Good news for small savers who leave billions and billions of dollars lying around in term deposits, GICs (guaranteed investment certificates) or bonds and term products from Épargne placement Québec.
While borrowers will be squeezed like lemons as the Bank of Canada raises its key rate to fight inflation, small savers who rely on ultra-conservative investments to bail out their portfolios are welcoming the rise. interest rates with a big sigh of relief.
The two hikes in the Bank of Canada’s key rate, the 0.25% hike in March and the 0.50% hike this week, had a noticeable impact on the interest yield of risk-free investments.
GOODBYE SHOTS
Gone, then, are the recent times when banking institutions only offered small amounts of interest on the mountain of deposits ($1,250 billion in chartered banks in Canada) that ultra-conservative savers leave in bank vaults, very often for fear of running risks by investing their savings either in the stock market or in the multitude of mutual funds (stocks, fixed-income securities or diversified portfolios).
Last September, the major Canadian banks were only offering an interest yield of around 0.40% on a one-year GIC. Cheaper than that, you keep your money under the mattress!
FIVE TIMES MORE
Today, following the Bank of Canada’s two key rate hikes, the same banking institutions are offering five times more, or an interest yield that exceeds 2.0% for the one-year term.
And since the upward trend in the key rate should continue over the next few months, savers can even expect to obtain a higher return for their future deposits and bank GICs.
But caution requires: the Bank of Canada will continue to tighten bank lending by raising its key rate as long as there is no sign of recession warning it.
We know that in Europe, there is currently a risk of recession which is looming because of the monstrous war unleashed by Russian Vladimir Putin once morest Ukraine. As all major economies influence each other, economic trends can change quickly.
THE BEST CONSERVATIVE INVESTMENTS
In the tables opposite, I present a selection of the best conservative investments currently available to Quebec savers.
Given the increases in the Bank of Canada’s key rate that are still to come, it is best not to freeze your savings for more than 2 years. The reason ? The interest yield should rise further over the next few months.
But as “one in the hand is better than two in the end”, one might as well start taking advantage of the current upward revision of the return on the said risk-free investments by reinvesting now at least a portion of one’s savings which are sleeping in the safes. banking.
Regarding GICs and term deposits, it is possible that the major Canadian banks offer, for a limited time, a return higher than that presented in the table.
As for the suggested federal, provincial and municipal bonds that I give as an example, you will obtain the expected return as long as you hold them until maturity. To access these marketable bonds (or their like), all you need is a brokerage, full service or discount account.
Since they are all negotiable on the bond market, if you resell the said bonds before their maturity, the return will necessarily be different due to the fluctuation of the market value.
Surprisingly, the two major institutions that are the least generous these days in conservative investments with a one-year term are Desjardins with barely 1.1% and Épargne Placement Québec with 1.75%.
CERTIFICATES GUARANTEED 1 YEAR / 2 YEARS
- B2B Bank: 2.65% / 3.32%
- Laurentian Bank: 2.65% / 3.32%
- Equitable Bank: 2,67 % / 3,36 %
- General Bank of Canada: 2,60 % / 3,30 %
- Home Trust Company: 2,70 % / 3,38 %
- ICICI Bank: 2,67 % / 3,40 %
- Canadian Western Bank: 2,58 % / 3,29 %
- Major Canadian Banks: 2.05% / 2.65%
PROVINCIAL OBLIGATIONS MATURITY 12 To 18 MONTHS
- Manitoba: June 2, 2023 2.06%
- Hydro-Quebec: August 15, 2023 2.11%
- Alberta: September 1, 2023 2.18%
- Quebec: September 1, 2023 2.20%
- Ontario: September 8, 2023 2.20%
- British Columbia: September 8, 2023 2.28%
FEDERAL BONDS MATURITY 12 TO 18 MONTHS
- Canada: May 1, 2023 1.93%
- Canada: June 1, 2023 1.98%
- Canada CMHC: June 15, 2023 1.98%
- Canada: 1 September 2023 2.08%
- Canada CMHC: December 15, 2023 2.29%
MUNICIPAL BONDS MATURITY 12 TO 18 MONTHS
- Trois-Rivières: April 17, 2023 2.28%
- Shawinigan: May 8, 2023 2.27%
- Longueuil: July 11, 2023 2.47%
- Laval transport company: July 24, 2023 2.52%
- Sherbrooke: October 23, 2023 2.57%
