Of all financial institutions, Épargne Placements Québec, the “financial subsidiary” of Eric Girard’s Treasury Department, is currently one of the “cheapest” for small savers. Quite the opposite of the generous sales strategy it implemented during the RRSP blitz last January and February.
During the last RRSP campaign, Épargne Placements Québec showed surprising generosity to savers by offering the best returns in the ultra-conservative investment market, such as Guaranteed Certificates (GICs) and other term savings products.
Notably, during the RRSP blitz from January 6 through March 1, Épargne Placements Québec offered a generous step-up rate bond that increased its yield annually from 4.25% in the first year to an interest rate of 6.0% in the year tenth year would rise. Over 10 years, this bond will yield an average annual return of 4.95%.
The Quebec financial community believes that the Treasury Department’s “treasury subsidiary” made a mistake in showing such generosity with this 10-year bond issue.
Increasing popularity
Whether it is so or not, we will never know. But one thing is for sure: Épargne Placements Québec made a heck of a lot of money during the last RRSP campaign.
Pending savings products issued by Épargne Placements Québec were nearly $13.7 billion at the end of March, up $756 million from the previous report dated September 30, 2022.
In the previous corresponding period (October 1, 2021 to March 31, 2022) encompassing the 2022 RRSP campaign, the Treasury Department subsidiary’s outstanding amount had increased by only $40 million.
In addition to the generous bond offering with a progressive interest rate of up to 6%, it must be said that Épargne Placements Québec has also significantly increased its March 2023 stock market bond issuance. Based on the performance of the Québec 30 Index, the exchange offers bonds in two terms, i.e. 5 years and 10 years.
Instead of 40%, the “maximum” yield for the 5-year term of the new issue was capped at 100%. With a term of 10 years, the “maximum” return increased from 100% to 400%.
BACK TO EARTH
While the Bank of Canada’s policy rate has risen 75 basis points, or from 4.25% to 5.0%, since early January, Épargne Placements Québec (EPQ) has significantly reduced the attractiveness of its popular bond at a progressive pace. EPQ now offers a 10-year average yield of 4.03%, compared to 4.95% in January.
While banks offer 5-year GICs with a yield of 4.6% to 5.14%, EPQ settles for 4.25%, the same rate as its Flexi-Plus Savings, which can be withdrawn at any time.
And on the exchange bond side, the caps have been lowered to 60% for the 5-year term and 200% for the 10-year term.
