Gyroscopic Investing

The gov't changed the Canada savings bonds, and I'm wondering whether they'd be suitable for the cash portion of the PP.

Web site for more info: http://www.csb.gc.ca/8086/canada-saving ... ober-2012/

Excerpts from above web site:

"Beginning with the fall 2012 campaign, the Canada Savings Bonds Program will offer one product per sales channel, Canada Premium Bonds will be enhanced with a new cashability feature and the term to maturity of all new Canada Premium Bonds and Canada Savings Bonds will be shortened to three years from ten years."

"The new cashability feature will allow Canadians to redeem their bonds anytime during the year without penalty. Beginning August 1, 2012 all outstanding and future CPB issues will become cashable at anytime with interest earned up to the last anniversary date of issue. This will allow Canadians to earn the higher interest rate offered by the CPB while also having access to their funds when they need them."

Honestly I don't know much about them.  I thought the whole CSB program was a bit of a boondoggle, and the Canadian Gov't was trying to phase them out.  Aren't they mainly used as gifts from your company or your grandmother, and not really meant to be a "good investment".  I always cash mine in and throw it into my high interest savings account (covered by CDIC), buy short term bonds, or pay off debt.

The regular CSB is only yielding 0.65%, while a 1 year Can Gov't is at 1.0%.  The premium CSB is yielding 1.19% over the next 3 years...which is close to what a 3 year Can Gov't bond is offering.

The new cashability of the premium CSBs will only return interest up to the date of the last anniversary date (I'm assuming this is annual), so you would miss out on any interest between the date you sell and the last anniversary date.  With "normal" bonds you are paid the accrued interest when you sell on the secondary market (although you have to pay the spread and/or commission to your broker).

I really wish Canada had its own Treasury Direct, rather than having to purchase the bonds on the secondary market...oh well.