|
 The
Money Management Newsletter: GICs
and Fixed Income
2002 Ontario Savings Bonds Information
By David Newman
Money Management Newsletter
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.
* * *
|
|
Use this link to load a printer-friendly
version of this document. |
Have a question regarding this article? Use our feedback form to send us a note.
 © , Fiscal Agents Money Management Newsletter
25 Lakeshore Road, Oakville, On L6K 1C6.
(905) 844-7700
| 
