Canada's GIC Rates Fall Behind Rising Bond Yields

Canada's government bond yields have risen significantly since June 24, but Guaranteed Investment Certificate (GIC) rates have barely followed suit. The five-year government of Canada yield has climbed about 18 basis points and the two-year yield more than 10 basis points. In contrast, the top one-year GIC rate remains at 3.65 per cent, while the best two- and three-year rates are 3.90 per cent, and the leading five-year rate is still at 4.10 per cent.

However, more institutions are matching the leaders in certain terms, with the second-best offer moving closer to the top rate. This has led to a broadening of competition without lifting the GIC ceiling. The strongest increases have appeared in savings accounts, where the top short-term promotional savings rate has reached 5 per cent.

The Bank of Canada has acknowledged that the global inflation outlook depends heavily on how the conflict involving the United States, Israel, and Iran develops. Military escalation and disruption to the Strait of Hormuz are pushing energy prices higher, but a pause in strikes or progress by mediators can quickly reverse this trend.