With interest rates rising in the US, and an expectation that the Bank of Canada will raise rates during the remainder of 2018 (including an expected July raise), Canadian high interest savings accounts issuers, have mostly settled into offering rates at 1.10%. The exceptions are Home Trust & B2B Bank which are at 1.15%.
Usually, the mining yield for Clam Coins, a proof of stake cryptocurrency, is high enough that I don’t use Poloniex to lend my clams, but over the past few days as the price of clam coins has been rising, the interest rate to lend/borrow clams has gone through the roof. At the time of writing, the lending/borrowing rate for clams on Poloniex is over 2% per day!
What are the reasons why the rate on clams is so high? Obviously there are far more users willing to borrow clams then are willing to lend them, the liquidity on clams is less than many other cryptos, and there are probably less clam users paying attention to the lending rates on Poloniex and so there is a lag of time between when the capital flows to Poloniex from the miners.
Generally, I’m bullish on the price of clam coins. For what its worth, they have recently broke out to the upside after trading in a tight range for several weeks on the Poloniex clam/btc market. Users who are interested in clams have a few ways to get in on this market, they can use Poloniex to exchange btc for clams, or they can bypass the exchange and use ShapeShift to send the clams to a miner like Just-Dice.
Since Bank of Canada raised benchmark rates a few weeks ago, by this time, all the major HISA issuers in Canada have updated their corresponding rates. The average rate on a high interest savings account that can be purchased through the brokerage channel is now 0.95%. Yes, still less than 1%, but 10 bps higher than it had been before the Bank of Canada raised rates.
The standout rate among those that I follow is Home Trust HISA which is currently offering 1.00%. This rate has dropped slightly and the spread between this rate and competitors has narrowed since Berkshire Hathaway took a position at the lender. Also, at the recent shareholders meeting to decide whether to issue more shares to Berkshire chose, the shareholders voted not raise more capital. This gives Berkshire more limited control of the company going forward, and also signals to the market that the lender has found better liquidity. This is also evidenced by the rate being offered on Home Trust HISAs.
Stock market investors should pay at least some attention to the yield curve. An inverted yield curve has signaled a coming recession many times in the post war era, and an inverted yield curve might be appearing again soon.
More often, the yield curve slopes upward, meaning, short term rates are lower than long term rates. Intuitively, “if one in the hand is better than two in the bush”, investors should expect interest rates today to be lower than future rates because of the time value of money when living with monetary inflation. When the yield curve is “inverted”, this means that short term rates are higher than long term rates.
An inverted yield curve represents many different things. It at least represents expectations about the future value of money.