High interest rates for savings, GICs and MMFs (2017)

Banking and Saving strategies, maximizing interest rates, budgeting, GICs, HISAs.
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by gsp_ »

Wing wrote:
DenisD wrote:I was thinking of switching my USD cash to RBF261. I noticed that the banks are increasing their rates on USD HISAs. TD is 0.4% and RBC is 0.45%. IIRC, they used to be about 0.15%. A 200% increase from RBC! :D Still not as good as RBF261's 0.77% though.
https://www.tdassetmanagement.com/solut ... eId=130268
http://www.rbcroyalbank.com/products/isa/
I'm new to these ISAs. What kind of risk level are they? Is it similar to that of Money Market Fund?
No different from a savings account at the corresponding bank or its subsidiaries. The ones in CAD have CDIC protection up to 100k but of course USD instruments are not eligible.
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by westcoastfella »

DenisD wrote:I was thinking of switching my USD cash to RBF261. I noticed that the banks are increasing their rates on USD HISAs. TD is 0.4% and RBC is 0.45%. IIRC, they used to be about 0.15%. A 200% increase from RBC! :D Still not as good as RBF261's 0.77% though.
https://www.tdassetmanagement.com/solut ... eId=130268
http://www.rbcroyalbank.com/products/isa/
Tangerine is still towing the line at 0.15%...sigh
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by SoninlawofGus »

The CPI rate just increased somewhat dramatically to 2.1%, and even 5-year rates through discount brokerages are now, momentarily at least, giving a negative real return (I have a rung that just matured). Does anyone know if GIC rates will respond to the CPI increase at all over the coming days? Rates have been falling for so long now that I have never really tracked the rates against CPI increases.
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by good4u »

SoninlawofGus wrote:The CPI rate just increased somewhat dramatically to 2.1%, and even 5-year rates through discount brokerages are now, momentarily at least, giving a negative real return (I have a rung that just matured). Does anyone know if GIC rates will respond to the CPI increase at all over the coming days? Rates have been falling for so long now that I have never really tracked the rates against CPI increases.
I know what you mean. I have recently purchased a couple of 5-year GIC's at 2.01% in small amounts because this is the best rate available but keep wondering if this is a bad move. A bird in the hand is better? Only time will tell. I (more than ever before) expect that U.S. rates will be rising shortly and I am told that this will drive up Canadian interest rates. I guess only time will tell.
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by Okanagan »

fyi - there is a 5 year GIC at Canadian Tire for 2.5 % for 5 years...just took out earlier this week.
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by Wing »

gsp_ wrote:
Wing wrote:
DenisD wrote:I was thinking of switching my USD cash to RBF261. I noticed that the banks are increasing their rates on USD HISAs. TD is 0.4% and RBC is 0.45%. IIRC, they used to be about 0.15%. A 200% increase from RBC! :D Still not as good as RBF261's 0.77% though.
https://www.tdassetmanagement.com/solut ... eId=130268
http://www.rbcroyalbank.com/products/isa/
I'm new to these ISAs. What kind of risk level are they? Is it similar to that of Money Market Fund?
No different from a savings account at the corresponding bank or its subsidiaries. The ones in CAD have CDIC protection up to 100k but of course USD instruments are not eligible.
Are these ISAs not only available for purchase under brokerages and thus covered by CIPF/IIROC up to CAD 1 million assets including USD investments? My USD is currently under USD HISA that is offering 0.25% return, I'm seeking higher return but equal low risk alternatives.
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by 2of3aintbad »

good4u wrote:
SoninlawofGus wrote:The CPI rate just increased somewhat dramatically to 2.1%, and even 5-year rates through discount brokerages are now, momentarily at least, giving a negative real return (I have a rung that just matured). Does anyone know if GIC rates will respond to the CPI increase at all over the coming days? Rates have been falling for so long now that I have never really tracked the rates against CPI increases.
I know what you mean. I have recently purchased a couple of 5-year GIC's at 2.01% in small amounts because this is the best rate available but keep wondering if this is a bad move. A bird in the hand is better? Only time will tell. I (more than ever before) expect that U.S. rates will be rising shortly and I am told that this will drive up Canadian interest rates. I guess only time will tell.
In a parent's RRIF, a 2.75% GIC will mature on Monday. The 5 year rate there is now 1.95%, up from 1.86%. I'm not keen on renewing for 5 years - we've seen the low !
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by AltaRed »

Wing wrote:Are these ISAs not only available for purchase under brokerages and thus covered by CIPF/IIROC up to CAD 1 million assets including USD investments? My USD is currently under USD HISA that is offering 0.25% return, I'm seeking higher return but equal low risk alternatives.
AFAIK, these ISAs are only available at brokerages. CIPF does not guarantee the value of any investment. It is simply insurance against loss of assets due to brokerage fraud, insolvency, etc. The assets carry their own market risk. Hence a USD HISA is not unlike any other uninsured investment such as stocks or bonds or ETFs or mutual funds. But most/all of the CAD equivalents are CDIC insured just like most GICs.

