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I think one of the best things us fixed income investors can hope for right now is a powerful mania in stocks & risk assets.

If speculation in tech stocks & bitcoinz goes nuts, it should suck money out of bonds and into risky gambles. That will drive interest rates up.

I was worried that we'd be stuck with 0% yields in fixed income for a long time to come, but that's clearly not the case, which is great news I think.
 

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Inflation has already happened from all of this debt/money printing. You can see it in the inflation of asset prices -- stocks, real estate, etc. And you have little speculative bubbles here and there in SPACs, cryptocurrency, and so on.
It's also possible that the bond market is looking at the current situation with speculative manias, and figures that the Federal Reserve will be forced to raise interest rates and/or reduce their QE stimulus.

The crazier the GameStop/Bitcoin gambling gets, the greater the chance the Federal Reserve will tighten.

Remember that at this point, even just the Federal Reserve 'easing off' on the amount of stimulus is equivalent to tightening. The market is absolutely addicted to central banks flooding money into the market.

Beware: the S&P 500 is also addicted to Federal Reserve stimulus.
 

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All govts/Corporation/people are drowned in debt. Interest rates may not rise significantly. Maybe 5yr fixed mortgage will come to 2.25 at the most. otherwise western economies collapse and there will be riots.

If you believe the stories written in mainstream media, you will lose big time. If you are in Ontario, invest in RE only. In the last two years, I would have made close to 400k in RE , but believing stories like RE are overvalued, rates will rise stories did not let that happen.

skip Starbucks coffee, invest that money, you will become a millionaire is the thing of the past.
Borrow as much as possible and invest in Ontario RE to become a millionaire is valid for now and the future.
 

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The US 10 year bond just fell off a cliff. If you look at the 10 year treasury note you can see that something very significant happened to it today.

This should get interesting. Notice that the stock market isn't thrilled about it.
 

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Discussion Starter · #25 ·
I guess all I had to do was wait a couple days and everyone would have been watching interest rates. I thought the discussion would have started taking place when it went through 1% but I guess 1.50% was the right number. What was I thinking? lol.
 

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GIC rates are starting to look better. Here's the current view at iTrade... already these interest rates are higher than a week ago.

I expect these rates to increase in the coming days. There is usually a lag versus the bond market.

21344
 

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Discussion Starter · #28 ·
GIC rates are starting to look better. Here's the current view at iTrade... already these interest rates are higher than a week ago.

I expect these rates to increase in the coming days. There is usually a lag versus the bond market.

View attachment 21344
and for anyone who is familiar with the banking business knows where all that GIC money is mostly lent out...mortgages. If one goes up the other will almost always follow.

Luckily for now, these moves are not overly significant but they do deserve watching.
 

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and for anyone who is familiar with the banking business knows where all that GIC money is mostly lent out...mortgages. If one goes up the other will almost always follow.

Luckily for now, these moves are not overly significant but they do deserve watching.
Yeah, it will be interesting to see how far rates increase. I think the stock market is starting to get nervous about higher interest rates.

One thing I always kind of laugh at is how people tell me my fixed income investments are dangerous, because interest rates "have nowhere to go but up". And... that makes stocks safer?
 

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Discussion Starter · #30 ·
I also wonder if this current move is really just a move from "abnormal" to "more normal" but like all moves the answer is only known after it is all over.
 

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I also wonder if this current move is really just a move from "abnormal" to "more normal" but like all moves the answer is only known after it is all over.
Could be a million different things going on. But I might make myself a drink tonight and head over to CNBC to see what the talking heads are flapping about.

Maybe everyone is selling their bonds and buying bitcoin instead, since it's the future. lol
 

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GIC rates are starting to look better. Here's the current view at iTrade... already these interest rates are higher than a week ago.

I expect these rates to increase in the coming days. There is usually a lag versus the bond market.
Too bad I can't sell/trade GICs. I have way better rates from 11 months ago.. but locking up funds was a huge opportunity cost in hindsight. Who knew

Anything below 2% is just decaying fiat

Just built my first GIC ladder:

3 months 2.45% (EQ Bank)
6 months 2.8%
1 year 2.8%
1.5 year 2.85%
2 year 2.9%
3 year 3%
4 year 3.1%
5 year 3.2%

Will compare rates in 6 months to see if it's worth building more
 

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GIC rates are starting to look better. Here's the current view at iTrade... already these interest rates are higher than a week ago.

