What is Canada Premium Bond (CPB)?

A Canada Premium Bond (CPB) is a low-risk debt instrument issued by the Bank of Canada. It comes with a higher interest rate than a Canada Savings Bond (CSB) with the same maturity but can only be redeemed on its anniversary date or 30 days thereafter.

Key Takeaways

  • A Canada Premium Bond is a low-risk debt instrument issued by the Bank of Canada.
  • It is similar to a Canada Savings Bond, but pays a higher interest rate and can only be redeemed on its anniversary date or 30 days thereafter.
  • Canada's bond program was created following World War II and peaked at C$55 billion in outstanding retail debt in the late 1980s.
  • Canada stopped selling both bonds as of November 1, 2017.

Understanding Canada Premium Bond (CPB)

Canada launched the Canada Savings Bonds Program in 1946 as part of the country's financing efforts following World War II. The bonds were purchased via payroll deductions and about 16,000 employers participated. The program reached its peak in the late 1980s, at one point recording C$55 billion of outstanding retail debt. In 1998, the Canada Premium Bonds program was introduced.

The Canada Premium Bond (CPB) was a financial instrument which gave the government a way to manage its debt. The CPB also provided citizens with a tool for saving and investing. As with other types of government bonds, one appealing attribute of the Canada Premium Bond was its status as a safe and secure investment. However, Canada Savings Bonds and Canada Premium Bonds are no longer available for purchase as of November 1, 2017.

While a Canada Savings Bond is redeemable at any time, a Canada Premium Bond was redeemable once a year. It must be redeemed either on the anniversary of the issue date or within 30 days of that date. Once a CPB reaches maturity, it no longer earns interest. If a CPB is redeemed before it reaches maturity, the redeemer will receive the face value plus all earned interest as of the last anniversary of the issue date.

The arrival of other investment options in a competitive market made the Canada Savings bond program increasingly less cost-effective and profitable for the government. The government said dwindling bond sales and rising administrative costs did not make it financially worthwhile to keep the program going. Existing bonds will continue to earn interest until they are redeemed or reach maturity.

CPBs that are lost, or stolen, and have not reached their maturity date may be reissued.