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.