at a few institutions on the GIC chart.

August 4, 2022
7:28 am
dougjp
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COIN said
Looking at the GIC chart the gap between 1 year and 5 years is only around 50bp in many, maybe most institutions.  

True, and I don't really expect the 15 month to increase again. Some are reducing long term GIC rates as noted in other bank sub forums.

Reversal of real estate prices and sales, US technical recession, first signs of consumer backlash to inflation, time delay until most people act due to purchases first onto credit cards and then until the seriousness of spending hits home, end of summer post pandemic travel and other spending binge etc. I'm starting to think a perfect storm "thud" landing late this fall, and don't expect more than one more smaller rate increase as a result.

Nobody else seems to think this, so "I could be wrong" sf-wink

The one thing that unites all human beings is that, deep
down inside, we ALL believe that we are above-average drivers.

August 4, 2022
10:20 am
COIN
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dougjp said
Nobody else seems to think this, so "I could be wrong" sf-wink  

Contrarian thinking is sometimes the best. Avoid the herd instinct.

Anyway, the 4-5 year GIC rates may have topped out at 5% or slightly north of.

August 4, 2022
11:22 am
seh
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dougjp said

I was told a GIC's terms can be changed up to 10 days after, ie; if rates go up subsequently. Could be interesting info in a rising rate market.  

"terms can be changed" by whom - People's, or by the customer? Is that 10 business or calendar days? I don't see this in their terms and conditions?

UPDATE: I guess it's their policy, even though not showing in t&c. I was able to phone in and they changed the GIC to the new, higher rate.

August 4, 2022
12:28 pm
dougjp
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seh said

"terms can be changed" by whom - People's, or by the customer? Is that 10 business or calendar days? I don't see this in their terms and conditions?

UPDATE: I guess it's their policy, even though not showing in t&c. I was able to phone in and they changed the GIC to the new, higher rate.  

No, only by the customer, so I was told. They can't reduce or otherwise change the rate or other things. I have no idea about the rest that you mentioned, but I do know from experience you can call and retroactively change their automatic renewal of whatever term existed before.

The one thing that unites all human beings is that, deep
down inside, we ALL believe that we are above-average drivers.

August 7, 2022
4:22 am
RetirEd
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This is the law, at least in BC.
RetirEd

August 7, 2022
10:20 am
Doug
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AltaRed said

That may decline to about 0-20bp by end of September. With declining GoC5 bond yields and another BoC rate increase in September, the bond yield curve could be severely inverted.

Technically, the GIC rate curve could go inverted too though I don't believe it has happened in recent times. Perhaps it did in the circa 1980-1981 period.

Added: It is already inverted at a few institutions on the GIC chart.  

Interesting, yeah. I don't know what, if anything, that would signify, but the idea that shorter term rates will be higher than longer term rates is interesting. I'd say that's probably more likely than continuing to see GIC rates continuing to climb. We're already at the point where bond yields are roughly equal to GIC yields, and there's no to only modest premiums on common share/preferred dividend yields relative to GIC yields, despite the higher risk. Bonds and equities do offer much greater liquidity than GICs, but not enough to justify that much of a liquidity premium.

Cheers,
Doug

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