Investment Insights Fixed income

Considering Fixed Income

As interest rates rise, some investors are wondering if now is the right time to consider a fixed income investment.

CIBC Investor’s Edge Sep. 29, 2022 4-minute read

Is your cash looking for a home?

Both the stock and bond markets have been very volatile over the past 12 months, as investors express concern over rising inflation and rising interest rates. As rates rise, some investors are wondering if it’s the right time to consider a fixed income investment.

Almost all fixed income products, including Guaranteed Investment Certificates (GICs), government bonds and corporate bonds, are now offering higher interest rates as compared to a year ago. Of course, interest rates may still move higher from here, but this could be a good time to refresh — or begin — your understanding of the fixed income market. It doesn’t hurt to remind yourself about what moves fixed income prices, available fixed income options and how to place a fixed income trade on Investor’s Edge.

How changes in interest rates affect fixed income investments

Interest rates have moved lower for much of the past 30 years, which means that bond prices have risen over most of that time. What we’re seeing right now — higher inflation, rising interest rates and falling bond prices — is new territory for many investors.

Learn more about what happens to bonds and other fixed income investments when interest rates rise.

How interest rates affect your investments

Sorting through the fixed income options

Just like there are many different kinds of stocks, there are many different kinds of fixed income products. What are some of the features that distinguish various fixed income choices? The term, or maturity, which simply refers to how long before the product matures and you get your money back¹, is important to consider.

Another key attribute is how the investment is rated for “creditworthiness,” or its ability to make interest payments and eventually return the money you invested.

Both these factors will influence the product’s yield — the rate of return you’ll receive on that fixed income investment.

Investing with fixed income

You can find more information on various fixed income products in our Learn section on fixed income.

Spotlight on GICs

After many years of not feeling the love, GICs are buzzworthy again. A GIC offers a guaranteed rate of return on an investment that’s held for a fixed period of time. In general, and like most fixed income products, the longer you commit your money, the higher the rate of interest you’ll receive.

Both cashable GICs — where you can withdraw your money before maturity without penalty — and non-cashable GICs are available. The rate on a non-cashable GIC is usually higher than the equivalent cashable GIC, to compensate for its reduced liquidity.

You can also buy GICs where the interest rate is linked to the performance of a “reference asset,” such as the equity market. These are known as Market Linked GICs.

At Investor’s Edge you can buy CIBC GICs, CIBC Market-Linked GICs, and third-party GICs offered by financial institutions other than CIBC. For how to place a trade and how to research the specific features of the GIC you’re considering, visit How to place a fixed income trade.

Looking to place a fixed income trade?

If you decide that your situation would benefit from an investment in fixed income, we’ll guide you through the steps to buy or sell fixed income securities.