B4 - Friday, June 22, 1984 - North Shore News

ll business =i

Interest rates: where to now?

N INTERESTING

thing happened last

week. The Bank Rate went up. Nothing sO exciting about that you may be saying, it

does that all the time!

dollar sense

by Helen

Davenport ES

Yes, but the bond market didn’t go down. This is dif- ferent and if sustained means that interest rates are pro- bably reaching their peak and could start to come down.

Normally when the Bank Rate goes up it means interest tates are following. As a result the price of bonds, such as the Government of Canada Bonds, tend to move down because investors don’t want to buy long-term vehicles with a medium return — when they can go to the bank and get attractive short-term interest yields that are rising.

Now, the Bank Rates 1s up, but people (or institunons who are the major purchasers of bonds) are willing to pay more for bonds than in the recent past. An = indication that they want to lock-in to the current: returns because they don't think any better deals are coming along

Carl Beigie, a senior economist, was in town last

iwW.G.0

Saturday, June 25 far alfa at

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seOTeVRE re

week and broached this same question about interest rates. His comment was that the rate of economic growth 1s showing signs of slowing, the U.S. elections in the tall, and the temporary stemming of inflation (you only have to look at wage increases lately to see that business costs are generally reduced) will in- fluence interest rates to move

downwards itn a ‘‘roller- coaster fashion through 1985”°.

So what can you do tf in-

terest rates edge lower lo get

the best return on your in- vestment doHar? You have several major options. Investing tn) bonds. You should familiarize yourself with: Gov. of Canada 9' 2% Oct. 1/2001

Ontario Hydro Belt Canada 1 2000

12% May 1 1989 13.875 % May

These bonds have top ratings, and are bought and sold in qualtity on a regular basis. They each have etfec- uve ytelds over 13%.

Investing in preterred shares. Retractable prefer- reds are very popular. Some

typical examples with high quality ratings would be:

Canadian Utilities PfdH B.C. Rait $2.3125 Northern Telecon $2.22

Transalta Utilities

These issues have yields at or above 9% pre-tax and an effective after-tax yield close to 13% (using the dividend tax credit).

To take the top interest in short-term notes or Treasury Bills for 6 months to a year or longer depend on your own perception of interest rates. Several economic analysts in- cluding Carl Beigie feel very optimistic about 1986, and therfore it might be a good idea to reassess your invest- ment position next summer or fall before making any major decisions. After all, the interest rates are not ex-

a7th

Saturday, June 23,1984

ceptional, they are just better than we have seen in a long tume.

Investing tin sensitive stocks. have followed the stock market know that the best stock buys when interest rates are moving down are in the interes{-sensilive areas.

What did 1 mean by that? Banks and utilities are interest-sensitive stocks. These are compames which are more profitable when

interest- People who

rates are lower rather than

higher. These types of stock often given you the oppor- tunity tO make capital gains as well as good dividend in- come, and are suitable for those in a higher tax bracket

Lonsdal

9:00am -6:00pm

Opportunity to win

LISTEN TO Chtam FROM 10 OO am

TO 4 OO pm

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SPECIAL OFFERS ON COKE ANDO ESSO MOTUn cue

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where interest income (which after the $1,000 deduction) would not be as lucrative.

Other good. stock in- vestments which are interest- sensiuive include real-estate and oils. These should be picked over and chosen more carefully.

This package of investment ideas can provide choices for everyone. Remember that these are not straight recom- mendations but ideas for you to build on, and that the good news for lower interest rates reflects a decrease in in- flationary expectations.

Helen Davenport is a registered representative with Dominion Securities Pitfield in Vancouver (682-4424).

Weekend for 2 at the “Inn of the Sea” at Yellow Point on Vancouver Island

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