What is the 'Canada Premium Bond (CPB)'

A Canada Premium Bond (CPB) is a debt instrument issued by the Bank of Canada. It offered a higher interest rate than a Canada Savings Bond with the same issuance date. 

In the 2017 Canadian federal budget, the government announced that it would discontinue the sale of Canada Premium Bonds (CPB) and Canada Savings Bonds (CSB) as of November 1, 2017.

BREAKING DOWN 'Canada Premium Bond (CPB)'

Canada Premium Bond (CPB) was a financial instrument which gave the Canadian government a way to manage debt. The CPB also provided citizens with a tool for saving and investing. As with many other types of government bonds, one of the most appealing attributes of the Canada Premium Bond its status as a safe and secure investment.

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 any additional 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.

History of Canada Premium Bonds

Canada Premium Bonds were part of the Canada Savings Bonds program, created in 1946. Initially, the program offered just Canada Savings Bonds. The introduction of these bonds was as part of the country’s post World War II financing program. The program reached its peak in the late 1980s, at one point recording $55 billion of outstanding retail debt. The introduction of the Canada Premium Bonds was an addition to this program in 1998.

The arrival of other investment options in a competitive market, coupled with escalating administrative costs, made the CSB program increasingly less cost-effective and profitable for the government. These pressures encouraged the Canadian government to end the program as part of its 2017 federal budget. Sales of the bonds terminated in November 2017. 

The government said dwindling sales of the bonds and rising costs involved with managing the program did not make it financially worthwhile to keep the program going. Existing bonds will continue to earn interest until they are redeemed, or reach the point of maturity. Lost or stolen, unmatured bonds may be reissued. Government officials did not recommend specific investing alternatives but advised the public to consult with their financial advisors to discuss options that would be the best fit for their circumstances and financial goals.

RELATED TERMS
  1. Canada Savings Bond (CSB)

    Canada Savings Bond is a financial product issued by the Bank ...
  2. U.S. Savings Bonds

    A U.S. savings bond is a government bond that offers a fixed ...
  3. Bond Fund

    A bond fund is a fund invested primarily in bonds and other debt ...
  4. Bond

    A bond is a fixed income investment in which an investor loans ...
  5. Government Bond

    A government bond is a debt security issued by a government to ...
  6. U.S. Savings Bond Adjustment

    U.S. savings bond adjustment describes a change in the amount ...
Related Articles
  1. Investing

    Corporate Bond Basics: Learn to Invest

    Understand the basics of corporate bonds to increase your chances of positive returns.
  2. Investing

    Investing in Bonds: 5 Mistakes to Avoid in Today's Market

    Investors need to understand the five mistakes involving interest rate risk, credit risk, complex bonds, markups and inflation to avoid in the bond market.
  3. Investing

    U.S. Corporate Bonds: The Last Safe Place to Make Money

    There aren't many other sources right now for relatively safe, steady income.
  4. Investing

    Taxation Rules for Bond Investors

    To sum-up there are three types of bonds: government bonds, municipal bonds, and corporate bonds. Find out how each of these bonds are taxed and what you can do as an investor.
  5. Investing

    6 Ways That Investors Use Bonds

    Learn how the stodgy stereotype of bonds can overshadow the basic and advanced uses of what these investments can do for your portfolio.
  6. Investing

    Six biggest bond risks

    Bonds can be a great tool to generate income, but investors need to be aware of the pitfalls and risks of holding corporate and/or government securities.
  7. Investing

    How Bonds Are Vital to a Successful Portfolio

    While bonds are a vital part of an investment portfolio, they are often ignored.
  8. Investing

    Corporate Bonds: Advantages and Disadvantages

    Corporate bonds can provide compelling returns, even in low-yield environments. But they are not without risk.
RELATED FAQS
  1. What determines bond prices on the open market?

    Learn more about some of the factors that influence the valuation of bonds on the open market and why bond prices and yields ... Read Answer >>
  2. Why is my bond worth less than face value?

    Find out how bonds can be issued or traded for less than their listed face values, and learn what causes bond prices to fluctuate ... Read Answer >>
Trading Center