[AltaRed]

There is also the possibility that inflation comes down over the coming months, perhaps quicker than envisioned by those straight lining past trends. Personally I am open to all possibilities, including this one. Making the case: Commodity prices over the past 6 weeks have fallen significantly. Most notable is the recent move in oil. However, preceding this move were other commodities and metals (copper, grains, aluminum, etc) that dropped 20% or more in a matter of weeks. Target, Walmart and other US retailers have warned of excess inventory that will not clear until Q4. Micron last week warned of a drop in demand for memory and is forecasting unit declines in PCs, smartphones this year. Some of this is a shift to services from goods. We will see.

YOY inflation rates will, of course, begin to drop at some point, especially if energy costs do not get appreciably higher. However, energy costs have not yet percolated through all goods and services yet, so the prices of goods and services do not yet fully reflect underlying higher energy costs. The bigger issue will remain wage demands going forward. Once a new 3 year union contract is signed for 5% increases in each of the 3 forward years, these costs will be passed through to customers. That is the key fear of "high inflation expectations" I mentioned in an earlier post on the latest BoC surveys. So yes, we should expect YOY rates to start to decrease but mostly due to purely mathematical reasons.

 

[damian13ster]

Core inflation that strips energy and food has been rising rapidly as well

 

[Covariance]

HISA (TD) at 1.85% today

 

[MrBlackhill]

I've opened a MomentumPLUS Savings Account recently. Even using only a 90-day premium, I get 0.85% + 0.85% + 0.10% + 1.60% = 3.40%

 

[james4beach]

I've opened a MomentumPLUS Savings Account recently

Man they sure make this account complicated. I wonder why they would use such a convoluted recipe for the interest rate.

 

[nathan79]

I've opened a MomentumPLUS Savings Account recently. Even using only a 90-day premium, I get 0.85% + 0.85% + 0.10% + 1.60% = 3.40%

View attachment 23410

Bizarre.

How can Scotia offer this, but Tangerine's regular rate is still only 0.4%? Some people are getting a maximum of 3% even with promotions. I'm currently getting 2.8%.

 

[MrBlackhill]

Man they sure make this account complicated.

Not that much, the only thing you have to manage is the premium period when you want to add one.

Otherwise, the money you put in that account will have the regular interest + ultimate interest if you have that account + bonus interest from promotions.

Then, you may add premium periods and the money you move in premium periods will have the premium interest if you don't touch it during the premium period.

Bizarre.

How can Scotia offer this, but Tangerine's regular rate is still only 0.4%?

Yes, I also have a Tangerine account and I was wondering the same thing.

 

[MrMatt]

Bizarre.

How can Scotia offer this, but Tangerine's regular rate is still only 0.4%? Some people are getting a maximum of 3% even with promotions. I'm currently getting 2.8%.

These schemes are just ways to buy customers. The discounts and premiums come from the marketting budget, not in the underlying financials of the activity.

In what way does it make sense for the bank to pay you 2.8%, when they can borrow from the BoC for 2.5%?

 

[james4beach]

I've become somewhat tired of these promo games over the years.

Many can be very tricky. My parents opened a Momentum account some time ago (based on one of these promotions) but they've never gotten the high rates ever again. I believe the high rate is also cancelled if you move money out during the period, similar to what Simplii does.

 

[james4beach]

Interest rates appear to be stable for the time being. You can see this in the charts of XSB and XBB ... their prices have now been stable for about 3 weeks (yields not changing much)

 

[MrBlackhill]

I've become somewhat tired of these promo games over the years.

I don't really care about the promos either, it's simply that our main operations are with the Scotiabank. Rates are so low anyways and I don't really hold cash other than for some annual expenses and I just thought that even at only 1.5% to 2% that could bring about $150/year, which is basically nothing, but I'll take it anyways. After all, $150/year invested in the market over 30 years could turn into $20k inflation adjusted.

 

[Thal81]

TDB8150 is now at 2.25%.

 

[james4beach]

TDB8150 is now at 2.25%.

Wow that's actually impressive, this is within 25 basis points of the BoC rate.

And by the way, longer term interest rates have fallen sharply in the last couple days. Both the 5-year and 10-year bond yields (interest rates) are down significantly this week.

There is now some inversion in the Canadian yield curve:
2 years @ 3.11%
5 years @ 2.88%
10 years @ 2.88%

 

[Thal81]

And by the way, longer term interest rates have fallen sharply in the last couple days. Both the 5-year and 10-year bond yields (interest rates) are down significantly this week.

Yeah, and this is reflected in the price of bond funds like ZAG and XBB which have shot up a lot this week. But this trend really started in mid-June when bond funds bottomed. The market doesn't believe we're going to see high interest rates in the long term, and I agree with them.

 

[james4beach]

Yeah, and this is reflected in the price of bond funds like ZAG and XBB which have shot up a lot this week. But this trend really started in mid-June when bond funds bottomed. The market doesn't believe we're going to see high interest rates in the long term, and I agree with them.

I'm still not sure. The market seems willing to believe the central banks but I personally doubt their commitment to fighting inflation. I think the central banks (including the BoC) are biased towards protecting real estate and propping up the credit economy.

I think they are acting tough, and "the act" is part of the game here... but I think they're bluffing. Personally I don't think the Federal Reserve or Bank of Canada is really committed to raising rates enough to fight inflation. So I think we could easily end up in a situation where, a few years from now, we still have chronically high inflation and the central banks have to tighten further than anyone is guessing right now.

That being said, I continue to keep a 50% bond and GIC allocation because it's impossible to accurately predict these things, and rising interest rates are actually good for my bond portfolio in the long term. But I will NOT be surprised at all if we see much higher interest rates in the coming years.

 

[james4beach]

This will be an exciting week, so buckle up

Tuesday has some critical US housing data including the Case-Shiller national home price index value. This will give some insight into whether real estate is responding yet to central bank tightening.

Wednesday July 27 is the Federal Reserve's decision on interest rates and press conference with Powell

Thursday is American GDP release and jobless claims (both are quite important economic data)

Friday is a ton of inflation-related data including the PCE and Chicago PMI

 

[londoncalling]

Anybody have any guess on the amount that the Fed will raise? I am going to say .75% I will also follow that guess with disclosing that I haven't guessed right all year for either US or Canada. I am going get August right though. No change in rate. : D

 

[Covariance]

This will be an exciting week, so buckle up

Tuesday has some critical US housing data including the Case-Shiller national home price index value. This will give some insight into whether real estate is responding yet to central bank tightening.

Wednesday July 27 is the Federal Reserve's decision on interest rates and press conference with Powell

Thursday is American GDP release and jobless claims (both are quite important economic data)

Friday is a ton of inflation-related data including the PCE and Chicago PMI

Great list. One addition, on Friday we see Canada GDP.

 

[Covariance]

Anybody have any guess on the amount that the Fed will raise? I am going to say .75% I will also follow that guess with disclosing that I haven't guessed right all year for either US or Canada. I am going get August right though. No change in rate. : D

75 or 100 There is no meeting in August and the Sept meeting is later in the month on the 21st.

 

[james4beach]

Great list. One addition, on Friday we see Canada GDP.

Wow thanks, didn't know Canadian GDP is this week as well!

US economic data is starting to look bearish (e.g. manufacturing indicators, and last week's Initial Jobless Claims).

If GDP prints for US & Canada look weak... holy cow, watch out.