Apr 30, 2024

Guaranteed Investment Certificate (GIC) Investment in the current Interest Rate Environment – What Should You Consider

GPM received inquiries from Board Members on their current investment situation and looking for further context on what to do next in light of the current interest rate situation. Here are some considerations (Note: each Corporations’ financial situation, upcoming projects and cashflow differs).

Currently the bank account is earning more than Guaranteed Investment Certificates (GICs) being offered for a one-year term largely based on the fact that interest rates are expected to decline in the latter half of 2024.

In March 2024 the rate earned on the bank account was 5.2% BUT this rate changes monthly and if interest rates are expected to decline, it still makes sense to invest out for one year at a slightly lower rate now IF the rate in future will be lower than what a current one-year GIC will pay presently.  While it is anticipated that interest will drop in 2024, when and by how much is all speculation but it is still prudent to assess this information and consider if a longer-term GIC is a good option at this time.

There is no guaranteed the above investment in a longer term GIC will maximize the returns as rates are constantly changing NOR should this be the Boards primary concern. The focus should always be on protecting the funds and ensuring funds are available when needed with getting a “fair” not “maximum” return on these funds being a secondary consideration.

However, having said that, when possible, getting the ‘best’ rate is always preferred.

Further, if the Board wished to invest in any GIC given the current rates of return, the amount recommended for Canadian Deposit Insurance Corporation (CDIC) considerations would be about $95,000. This is to cover interest as well as principal up to $100K per institution. For example, at 5% this is $4,750 in interest over one year or a total of $99,750 – within the $100,000 limit.  Further, keep in mind that at the branch level, TD only invests in its related entities and there are generally only 4 or 5 of these, so investments for greater than $400,000 either need to be with an investment broker or consideration will need to be given for larger investments NOT covered by CDIC (higher rates if investment is over $300,000, are generally available) on the basis that the chance of a Schedule A bank, such as TD Bank, failing is highly unlikely.

GIC rates change daily and throughout the day, but based on posted rates at TD Bank in April 2024, this will give you an idea of where rates sit and allow the Board to make some decisions regarding investing:

  • 6-month (fixed) GIC: 4.15% to 4.20%
  • 1-year (fixed) GIC: 4.95% to 5.14%

(cashable GICs are available but at lower rates)

Rate of Return in TD bank account March 2024 – 5.2%

A review of investment options including potential changes in inflation, interest rates, available insurance coverages by the government agencies (CDIC) limits, staggering of investments to ensure sufficient liquidity to meet upcoming reserve expenditures, and moving investments to an investment broker – are all considerations for review from time to time as these are constantly changing components which impact investment decisions.


* Rates can fluctuate.

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