Interest rates?

[Hopperbin]

Was just wondering what others are finding for Prime rates at their financial institutions. The 2 credit unions I deal with still have 4 percent as their prime. Hopefully the banks pass on some of this rate reduction soon. Sure paid off to be at floating the last couple years.

[bucket]

What pisses me off about rates is that the banks are getting massive taxpayer cash injections and are supposed to be helping the economy BUT they are not forced to take the same cuts. The last 2 rate cuts from the boc put the banks .5 higher than they should be. Fine, they are allowed 1 point over boc prime in normal operating. When they are on the public trough they shouldn't be allowed to be at 2.5 over boc prime.

The lending rate should be 2% from any bank right now.

[charliep]

Will note the bank of canada is government backed lending to banks. The real rate of return on investments is substantially higher - look at GIC rates these days.

I note cottonpickens concerns about bond markets and a likely decline in the future. The rates of return on corporate bonds remain extremely high as they compete for an increasingly expensive/hard to access credit market. When banks don't lend to banks (require government intervention), then you know there is trouble.

[bucket]

charliep

What should the interest rates be for farmers or on mortgages considering the government is dumping money into the banks?

[charliep]

No idea.

Will note that bank of Canada is short term money to add liquidity to bank transactions. So you real question should be what is the true cost of borrowing? If you were a senior today and wanting to invest 1 to 5 year term money, what interest rate would you expect? Would 2 % be adequate? With risk of inflation (real risk), would you want at least 4 %? 6%? You can add bank margin to this

Looking a corporate bond for a relative (supposedly safe return 5 % when bought) and note that poop kicking the original asset value has taken. The new bond issue (I suspect) will be a substantially higher return to reflect risk of investment. I note cottonpickens comments about bond markets in previous threads.

To your question, farms will be no different that any other business down the road. Perhaps the real advantage you have 80 % plus equity in a multi million dollar business. Farming (crops in particular) is highly dependent on factors outside anyones control starting with weather. Agriculture land values have not adjusted to the new economic realily - it will come if things stay the same as today. All these things go into interest rates.

[charliep]

By the way, Canadian banks are still profitable. Bank share values have come down (yes I should have sold cottonpicken but I am still above where I bought/provides a decent dividend on the original investment)

[cottonpicken]

I would respectfully disagree about owning banks or any type of bonds.

There will be more right downs coming down the pipe-which may even turn catasrophic.The balance sheet of these financials is going to be hit hard.

Ontario/Quebec has to be focused on,not western canada.When i said a year ago that manufacturing in canada was dead,i meant DEAD.That means a spiraling down of eastern asset prices.
Which means a collapse in the service sector industry.

So why not bonds?

Because inflation.

You can spend time pondering many things and not think of m3 but you cant hide from its effects.

Which brings me straight to gold.Did anybody even ****ing notice how well its held up in light of the big mess.

Its about to travel into the stratsophere.Sellers no longer want to sell.Its called backwardization.

Dont beleive me?

Alls i need is 3 to 6 week time period.

[cottonpicken]

oh ya

DYODD

[charliep]

I should note the issue is deflation today although things will make the flip eventually.

Not recommending bonds or bank shares by the way either. What is important is for all to look at where they invest or perhaps store money in uncertain times based on their financial needs and risk tolerance.

Perhaps I will note the original was about the difference between bank of canada prime and bank primes. Money market returns today are pretty much bank prime. You can shop but one bank I looke at was prime of 3.5 % and money market of 1.5 %. My observation is that bank spread is normally about 2 %.

[Hopperbin]

What bank did you find at 3.5 prime?
My financials are still at 4.
Actually had a talk with the bank manager today and 3.5, 4, or 5 prime does not make any difference anymore unless you have a floating loan that never comes up for renewal. For instance if you are .5 over prime floating that does not renew then you can stay at .5 over. If your loan is to renew then most likely the loan will go from .5 over to 1.75 over. So in other words if you have a floating loan that does not come up for renewal you best keep it, that is where you will get the best rates.

[charliep]

Google the majors. I'll pick on the CIBC but the same applies to other banks.

https://www.cibc.com/ca/loans/index.html

Yes - short term equals cheap (if you are a good customer or have a variable rate loan on longer term debt). What is the real cost if you want to borrow longer term? What do investors want for return on their money including risk premium in uncertain times?