Taking advantage of the reduction in the key rate of the Bank of Canada, the Minister of Finance Eric Girard is, this time, particularly cheap towards small savers.
In fact, Minister Girard is offering barely 3.5% interest on the new vintage of Savings Bonds that he has just launched on the market, through Épargne Placements Québec.
Why do I find him stingy, the financier of the Legault government? Because the Bank of Canada’s key rate has fallen by 3⁄4 of a percentage point over the past year (from 5.0 to 4.25%) while it has decided to cut the yield on its new Bonds. savings of 1.5 percentage points.
Last year at this same period of sale of Savings Bonds (from 1is October to 1is November), Quebec offered us an interest yield of 5% on Savings Bonds. This year, with its yield of 3.5%, it reduces the yield by 1.5 percentage points, or double the reduction in the Bank of Canada’s key rate.
We agree that the minister could have shown a certain kindness towards small savers by only reducing the rate by 3/4 of a percentage point as the Bank of Canada did. But no! he preferred to cut the yield on Savings Bonds by double the reduction in the central bank’s key rate.
Eric Girard will thus save interest costs on the backs of small savers who are fond of Savings Bonds due in particular to the great flexibility of being able to cash them in at any time without financial penalty.
You should know that all current Savings Bond issues will also see their yield drop to 3.5% interest. The yield of the old vintage from October 2023 falls from 5% to 3.5%. And all others in circulation see their yield drop from 4.75% to only 3.5%.
LESS THAN BANKS
Due to the drop in the key rate, the banks obviously followed in the footsteps of the Bank of Canada by reducing the interest yield on the guaranteed investment certificates offered to their clients.
But surprisingly, even the big banks are currently showing greater “generosity” than the Minister of Finance with Épargne Placements Québec (EPQ).
For example, EPQ offers a yield of 3.45% for its one-year fixed rate bonds. The large banks show a return of at least 3.60% for the same fixed term of one year. Smaller banking institutions, such as the Laurentian Bank, Equitable Bank, Credit Unions or certain trusts, offer returns ranging from 3.8 to 3.94% for the same one-year term.
Regarding the 5-year term, the EPQ Fixed Rate Bond yields barely 3.15%. For the same term, you will receive a higher yield, ranging from 3.40% to 3.50%, with most other banking institutions.
You will tell me that the difference is not huge. You are right. But damn, why is the Quebec government showing itself more cheap than banks and credit unions?
At the end of last March, the outstanding investments held by small savers at Épargne Placements Québec reached the handsome sum of $15.2 billion.
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