Canada Savings Bonds

Canada Savings Bonds and Canada Premium Bonds, like Treasury-bills, are a direct obligation of the Government of Canada. When you purchase one of these bonds, you are lending money to the government, and in return the government promises repayment of principal and interest on a specified date or dates. Both types of bonds are available with both regular and compound interest. The bonds are guaranteed and backed by the Government of Canada.

CSBs and CPBs are differentiated chiefly in two ways:

  • The interest rate offered.
  • When the bonds can be redeemed.

CPBs offer a higher interest rate than CSBs, primarily to compensate for their more limited liquidity than CSBs. A Canada Savings Bond can be cashed at any time, but a Canada Premium Bond can be cashed only once a year, on the anniversary date of its issue and for 30 days thereafter. Other than these differences, the bonds are alike in almost every other way.

CSBs and CPBs must be purchased with Canadian currency and are available in denominations of $100 for a compound interest bond, and $300, $500, $1,000, $5,000, and $10,000 for compound and regular-interest bonds. They have a 10-year term-to-maturity. The interest rate of CSBs is guaranteed for the first year, but fluctuates with market conditions for the remaining nine years. The interest rate of CPBs is guaranteed for the first three years and then fluctuates. Interest is paid on the anniversary date of the bond. If compound interest is owed to the bond owner, it is paid when the bond is redeemed.

The maximum principal amount that any one person can hold in bonds is $500,000 per series per type of bond. However, this limit can be increased if more bonds are purchased from a maturing series or more bonds are received as a result of the death of another bond owner.

Bonds are available only from October to April 1st each year, although the sale of bonds may be ended at any time at the discretion of the Minister of Finance.

If held outside registered plans, the interest earned on both regular and compound interest bonds must be declared annually and tax must be paid accordingly.

Bond ownership can be transferred if the bond owner dies or if there is a change of name due to divorce, marriage, adoption, or legal name change. Transfers to RRSPs, RRIFs, and other registered plans are also permitted.

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