Added: There is nothing much available for USD cash or cash equivalents beyond MMFs or ISAs
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by Hopetoretire »

Do you think Cdn Tire has a less chance of failure and defaulting to CDIC because of its Canadian Tire business? Is there another bank linked to a non-financial business? Can't seem to find any since PC was taken over?
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by AltaRed »

CT the store would be a separate corporate entity from CT Bank. The latter could go teats up without affecting the former too much I reckon (CT credit card business aside). Why does it matter whether a CDIC institution is tied to a financial business or not? I would have no issue going over $100k with a blue chip bank, but wouldn't do it with second tier businesses.
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by Hopetoretire »

Just thinking that CT isn't subject to derivative crash, or previous subprime mortgage fiasco - so maybe less risk even though less revenue and not blue chip ... am I going down the rabbit hole?
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by AltaRed »

Don't know. Who does CT Bank lend their money out too? Credit worthy secured loans? Beer-can-smashing-in-the-forehead rednecks? I am not famiiar with any of CT's businesses...beyond their mostly disorderly, junky (but often useful) stores.
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by Wing »

AltaRed wrote:
Wing wrote:Are these ISAs not only available for purchase under brokerages and thus covered by CIPF/IIROC up to CAD 1 million assets including USD investments? My USD is currently under USD HISA that is offering 0.25% return, I'm seeking higher return but equal low risk alternatives.
AFAIK, these ISAs are only available at brokerages. CIPF does not guarantee the value of any investment. It is simply insurance against loss of assets due to brokerage fraud, insolvency, etc. The assets carry their own market risk. Hence a USD HISA is not unlike any other uninsured investment such as stocks or bonds or ETFs or mutual funds. But most/all of the CAD equivalents are CDIC insured just like most GICs.

Added: There is nothing much available for USD cash or cash equivalents beyond MMFs or ISAs
But isn't USD HISA account at bank (and other foreign currencies) NOT covered by CDIC AT ALL even when I have nil CAD at the same bank?

So, thinking if USD ISAs have better security at brokerages when at least insured by CIPF up to 1 million CAD equivalent of assets. Not sure how ISAs can go down in value but even if it does, I won't loss everything as in USD HISA (or USD GIC) at a bank due to insolvency.

Am I understanding the above correctly? Thanks!
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by adrian2 »

Wing wrote:But isn't USD HISA account at bank (and other foreign currencies) NOT covered by CDIC AT ALL even when I have nil CAD at the same bank?
Yes.
Wing wrote:So, thinking if USD ISAs have better security at brokerages when at least insured by CIPF up to 1 million CAD equivalent of assets. Not sure how ISAs can go down in value but even if it does, I won't loss everything as in USD HISA (or USD GIC) at a bank due to insolvency.
No.
CIPF protects against insolvency/fraud at the brokerage level. Securities you hold in your brokerage account, under the CIPF umbrella, can and do go bankrupt. CIPF will do nothing if somehow a US$ HISA goes down in value, as per issuer's troubles or whatever. Think of it as protection against theft.
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by Wing »

adrian2 wrote:
Wing wrote:But isn't USD HISA account at bank (and other foreign currencies) NOT covered by CDIC AT ALL even when I have nil CAD at the same bank?
Yes.
Wing wrote:So, thinking if USD ISAs have better security at brokerages when at least insured by CIPF up to 1 million CAD equivalent of assets. Not sure how ISAs can go down in value but even if it does, I won't loss everything as in USD HISA (or USD GIC) at a bank due to insolvency.
No.
CIPF protects against insolvency/fraud at the brokerage level. Securities you hold in your brokerage account, under the CIPF umbrella, can and do go bankrupt. CIPF will do nothing if somehow a US$ HISA goes down in value, as per issuer's troubles or whatever. Think of it as protection against theft.
Let me see if I get it right this time. You're saying if I buy USD HISA/ISA/GIC under say, HSBC Bank Canada, and if HSBC bank goes under, they will lose their values regardless being kept under a bank or brokerage?

So, it is right to assume when comparing HISA/ISA/GIC, the lower the return the lower the risk level?

Umm... don't feel too comfortable holding USD when not protected by CDIC but don't want to take any risk either in any investment products (including MMF). Where are people putting their idle USD except investing? Or, is there any bullet proof USD MMF/HISA/ISA/GIC out there? Difficult to really understand fully what's behind each investment product these days.
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by gobsmack »

Wing wrote:Umm... don't feel too comfortable holding USD when not protected by CDIC but don't want to take any risk either in any investment products (including MMF). Where are people putting their idle USD except investing? Or, is there any bullet proof USD MMF/HISA/ISA/GIC out there?
That's correct. There is no insurance on USD deposits in Canada. If you open an account with TD Canada Trust, they can help you open another account with TD Bank (same company but on the US side). Wire transfers between the two accounts are free (up to 100k per day) and your deposits on the US side will be FDIC insured. This is probably the easiest solution if you want your deposits to be insured.

