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No matter where you look, interest rates for savers and investors lag the inflation rate by kilometres.

The most recent inflation rate of 7 per cent compares with as much as 3.3 per cent for savings accounts, 4 to 5.18 per cent for guaranteed investment certificates and yields of as much as 4 to 5.5 per cent for corporate bonds maturing in five years. But inflation will drop at some point in the coming years, and so will interest rates. Today’s GIC rate and bond yields could well look great in retrospect.

Care to lock in today’s rates for 10 years? I took a look around this week to see what’s on offer. In GIC-land, Motive Financial offered 5.1 per cent for 10 years, EQ Bank had a 4.7-per-cent rate for terms of two through 10 years and RBC offered 4 per cent. Note that Canada Deposit Insurance Corp. coverage applies to GICs of any term; it used to be limited to five years or less. In any case, a good number of GIC terms are no more than five years.

There’s more of a selection in the world of investment-grade corporate bonds maturing in nine to 10 years. Here, you’ll find yields of 5 per cent and more from blue-chip companies like banks, insurers and telecoms. Some examples from a couple of online brokerages, with yields based on late September bond prices:

  • Bell Canada: Matures Dec. 30, 2032, with a yield of 5.97 per cent.
  • Brookfield Infrastructure: Matures Sept. 1, 2032, with a yield of 5.5 per cent.
  • CIBC: Matures May 15, 2031, with a yield of 5.3 per cent.
  • Sun Life Financial: Maturing May 10, 2032, with a yield of 5.1 per cent.
  • Telus Corp.: Maturing Nov. 15, 2032, with a yield of 5.4 per cent.

Long-term bonds like these will drop in price if interest rates climb from current levels, and the decline will be worse than with short- and medium-term bonds. For reference, the FTSE Canada Long Term Bond Index was down 19 per cent for the year to late September.

But when interest rates plateau and then move lower, long-term bonds will rise the most in price. There may be opportunities at some future date to sell them for a capital gain. Or, you can hold them to maturity and enjoy a yield that should hold up well over time.

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