The benefit of parking cash in a high-interest savings account ETF was demonstrated this week after the latest increase in the Bank of Canada’s overnight rate.

The central bank raised its trendsetting rate by a quarter of a percentage point Wednesday. Almost immediately, the yield on HISA exchange-traded funds increased by a similar amount. For example, the gross yield on the Horizons High Interest Savings ETF CASH-T was 5.18 per cent late this week, up from 4.93 per cent late last month. CASH has a management expense ratio of 0.11 per cent, so its net yield is now 5.07 per cent.

Changes in the overnight rate do not directly influence returns from guaranteed investment certificates, but there’s an indirect effect that right now is working in favour of GIC investors. The Bank of Canada is worried about inflation – that’s why it increased the overnight rate. Inflation fears are also weighing on the bond market, where rates have been moving higher as well lately. Yields on Government of Canada bonds influence rates on GICs, which have been creeping higher lately for terms of one and two years.

As of late this week, the number of alternative banks, trust companies and credit unions offering 5 per cent for one year had grown to seven, and the number offering 5 per cent for two years was four. The best three-year rate was 4.95 per cent. GIC issuers have been reluctant to raise rates on longer terms, but this could change if bond yields keep rising.

HISA ETFs accounted for two of the top 10 sellers last month in ETF land, even though they are under review by the federal Office of the Superintendent of Financial Institutions. These funds hold their assets in accounts at big banks that pay rates of return that are superior to what’s offered to retail depositors. Regulators at OSFI are looking into what would happen to banks if investors were to pull all their money from HISA ETFs at once. OSFI may order changes that will lower returns on HISA ETFs.

As a hedge against this outcome, some ETF providers recently introduced funds holding government treasury bills. T-bill yields have been rising lately as a result of the same inflation concerns that drove the Bank of Canada rate increase this week. T-bill ETF yields would benefit if this continues.

HISAs for investors are also available in a mutual fund format. Rates on these products have been stuck in the 4.05 to 4.35 per cent range in recent months.

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Indigo Books and Music Inc. says founder Heather Reisman will retire as executive chair and as a director this summer, while four other members of its board have also stepped down.

The company says director Chika Stacy Oriuwa indicated she resigned “because of her loss of confidence in board leadership and because of mistreatment.”

In addition to Oriuwa, Indigo says Frank Clegg, Howard Grosfield and Anne Marie O’Donovan have also stepped down as directors. No explanation for their departures was given.

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Indigo CEO Heather Reisman talks about creating a happier planet in her new book ‘Imagine It!’

 

Indigo wished the departing directors well and thanked them for their contributions.

The retailer says Reisman will retire as executive chair and from the board effective Aug. 22.

Reisman stepped down as chief executive of Indigo last year as part a transition that saw Peter Ruis, who had been the retailer’s president, promoted to chief executive.

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Big banks follow suit after surprise quarter-point hike

Royal Bank of Canada, TD Canada Trust, Canadian Imperial Bank of Commerce (CIBC), Bank of Montreal, National Bank of Canada and Bank of Nova Scotia all said they were increasing the prime rate by 25 basis points to 6.95 per cent from 6.70 per cent, effective June 8, 2023.

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