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GIC investors often felt cheated last year when the Bank of Canada’s overnight rate would increase without a corresponding move in GIC rates.

Their anger was actually misdirected – it’s bond yields that have a big influence on GIC rates, not the overnight rate. So what are bond yields doing now? Rising like nobody’s business. GIC yields? They’re flat to lower, which has to be frustrating for the many people eager to lock down today’s high interest rates using GICs with terms of one to five years.

You can still get 5-per-cent GIC yields from some alternative banks. But the size of this group seems to be dwindling at almost the same pace as the yield on government bonds is rising.

Bond yields are on the increase because of financial market concerns that interest rates will have to keep rising to quell inflation. Until recently, the prevailing view was that inflation and rates had peaked. The bond market has zigzagged a lot in the past year – it may be that GIC issuers believe the recent rise in yields will backtrack in the not too distant future.

But in previous retreats by bond yields, GIC rates held up much better than they have lately. GIC issuers seem notably less eager to attract new money right now with competitive rates, which could be a reflection of the slow pace of home sales. Money taken in via GIC investments is commonly lent out in the form of mortgages. The spread between GIC yields and mortgage rates is where a lot of money is made in the financial industry.

Recent developments suggest GIC investors would be wise to scoop up top rates where they can rather than sit back and wait for increases ahead. The bias in the GIC sector does seem to lean toward the status quo or lower on rates. Cashable GICs offer a compromise of so-so rates right now, with the freedom to cash out and buy a better-paying GIC later.

Another approach for GIC investors is to consider comparable investments that take their cue from the Bank of Canada’s overnight rate, including high-interest savings account exchange-traded funds and mutual funds. Expect the overnight rate to stay put until either late this year or early next.

The yield on HISA ETFs is about 4.85 per cent these days, with far better liquidity than GICs offer. HISA mutual funds offer 4 per cent or better, and they’re generally cost-free to buy and sell. The ETF version of the HISA is traded like a stock, which means commissions of about $10 to buy and sell at some brokers.