Keep in mind that moving money between USD and US HISA does not trigger any capital gains/losses. However, simply putting your USD in a MMF may trigger taxes that will be calculated based on the exchange rate (i.e., even though the funds were never converted to CAD). In short, the CRA treats an MMF just like the purchase/sale of something like VTI.
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by iluvnascar »

AltaRed wrote:CT the store would be a separate corporate entity from CT Bank. The latter could go teats up without affecting the former too much I reckon (CT credit card business aside). Why does it matter whether a CDIC institution is tied to a financial business or not? I would have no issue going over $100k with a blue chip bank, but wouldn't do it with second tier businesses.

Just googled Cdn Tire - interesting that Scotiabank owns 20% of it.

I also found that CTFS sold its entire mortgage portfolio to National Bank a few years ago.
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by adrian2 »

Wing wrote:Let me see if I get it right this time. You're saying if I buy USD HISA/ISA/GIC under say, HSBC Bank Canada, and if HSBC bank goes under, they will lose their values regardless being kept under a bank or brokerage?
Yes.
Wing wrote:So, it is right to assume when comparing HISA/ISA/GIC, the lower the return the lower the risk level?
Generally, yes.

FWIW, no money market fund or HISA in Canada has ever "broken the buck", AFAIK.
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by BRIAN5000 »

gobsmack wrote:
Wing wrote:Umm... don't feel too comfortable holding USD when not protected by CDIC but don't want to take any risk either in any investment products (including MMF). Where are people putting their idle USD except investing? Or, is there any bullet proof USD MMF/HISA/ISA/GIC out there?
That's correct. There is no insurance on USD deposits in Canada. .........................
Unless you invest in a BC Credit Union don't know about other provinces.

All money on deposit and money invested in non-equity shares with a BC credit union, regardless of whether it is placed directly with the credit union or through a broker, is 100% guaranteed. Personal and business accounts that are guaranteed include:

Savings accounts
Chequing accounts
Joint accounts
Trust accounts
Term deposits (with no limit on the length of the term to maturity)
GICs (that are in the form of money on deposit with a BC credit union)
Foreign currency deposits.
Accrued interest on deposits is also guaranteed. All BC credit unions are covered.
https://www.coastcapitalsavings.com/Legal/LegalPolicy/
This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by AltaRed »

True but that is not CDIC insurance. Regardless, Wing is looking for something that just is not necessary. As Adrian has suggested, no MMF* or HISA has broken its $10, or $1 as the case may be, to date. There is too much repuatational pressure on a financial institution to allow that to happen. I have held USD cash in significant amounts in various accounts over the years and have not given it another thought. If those assets ever become at risk, we will all have way more severe problems on our hands...e.g. getting our hands on weapons and ammo.

* Think there were a few occasions in the USA where MMFs broke their $10 ($1) unit price from time to time, but that was quickly rectified.
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by Wing »

Thank you all for sharing your views. They are very helpful.
Last edited by Wing on 26 Feb 2017 19:34, edited 2 times in total.
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by Wing »

gobsmack wrote: Keep in mind that moving money between USD and US HISA does not trigger any capital gains/losses. However, simply putting your USD in a MMF may trigger taxes that will be calculated based on the exchange rate (i.e., even though the funds were never converted to CAD). In short, the CRA treats an MMF just like the purchase/sale of something like VTI.
Good point! Do you know if ISA is treated (tax wise) as HISA or MMF? ISA is insured under CDIC (for CAD), so would think it's just like HISA?
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by IdOp »

Just to add another class of alternative, though likely not necessary, one could look at ETFs that invest in US treasury bills or short bonds. BIL-N or SHV-N are examples IIRC. Their holdings should be quite safe, but anything has risks. It would also trigger capital gains getting in and out.
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by AltaRed »

ISAs, HISAs and MMFs all produce interest, taxable at full rates in taxable accounts. The difference is that MMFs (and ETFs) are trusts and thus Canadian domiciled ones issue T3 tax slips. ISAs and HISAs. on the other hand, are not mutual fund structures and thus all? most? issue T5 tax slips.

I don't know whether CRA treats USD MMFs (and ETFs) differently from ISAs and HISAs when it comes to cap gains/losses due to forex movements BUT I seem to recall that all USD cash might be subject to cap gains/losses when it is "used" to purchase something else. FWF has a thread somewhere on the nuances of currency gains/losses. That said, there is an annual exemption of $200 in currency cap gains so that most people 'should' not need to track it for Schedule 3 purposes.

Edited: to add ETFs to my post per IdOp.
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Re: High interest rates for savings, GICs and MMFs (2017)

Post by gobsmack »

BRIAN5000 wrote:
gobsmack wrote:That's correct. There is no insurance on USD deposits in Canada.
Unless you invest in a BC Credit Union don't know about other provinces.
Cool. I didn't know about that.
AltaRed wrote:I don't know whether CRA treats USD MMFs (and ETFs) differently from ISAs and HISAs when it comes to cap gains/losses due to forex movements BUT I seem to recall that all USD cash might be subject to cap gains/losses when it is "used" to purchase something else. FWF has a thread somewhere on the nuances of currency gains/losses.
I am not sure either but this is where I read about the different treatment for MMFs: http://www.financialwisdomforum.org/for ... p?t=117031
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