Canadian Bank Bonds vs GICs

In the past, we have highlighted GICs with 1 to 5 year maturities because of the spread pick-up they offer as a locked in investment. Recent developments concerning the transparency of issuers' loans have affected the market, increasing the yield of shorter termed GICs. If you are looking to invest for 1 to 2 years and can afford to hold on to the investment until maturity (you cannot sell early), take a look at the current posted rates for these products. This may be an opportune time to take advantage of spread widening versus straight bank deposit notes in the bond market. When comparing yields, the highest yielding GICs are approximately 1.35 basis points better than a bank bond in the 1 year term and 1.39 basis points better in the 2 year term, but again GICs are not liquid.

Depending on the issuer, GICs may be eligible for guarantees beyond the issuer itself. For example, in the province of British Columbia, the Credit Union Deposit Insurance Corporation (CUDIC), a statutory corporation, guarantees all deposits and non-equity shares of British Columbia credit unions. This means that 100% of your deposit is protected under this act regardless of the amount.

*As of June 22, 2017

There are various cash management products available that could add significant return to your bottom line. Our goal is to partner with our clients to deliver investment products that maximize their rates and match their cash flow forecasts and budgets. 

Your Dehal Investment Partners

Author:
Michael Dehal, MBA, CPA, CMA, CIM
Vice President & Portfolio Manager