Canadian Bond Market

The Canadian bond market has various types of bonds available, which are issued by both the government and non-governmental bodies. Amongst all the bond markets in Canada, the corporate bond market has been the most thriving.
Canadian Corporate Bond Market The corporate bond market has started doing good business over the last few years. The following factors have contributed to its success:
Low Inflation
Lowest Levels of Long Term Interest Rates
Reduced Public Borrowing
The development of new products has contributed to the bond market’s improved performance, and equally significant, is the increased interest of investors in bonds that offer higher returns.

The corporate bond market is extremely important for the bond market scenario as it offers the investors in Canada more opportunities, the biggest beneficiaries being business firms, who have depended on the Canadian banks and corporate bonds in the US for investing in high-risk projects.
Canadian Savings Bonds
Savings bonds, provided by the government, help holders to save and invest well as they are generally considered as a safe form of investment. They are customarily utilized for the purposes of gift giving, and can be cashed throughout the year.

Canadian Premium Bonds
Premium bonds, also supplied by the government, offer investors higher rates of return compared to savings bonds, which are sold at the same point of time.

They, however, cannot be redeemed before one year from the date of issuance. The period may be extended for only a month from that date.

Canadian Bond Market Products
There are some other bonds that are available the market are:
Treasury Bills
Real Return Bonds
Marketable Bonds
Benchmark bond yields
Selected benchmark bond yields are based on mid-market closing yields of selected Government of Canada bond issues that mature approximately in the indicated terms. The bond issues used are not necessarily the ones with the remaining time to maturity that is the closest to the indicated term and may differ from other sources. The selected 2-, 5-, 10-, or 30-year issues are generally changed when a building benchmark bond is adopted by financial markets as a benchmark, typically after the last auction for that bond. The selected 3-year issue is usually updated at approximately the same time as changes are made to the 2-year, and sometimes with the 5-year. The selected 7-year issue is typically updated at approximately the same time as the 5- or 10-year benchmarks are changed. The current benchmark bond issues and their effective dates, shown in brackets, are as follows.
2 year – 2012.06.01, 1.50% (2010.05.06);
3 year – 2013.03.01, 1.75% (2010.04.13);
5 year – 2015.06.01, 2.50% (2010.03.05);
7 year – 2016.06.01, 4.00% (2009.08.27);
10 year – 2020.06.01, 3.50% (2010.04.30);
Long – 2037.06.01, 5% (2008.01.18);
RRB – 2036.12.01, 3.00% (2007.06.14)

Canada’s junk bond market
is set to boom as income trusts are phased out and buyers seek investments that yield more than government debt and are less volatile than equities. Junk bonds, also known as high-yield debt, consist of debt from companies that don’t have an investment grade rating. The risk of default is higher than for better quality bonds, but the yield is higher too.

The global high-yield market is currently worth around $1 trillion, but Canada’s market is just a drop in that bucket. Companies that have successfully issued high yield debt in Canada recently include Cascades Inc, Superior Plus, Baytex Energy Trust, Fairfax Financial Holdings Ltd and Viterra Inc.

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Last Updated on : 10th July 2013

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