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Tangerine GIC rate curve
July 28, 2022
6:20 am
hwyc
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Rate changes today clearly rewarding shorter terms.

  • 90 Day Guaranteed Investment 1.75% (was 0.80%) sf-surprised
  • 180 Day Guaranteed Investment 4.00% (was 3.25%) sf-surprised
  • 270 Day Guaranteed Investment 4.25% (was 3.50%) sf-surprised
  • 1 Year Guaranteed Investment 4.50% (was 4.25%)
  • 1½ Year Guaranteed Investment 4.25% (was 4.00%)
  • 2 Year Guaranteed Investment 4.30%
  • 3 Year Guaranteed Investment 4.60%
  • 4 Year Guaranteed Investment 4.40% (was 4.65%) sf-frown
  • 5 Year Guaranteed Investment 4.45% (was 4.75%) sf-frown

Could it be a sign of rate peaking in general? sf-frown

July 28, 2022
7:13 am
agit
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quoting the article "While borrowing will become more expensive, those higher interest rates will reward savers. Admittedly, it may be some time before those returns compete with inflation

“We will see more responsiveness to the rising rates on the shorter maturity

The movement on longer durations — such as three-year, four-year and five-year CDs — will likely be more tempered amid recession fears, McBride predicted. "

full article here https://www.cnbc.com/2022/07/28/what-new-federal-reserve-interest-rate-hike-will-mean-for-your-savings.html

July 28, 2022
7:35 am
savemoresaveoften
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The US rate inches up to 3.75% for 1y as well

July 28, 2022
7:38 am
AltaRed
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hwyc said
Could it be a sign of rate peaking in general? sf-frown  

Don't know but with the bond yield curve having inverted and continuing further in that direction, start to expect shorter terms to exceed longer terms, or at least equal to longer terms for the time being. https://www.bankofcanada.ca/rates/interest-rates/canadian-bonds/

July 28, 2022
8:08 am
savemoresaveoften
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The real trick is if u keep waiting for another 6 months and 1y does hit 5% (not saying it will but assume it does), you run the reinvestment risk of rates may already come back down 18 months from today. Waiting does not always mean you remain better off.

July 29, 2022
11:42 am
cgouimet
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Kinda weird to see TNG as the top rate for 1Yr GIC's ...

https://www.highinterestsavings.ca/gic-rates/

CGO
July 29, 2022
12:12 pm
Dean
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cgouimet said

Kinda weird to see TNG as the top rate for 1Yr GIC's ...

https://www.highinterestsavings.ca/gic-rates/  

Yup ... and also when you see that their 5Yr GIC pays slightly 'Less'.

Go figure,

    Dean

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

August 5, 2022
11:36 am
implode
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savemoresaveoften said
The US rate inches up to 3.75% for 1y as well  

Took up on this. Split USD into two batches. Main batch at 1 year 3.75% and the other batch at 180 days, so just 3%. Still significantly higher than any rate that a USD savings account gives. And Tangerine hadn't made me any promo offers for many months after I didn't accept their previous 2% offering.

August 5, 2022
12:11 pm
Norman1
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Dean said

Yup ... and also when you see that their 5Yr GIC pays slightly 'Less'.

If Tangerine Bank finds that people are asking for one-year and three-year loans, then there's no point attracting two-, four-, and five-year GIC funds.

Let a competitor pay 5% for five-year money that Tangerine Bank doesn't need.

CIBC recently cut the rate on its 5-year CIBC Bonus Rate GIC from 5% to 4½%. Looks like CIBC doesn't need as much 5-year GIC funds too.

August 7, 2022
10:49 am
Doug
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hwyc said
Rate changes today clearly rewarding shorter terms.

  • 90 Day Guaranteed Investment 1.75% (was 0.80%) sf-surprised
  • 180 Day Guaranteed Investment 4.00% (was 3.25%) sf-surprised
  • 270 Day Guaranteed Investment 4.25% (was 3.50%) sf-surprised
  • 1 Year Guaranteed Investment 4.50% (was 4.25%)
  • 1½ Year Guaranteed Investment 4.25% (was 4.00%)
  • 2 Year Guaranteed Investment 4.30%
  • 3 Year Guaranteed Investment 4.60%
  • 4 Year Guaranteed Investment 4.40% (was 4.65%) sf-frown
  • 5 Year Guaranteed Investment 4.45% (was 4.75%) sf-frown

Could it be a sign of rate peaking in general? sf-frown  

Yeah, I noticed this as well...the Tangerine and Simplii Financial GIC rate curves have inverted, which is good for me, since I'm not looking to tie up funds longer than one year, let alone three to five years. The six-month GIC rate of 4.00% looks particularly interesting to me, as I may look to deploy that cash into either (a) equities or (b) possibly a condo purchase at some point. For this month and likely next, I've got it parked at Tangerine in the HISA with their 3% promotional rate.

Interestingly, just this week, I noticed Scotia iTRADE took down all their cashable (30-90 day minimum terms) and six-month GICs, such that 1 year non-redeemable GICs are now the minimum. 🙁

Cheers,
Doug

August 7, 2022
10:54 am
Doug
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Norman1 said

Dean said

Yup ... and also when you see that their 5Yr GIC pays slightly 'Less'.

