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The Money Management Newsletter: GICs and Fixed Income
2002 Ontario Savings Bonds Information

Ontario Savings Bonds - Historically, rates on this type of Government Bond are priced somewhat lower than competing GICs rates offered by the major banks and Trust CO's. This link or this link will take you to the new rates.

To compare the new bonds with their competitors the enclosed onsite crosslinks will help with that comparison.

The provincial bonds are 100% guaranteed by the Ontario Government. Minimums start at $100, to a maximum of $500,000, with 3 options available. All are available with annual or compound interest.

The Step-up Bond provides an annual interest rate that will increase between years one and five. To recognize value you'll need to compare them with Escalator type Guaranteed Investment Certificates. The blended rate column illustrates an equivalent rate for each year of its full term. We will include the OSB offering rate information in this survey.

Variable-Rate bond - A new rate every six months for seven years - A comparable product would be a 180 day renewable Short Term Deposit. The interest could be paid or compounded over a similar term. The short-term deposit would compound at a semi-annual factor, the OSB compounds annually.

Fixed Rate Bond - This non-redeemable bond will mature on June 21, 2005 and will carry the same interest rate throughout the term. To compare, look at the 3 year GIC rates. The columns in this table can be sorted by year by clicking on the orange headings.

All Bonds - If your have 1999 fixed-rate bonds, you can exchange them for the 2002 bonds. Holders of 1999-2001 Step-up and Variable-Rate Bonds have an additional 14 days to cash their bonds, with interest paid to the redemption dates. OSBs, with the exception of the non-redeemable fixed rate bonds, have the flexibility of being transferred to another person at any time or sold, whereas most Fixed rate or escalator type GICs are not pre-encasable. The GICs and the bonds can be held in a self-directed RRSP or RESP.

One major difference between them is the OSBs has a 100% guarantee vs. the $100,000 CDIC insurance for the term deposit. OSB can only be redeemed on any June/December 21st to be eligible for accrued interest. Whereas most short-term deposits would payout a certain level of interest whenever redeemed after, say 60 days. The term deposit will require more attention over the period.

However, if you are continually rate shopping and as the rate comparison calculators Short / Long Term Investment Calculator indicates, a $50,000 7 year investment with a difference of 1% being maintained, then the accumulated dollars difference is approx. $3,857.00. certainly worth the effort. (Rate comparison as of May 28, 2002)
Short / Long Term Rate Comparison Calculator

Background investment information that you may find useful, can be viewed at our Info-Reports section. Presented in a Features and Benefits format, each report evaluates several aspects of the investment product including investment safety, income return, and access to funds and risk type. Click for profiles for Provincial Bonds and Guaranteed Investment Certificates.

To read the Terms & Conditions of the OSBs, click here.

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© , Fiscal Agents Money Management Newsletter
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GICs And
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