The financial product is issued by the Bank of Canada and claims to offer a competitive rate of interest and has a guaranteed minimum interest rate.
Canada Premium Bonds are purchasable in regular and compounding interest. These bonds differ from the regular bonds in that they are only cashable on the anniversary of the issue date or during the 30 days thereafter. They come in denominations of $100, $300, $500, $1000, $5000, and $10000 (regular interest bond's lowest denomination is $300). They are sold with rates up to year 3 with each subsequent year offering higher interest. The interest rate fluctuates for the remaining 7 years with market conditions until its maturity. Previously, the rates were determined for 5 years and fluctuated for the last 5 years. The bonds were maroon in color and feature a picture of the Library of Parliament in Ottawa. But the new series as of November 1st 2006 are golden in colour and picture the National War Museum.
Canada Investment Bonds were bonds available only through investment brokers and were offered from October 1st, 2003 and April 1st, 2004. They are non-redeemable until maturity and had 3 year maturities. Only 6 different series were issued. They are currently unavailable.
Over the years, CSBs proved to be popular investments as they were flexible, safe and 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 are currently held by Canadians.
Many Canadians still rely on this program for their investment portfolio, and the program is recognized by 2 out of 3 Canadians as their first investments .This program recognition may give potential to an improved and more popular program. This may suggest that the program may not be scrapped for many years to come.