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Three-per-cent returns for conservative investors have been all but wiped out by the plunge in interest rates over the past 12 months.

A look through two interest rate websites, and, shows just a single financial firm offering a guaranteed investment certificate at 3 per cent. A year ago, 3 per cent would have looked good, but not great.

Oaken Financial’s five-year GIC appears to be the last refuge of the 3 per cent GIC on a national basis, but not for long. Oaken issued a rate update on Wednesday saying it will cut rates across the board as of Friday, Sept. 20, with the five-year rate falling to 2.85 per cent from 3 per cent. So goes another domino in the trend toward lower interest rates.

The yield on the five-year Government of Canada bond was in the 1.5 per cent range in mid-September, which is an improvement on the low of 1.13 per cent reached last month. But last fall, we had five-year Canada bonds in the 2.5 per cent range.

The question for conservative investors is whether to lock in today’s best rates or wait to see whether the recent uptick in bond yields builds enough momentum to drag GIC rates higher. The case for waiting is that Canada’s economy has been fairly strong lately and may not require rates as low as they are now.

The case for locking in rates is that the global economy is struggling, and Canada’s economic performance might be negatively affected. The flat yield curve – short- and long-term bonds have very similar yields – is a sign that investors are concerned about this country’s economic prospects. In a normal world, long-term rates offer the juicier return.

The inflation rate last month was 2 per cent, which means GICs offering anything in the high 2-per-cent range or 3 per cent give you a modest after-inflation return along with a high level of safety. This should give you some reassurance about committing at least some of your money at current rates.

As ever, the five-year GIC ladder makes some sense: Equal investments in terms of one through five years, with reinvestments of each maturing GIC into a new five-year term. This way, if rates are higher 12 months from now, at least you’ll get a taste.