Bonds are brutal and stocks are sinking - does a 10-year GIC sound good right about now?

A generational opportunity for safe investing in GICs has opened up this year, but don’t get carried away.

Returns for shorter-term GICs and bonds are higher today than for the long term, which is known in financial circles as an inverted yield curve. You see this phenomenon when financial markets see high rates and inflation as a near-term issue and believe rates in the longer term will be lower. EQ’s rate sheet highlights the disappointing returns from taking a term longer than five years. The bank’s non-registered rates peak at 5.75 per cent for one year and decline gradually to 5.1 per cent for five years. For six, seven and 10 years, you get 4.5 per cent.

Another consideration for long-term GICs is the lack of liquidity. If your financial goals change over time, breaking your GIC could be costly in penalties or foregone interest. This risk exists for four and five year terms, but seven and 10 years seem to present a higher level of risk that you’ll change your mind about your investments.

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