Canada Savings Bond (CSB)

What Were Canada Savings Bonds? (CSB)

Canada Savings Bonds (CSBs) were a financial product issued by the Bank of Canada (BOC) from 1946 through 2017. They offered a competitive rate of interest, with a guaranteed minimum rate. These bonds had both regular and compound interest features and were redeemable at any time.

Introduced as a way to manage national debt, Canada Savings Bonds also provided citizens with a stable, low-risk investment option. These were similar in many ways to U.S. savings bonds offered to American citizens.

Key Takeaways

  • Canada Savings Bonds (CSB) were a form of government debt issued to Canadian citizens to help fund federal expenditures.
  • CSBs are issued in denominations as small as $100 CAD and have 10 year maturities based on an initial fixed rate for the first year, followed by a variable rate for the following years.
  • Originally issued as war bonds to help fund the World War I war effort in 1915 and then again in 1945 to help with WWII, CSBs were discontinued in 2017.

Understanding Canada Savings Bonds

The Canadian government discontinued the sale of Canada Savings Bonds in November 2017, citing declining sales and rising program administrative costs. Government officials said the bond program had gradually become a less critical part of the country’s federal debt management strategy, being replaced by funding programs that offered more financially attractive rates.

CSBs were available in denominations of $100, $300, $500, $1,000, $5,000, and $10,000 with ten-year terms. The interest rate was fixed for the first year and would then switch to a variable rate based on market conditions for the remaining nine years until maturity.

The Canadian government will continue to honor all existing bonds at the time of maturity or redemption, and unmatured bonds will continue to earn interest until they reach the point of maturity. The Canadian treasury can reissue unmatured bonds after they have been lost, stolen or damaged, but will merely redeem any such bonds that have already reached maturity for payment instead of reissuing them.

History of Canada Savings Bonds

The genesis of the Canada Savings Bonds program is similar to that of some war bonds programs in the United States. Canada initially started selling war bonds in 1915 to help finance military efforts by the Allies during World War I. Initially dubbed war bonds, and they would become known as Victory Bonds a few years later. Around the same time, the U.S. began selling Liberty Bonds.

In 1945, the Canadian government began selling securities that were similar to the Victory Bonds but were called Canada Savings Bonds.

Over the past few decades, many Canadians first experienced investments in the form of Canada Savings Bonds. Their predictability and low risk made them a good starting point for inexperienced or cautious investors. As they grew in popularity, the bonds represented a portion of the investment portfolio for many Canadian residents.

However, the Canadian government began to see them as less attractive and not as financially profitable as other funding and debt management options. Starting in the early 2000s, federal officials and advisors in the Canadian government began recommending the program be discontinued. Initially, finance department officials resisted and instead implemented some tweaks to the program, making it more competitive and appealing to investors.

A few years later, though, government studies revealed the escalating costs of the program did not make it fiscally practical. The value of bonds issued was dropping significantly. In March 2017, as part of the release of the federal budget, the government announced the end of the Canada Savings Bonds program, effective later that year.

Article Sources
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  1. Government of Canada. "Important announcement about the Canada Savings Bonds Program." Accessed August 28, 2020.

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