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I have too much cash in TDB8150. Planning on moving it over to Steinbach Credit Union. Just a regular savings account now paying 1.50% or 1.65% if over $100K.

I'm tempted to dump some in a 1 yr GIC there now paying 3.10%. But with more rate hikes coming I think I'll stay liquid for now.

Sorry if this is wrong thread for GIC discussion!
 

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If you have a ton of cash you might also consider building a 5 year GIC ladder. That's how you really get juicy yields. Over the years I have shifted my large amount of cash into a ladder, with tightly spaced GICs that mature every few months. This way I enjoy 5 year GIC rates (always beats savings accounts) and the cash is accessible as each GIC matures, every few months.
I agree the GIC ladder is the way to go.

The 5 year rate is now at 4.1% at Steinbach but with more rate hikes coming this year, I'm going to wait before locking in anything longer than 1 year.

I've been avoiding bonds for fixed income and with these rate hikes still see no reason for them. GIC ladder is simple, safe and bonds are voodoo for me at least.
 

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Beware though, GIC rates are based on bond market rates (not BoC rate) and it's possible that the bond market has already priced in a lot of rate hikes. You are probably right that GIC rates will go higher, but there's the possibility they are close to topping out already -- we have no idea.
With the rate hikes being forecast, I can't see GIC rates not increasing again this year.

Are you currently holding any bond funds? I'm struggling with why I would continue myself.

For many years I held XBB currently yielding 2.81% and down 10.27% YTD.
And CBO yielding 2.55% and down 4.55% YTD.

I can build a GIC ladder that not only will outperform those but also protects my principal.

I've spoken to a few advisors lately who continue to use bonds in fixed part of portfolios but I guess I don't understand the intricacies of their bond investments. With raising rates I'll stick to the GIC ladder.
 

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Yes cumulative performance of XBB over the long term has been good. It no doubt has a place as a core holding.

XBB YTD1m3m6m1y3y5y10yIncept.
Total Return (%) -10.31-3.53-7.10-8.03-8.05-2.412.3321.34144.58
Benchmark (%) -10.22-3.49-7.05-7.92-7.90-2.092.8923.94156.34

XBB is at lowest level since Jan 2019 which is reflected in the 3y performance.

I'm just wondering at this point in time if new money in GIC ladder or XBB will produce better results going forward. Hard to say and I haven't put together a new GIC ladder yet or done the cumulative math on it.
 

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I use Purpose HISA ETF (PSA) a lot in Investor's Edge...currently 1.89%. Also have TFSA and RRSP cash on the way to Motive Financial to start laddering in on long term GICs. I'll try to be patient this year, but 5% compounding in a 10 year GIC is like getting a 6.28% dividend. I have another big GIC paying out in November, so if rates are higher then I won't feel too bad.
I'm also trying to be patient. As rates rise I think we'll get even better opportunity in coming months for higher GIC rates. I'm going to wait for 2 or 3 months before locking in more GIC's.

I use Steinbach credit Union and Oaken who are very competitive. Right now I park my cash in Steinbach's regular savings account at 1.90% and their TFSA with floating rate at 2.10% .

Not questioning your math that the 5% compounding in a 10 year GIC is like getting a 6.28% dividend. But I guess it depends on what you do with the dividend. If re-invested it can potentially beat the 5% compounding GIC.
 

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And what if rates fall in a few months?
They won't. :)

I don't think inflation will be controlled in next few months (2-3) so at a minimum rates stay the same or more likely climb as the fed hikes further. IMHO

Under what scenario do you see rates falling in the near term? Not saying it can't happen, I just don't see how.
 

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See what @m3s said.

I see many ways interest rates could fall (or QE could increase), both of which amount to the same kind of thing: more stimulus.

First thing that's guaranteed to happen is that investors and real estate investors are going to complain a lot. They're going to say the Fed has gone too far, is destroying prices and destroying the economy, and will push back. They will start begging and screaming to stop raising interest rates.

Average people may complain too. Both households and businesses rely on very low interest rates loans (lines of credit, business loans). These interest rates are going up dramatically and it's going to pinch many households and businesses. So I'm sure they will also beg and scream to stop raising interest rates.

Next is the possibility of a "market dislocation". Something in the financial markets could blow-up. For example, a crash in junk bonds, or maybe another crash in mortgage bonds. You can't ever predict what it's going to be, but when asset prices plummet, something can go severely wrong. If something blows up, then the central banks really could stop raising rates. They might even cut rates.

Another possibility is Trump. He's likely to win in 2024 and the last time he was in charge, he told the Federal Reserve to cut interest rates. He very directly interfered with Federal Reserve policy and he could easily do it again. Reducing interest rates is usually a crowd-pleaser as it's a way to juice up asset prices and the economy.

Trump is also unpredictable. He's mentally ill, so it's really hard to know what he may do. Push the Fed to raise rates? Lower rates? Who knows... a total wildcard.

Another way I see is that inflation could moderate. More supply from manufacturers, or maybe some resolution to the war, could alleviate rising prices. If inflation starts to level off and maybe looks like it's no longer running away, that changes the picture completely. At that point the central bank could stop aggressively hiking rates.

Interest rates continuing to rise for the next 10 years is likely, but not certain.
Hey James, Thanks for that post. I don't disagree with pretty much everything you said.

But the big caveat is that I'm considering what rates will do in the next 2-3 months before locking in any mid/longer term GIC's. Actually I really think we have at least 12 months with more increases.

Your post mostly relates to why rates could decrease in the longer term, that is longer than 2-3 months.

Yes, investors and real estate investors are going to complain but I think the fed's objective of lowering inflation trumps that. They are in fact relatively early in the cycle of raising rates and gauging the impact on inflation. This is a months long exercise. Likely many months.

The markets are already in turmoil. I think they keep raising rates, monitoring inflation as they try to get closer to the 2-3% objective. Markets be damned.

For sure Trump is a wild card but the next presidential election is not until November 5, 2024. That's 17 months down the road. Not a factor in the next 2-3 months or even 12 months. But I agree, if he gets in then juicing the economy will be a priority so rate cuts then would be likely.

It's a nice convergence of market correction and higher interest rates so can get some excellent dividends and finally good GIC rates to build a pretty good income portfolio.

But I guess it depends on your perspective. My son is not pleased about re-newing his mortgage next year.
 

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OK that's a good point, you're talking about the next 2-3 months. And I do agree that GIC rates will likely go higher in that time period.
Steinbach now offering Limited-time GIC special 17-month: 3.80% And Oaken at 5% for 5 year.

With more rate hikes coming we could see these go higher still. Not a bad place to park increased cash allocation to wait out a recession.
 

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Timing interest rates is a dangerous game.

How do you know interest rates are going higher? Maybe they will go lower.
My middle name is Karnac. ;) Maybe dating myself but loved that Carson bit.

But can they lower rates anytime soon with inflation at ~8% ? Said it before, my bet is still rates go higher in near term.
 
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