History
Introduced as Victory War Bonds in 1946, they are safe means of investment and savings versus mutual funds and stocks as each bond is guaranteed by the Bank of Canada. Before CSBs, Canada issued other instrument similar to CSBs:
- Canada - Dominion War Savings Certificate (1944)
- Canada Fourth Victory Loan (1943)
- Dominon of Canada Victory Loan (1942)
Over the years, CSBs proved to be popular investments as they were flexible, safe and a convenient way to invest. They are popular especially among younger children as the minimum purchase amount is relatively low ($100). Many grandparents purchase these for their grandkids rather than giving cash for birthdays and Christmas.
Recently, sales of the bonds have declined. This is due to the low interest rate environment that has plagued yields for investors and has caused a shift from Savings Bonds to more risky investments such as stocks and mutual funds. The yields are especially low considering their long term investment structure (10 year maturity). Rates in the 1980s were as high as 18% per annum. Also, many financial institutions have started to introduce high interest savings accounts which often beat rates for CSBs as well as give even more flexibility with access at anytime and on the internet. CSBs have been criticized for not being online friendly for bonds cannot be held electronically and certificates are only issued.
Between April 2005 and April 2006, CSBs held by Canadians fell by more than 10%. As of April 2006, $19.2 Billion worth of CSBs were held by Canadians. An undated entry on the CSB website titled "Canada Savings Bonds Program Changes 2012 Quick facts about Canada Savings Bonds", says that the CSB fund has only $9 billion in it and about 3 million Canadians own those bonds.
Read more about this topic: Canada Savings Bond
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