GIC Rates Surge as Bond Market Reflects War-Driven Rate Hikes

The Bank of Canada's decision to keep interest rates steady despite rising oil prices has led to an increase in GIC rates in Canada. According to data from WOWA.ca, the top five-year GIC rate has jumped to 4.45 per cent, up from 4.10 per cent on August 5. The best three-year rate has also risen by 45 basis points to 4.35 per cent.

This increase in GIC rates follows the trend set by the bond market. Over the same period, the two-year Government of Canada yield climbed 43 basis points to 3.25 per cent and the five-year yield rose by 37 points to 3.54 per cent.

However, shorter-term yields have risen more significantly. The 10-year yield gained 28 basis points and the long bond only 18. This suggests that markets are bracing for rate hikes, which could be triggered by the ongoing war with Iran.

The Bank of Canada held its interest rate at 2.25 per cent on September 2, but warned that high oil prices could spill into other prices. The U.S. Federal Reserve raised its rate on September 16.