The Government of Canada RRSP Bond With RRSP season upon us, and Canadians investing billions in their RRSP accounts, the Government of Canada is entering the market to compete for those investment dollars. The Government has introduced the Canadian RRSP Bond. It is design for the conservative investor, with a long-term investment horizon. After the success the new Canadian Investment and Savings Agency had marketing the 'step-up' Canadian Savings Bond in October, 1996, there was renewed optimism that a new product aimed at the conservative investor could be developed for the RRSP market. The new Canadian RRSP Bond is the first new product, developed by the Canadian government, aimed at the retail investor in 50 years. The aim of the product is to put more of the Federal Government's debt in the hands of Canadian investors. There are a couple of reasons why the Finance Department would like to see Canadians hold a larger portion of the Government's debt: - The foremost reason is to reduce the Government's dependance on international investors in order to fund the budgetary shortfalls each year. By reducing dependance on foreign investors, the Government hopes to mitigate some of the volatility exhibited by international flows of capital. Currently, over 40% of the Federal Government's debt is held by foreign investors. This is a costly burden. The fickle international investor, looking for the best returns today, may not favour the same investment tomorrow, causing rates to increase as positions are sold back into the market, pushing up the cost of servicing the debt.
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