I expect these rates to increase in the coming days. There is usually a lag versus the bond market.

View attachment 21344
... I'm looking at your chart. Does iTrade just start with a 2 year term (ie. don't offer 1 year 'cauase Scotia Mortgage at .45 for 2 years is like "why bother"?
 

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... I'm looking at your chart. Does iTrade just start with a 2 year term (ie. don't offer 1 year 'cauase Scotia Mortgage at .45 for 2 years is like "why bother"?
I clicked Compounding Annual GICs. I think this view doesn't show 1 year since compounding doesn't apply. I only ever buy 5 year GICs myself, so this table is showing compounding rates sorted by the 5 year rate.

My guess is that in the coming days/weeks these rates may go higher by 10 basis points
 

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Interest rates are still going up, and the stock market doesn't seem to like it.

At what point do we have to start worrying about the real estate market? The main reason home prices go up are low interest rates, and continuous interest rates cuts. I never bought the stories about foreign buyers/speculators being responsible ... I really think that low interest rates have fuelled the RE bubble.

This summer, when interest rates were slashed, I saw 3 friends go out and buy homes. For one, it was the couple's first home. For another one it was the man's second home, a second property he bought for fun! He was able to get a 1.0% mortgage from HSBC and said he had to buy.

The bond market seems to be forecasting somewhat higher interest rates and inflation to come. My guess is, if rates go high enough, this whole RE market collapses.
 

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Interest rates are still going up, and the stock market doesn't seem to like it.

At what point do we have to start worrying about the real estate market? The main reason home prices go up are low interest rates, and continuous interest rates cuts. I never bought the stories about foreign buyers/speculators being responsible ... I really think that low interest rates have fuelled the RE bubble.

This summer, when interest rates were slashed, I saw 3 friends go out and buy homes. For one, it was the couple's first home. For another one it was the man's second home, a second property he bought for fun! He was able to get a 1.0% mortgage from HSBC and said he had to buy.

The bond market seems to be forecasting somewhat higher interest rates and inflation to come. My guess is, if rates go high enough, this whole RE market collapses.
I'm no expert but I don't think rates will keep moving higher and higher. They will continue their trend: lower highs and lower lows. The 10Y bond rate for instance shouldn't go higher than 2.5% in the next years and I believe it won't go above 2% in the short term. We are still bary at the pre-pandemic level.

Again, I'm no expert but someone buying a property in 2019 was stress-tested for 5.34% while getting a 5-year variable rate around 2.70%. That means the stress-test was a rate 2.64% higher.

Now, the stress-test rate is 4.79%. In 2020, the 5-year variable could be bought around 0.99%. That means the stress-test was at least 3.80% higher. Even if rates go up to 3% in the next 5 years, I don't think the RE will collapse.

The selling price will decrease in response to increasing rates, but it won't collapse. As rates were dropping during the pandemic, here in Quebec we saw housing prices rise +25% year-on-year. We'll certainly get a small correction as rates start rising, but I'm pretty sure that prices will remain above their pre-pandemic level.
 

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Interest rates are still going up, and the stock market doesn't seem to like it.

At what point do we have to start worrying about the real estate market? The main reason home prices go up are low interest rates, and continuous interest rates cuts. I never bought the stories about foreign buyers/speculators being responsible ... I really think that low interest rates have fuelled the RE bubble.

This summer, when interest rates were slashed, I saw 3 friends go out and buy homes. For one, it was the couple's first home. For another one it was the man's second home, a second property he bought for fun! He was able to get a 1.0% mortgage from HSBC and said he had to buy.

The bond market seems to be forecasting somewhat higher interest rates and inflation to come. My guess is, if rates go high enough, this whole RE market collapses.
It matters what they thing is more damaging.

The problem is everyone knows this, and the government has been very clear, they intend to keep rates extremely low for the foreseeable future. So people are comfortable taking on even greater leverage.
I think that even a 1% mortgage rate increase will cause significant impacts, if we see rates increase by 2-3% over the next 5 years (when all these mortgages come due) we'll see a pretty severe crash.

"knowing" that, I think people are even more likely to keep the high debt levels

They really should be pushing to hike rates now, at least to challenge the psychology of the market.
FWIW I'm variable, but I can easily withstand a rate hike of a few %

Now is the time to deleverage, I think even small increases in rates are going to have some pretty severe impacts.
 
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