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The Bank of Canada’s interest rate finessing is working out quite well for GIC investors and people with money parked in savings.

The bank passed on a chance to raise its trendsetting overnight rate this week, but indicated that further rate increases are possible if inflation doesn’t move in the right direction. If you’ve got money to put into guaranteed investment certificates, savings bank accounts or savings products for investors, this is pretty much an ideal outlook. What a contrast to Canadian stocks and bonds, which have lately given back their gains of 2023.

Returns from GICs are dependent on what’s happening in the bond market, where investors consider the thinking of central banks among other factors. Rates in the bond market right now reflect perhaps a higher level of concern about inflation than the Bank of Canada, which means current GIC returns seem stable in the near term at least.

The status quo in GICs is a rate of 5 to 6 per cent for terms of one through five years at best, while investment savings accounts bought and sold like mutual funds pay in the mid 4 per cent range and high interest savings account exchange-traded funds offer around 5.3 per cent.

Top-of-the-market GIC rates have been stable in recent weeks, although there has been a fair bit of competition at the big banks through special offers above 5 per cent for shorter terms. GIC returns around 6 per cent were available late this week from GIC brokers like GIC Wealth Management and Monarch Wealth Corp. With a minimum $25,000, a rate of 6.08 per cent was available for a one-year term at GIC Wealth Management, and 6.1 per cent for two years.

Investment savings accounts and HISA ETFs are influenced by the Bank of Canada’s overnight rate, although there are competitive factors in play as well. HISA ETF returns are subject to a decision expected shortly from the federal banking regulator, the Office of the Superintendent of Financial Institutions.

HISA ETF assets are held in savings accounts at big banks with more generous returns than retail investors can get. Concerned about what would happen if investors sold their HISA ETFs en masse, OSFI is considering accounting changes for banks that could modestly reduce returns for these popular products.

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