If Tangerine Bank finds that people are asking for one-year and three-year loans, then there's no point attracting two-, four-, and five-year GIC funds.

Let a competitor pay 5% for five-year money that Tangerine Bank doesn't need.

CIBC recently cut the rate on its 5-year CIBC Bonus Rate GIC from 5% to 4½%. Looks like CIBC doesn't need as much 5-year GIC funds too.  

That's overly simplistic, as it doesn't work quite like that. They don't match every deposit to every mortgage. Ultimately, the bank does realize they will require the same level of funding now as they do in the future, so they'd ultimately like to lock in funding at longer terms. Their strategists and economists may have shifted or evolved their view on interest rate directions, such that they predict the BoC to begin easing (i.e., by cutting rates) sooner than later, too. And there's also the GIC demand, too. They may well need, or desire, five-year GIC funding, but if they're finding the demand isn't there, they may well have to evolve their offer.

Cheers,
Doug

August 7, 2022
11:06 am
AltaRed
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That is why one reason the spread between 5 year GICs and 5 year GoC bonds is currently higher than that between 2 or 3 year spreads. If one was to assume spreads should be about the same, 5 year GICs would be paying a heck of a lot less than they are today.

August 7, 2022
12:55 pm
canadian.100
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Doug said

Yeah, I noticed this as well...the Tangerine and Simplii Financial GIC rate curves have inverted, which is good for me, since I'm not looking to tie up funds longer than one year, let alone three to five years. The six-month GIC rate of 4.00% looks particularly interesting to me, as I may look to deploy that cash into either (a) equities or (b) possibly a condo purchase at some point. For this month and likely next, I've got it parked at Tangerine in the HISA with their 3% promotional rate.
Cheers,
Doug  

Tandia is offering a 180 day Term Deposit/GIC @ 0.50%. I doubt you will be lining up for that offer. I definitely won't!

August 7, 2022
1:10 pm
agit
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Doug said

Their strategists and economists may have shifted or evolved their view on interest rate directions, such that they predict the BoC to begin easing (i.e., by cutting rates) sooner than later, too.
Cheers,
Doug  

Fact

"[We're] nowhere near almost done," San Francisco Fed President Mary Daly said in an interview on LinkedIn last week. cnn

Fed Governor Bowman sees ‘similarly sized’ rate hikes ahead after three-quarter point moves “My view is that similarly sized increases should be on the table until we see inflation declining in a consistent, meaningful, and lasting way,” she added in prepared remarks in Colorado for the Kansas Bankers Association. In any case, we must fulfill our commitment to lowering inflation, and I will remain steadfastly focused on this task,” Bowman said. cnbc

Loretta Mester, head of the Federal Reserve Bank of Cleveland, told the Washington Post that it "would be inappropriate ... to cry victory too early" and risk letting high inflation become entrenched. cnbc

August 7, 2022
1:15 pm
Norman1
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Doug said

That's overly simplistic, as it doesn't work quite like that. They don't match every deposit to every mortgage. Ultimately, the bank does realize they will require the same level of funding now as they do in the future, so they'd ultimately like to lock in funding at longer terms. Their strategists and economists may have shifted or evolved their view…

It is actually as simple as that.

They don't need to lock in funding that they don't need right now. If it needs another $1 billion in future funding, Royal Bank can just wait another three months for another quarter to end and have another $4 billion in profit they can use.

The banks are not hedge funds speculating on interest rates. They've been around long enough to know that economists, including their own, don't have good records in predicting interest rates.

It is quite foolish to issue 5-year GIC's at 5% today for five-year funds that aren't needed now. That 5-year GIC has a limited shelf life. It only has four years left a year from now. If four-year GIC's drop to 4% next year, then the bank is going look quite stupid paying 5% for the remaining four years when it and competitors can issue fresh four-year GIC's at 4%.

Just match the GIC money flowing in to the loans being granted to lock in the spread. Leverage by 10:1 to capital, as allowed by the regulators and earn 10% to 20% per annum return on capital. Don't need to rely on shaky economic forecasts.

If it takes an extra ½% to bring in the needed five-year GIC money, then charge an extra ½% to the five-year borrower.

August 7, 2022
1:35 pm
AltaRed
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I suspect FIs tend to smooth out the rough edges so that GIC (and HISA) rates do not look as volatile as perhaps they should be. The degree to which this is done is obviously a complex algorithm taking account of current rate of demand deposits, demand for loans, changes in the bond yield curve and competitor rates, and staying within risk management policies.

It is interesting some FIs such as Motive have HISA rates that are out of step with competitors. Only Motive knows why they are doing that. Also, only those FIs who are paying 5% on 5 year GICs know why they are doing so.

August 7, 2022
8:11 pm
Norman1
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Canadian Western Bank, who is behind Motive, likely is not overrun with short term deposits and can make good use of more HISA money.

If a lender has lots of commercial mortgages or equipment leases that still make sense to fund, then they may not mind paying 5% on the five-year GIC's to fund them. canadian.100 shared that when five-year GIC's were around 3.15%, commercial mortgages were 4½% to 8½%.

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