# Why would anyone buy Canada Savings Bonds (CSB) over GIC?



## Guigz (Oct 28, 2010)

I was wondering why anyone would buy the current issue of Canada Savings Bonds instead of simply getting GICs? Let's assume you have less than 100,000$ to invest in those (i.e., CDIC insured).

The current CSB 3 yr issue will yield about 1.19% per year over the next 3 years. You can get a 3 yr GIC that will yield 2-3% per year.

Why would anyone buy CSBs?:stupid:


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## KaeJS (Sep 28, 2010)

Guigz said:


> You can get a 3 yr GIC that will yield 2-3% per year.


Where? In India?


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## HaroldCrump (Jun 10, 2009)

KaeJS said:


> Where? In India?


No, Guigz's numbers are correct, more or less:
http://www.gicbroker.com/


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## KaeJS (Sep 28, 2010)

Wow.

Incredible. I figured 2% was hard to come by on a 3 year.


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## Guigz (Oct 28, 2010)

I pulled the 3% out of thin air by extrapolating what is offered at TD.

My question still applies though. Why would you choose to get 1.19% per year with the CSBs when you can get nearly double in CDIC insured GICs? The risk is pretty much the same.


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## crazyjackcsa (Aug 8, 2010)

Older folks love CSB's. Probably liken it to "War Bonds". My parents buy my kids 10 year CSB's every year. $100 each, no great shakes, but I'm not going to look a gift horse in the mouth. Truth be told, I do kinda like how they are physical, you get to hold the paper and put them somewhere safe. 10 years later you can pull them out of hiding and cash them in.


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## KaeJS (Sep 28, 2010)

I would never touch a CSB.

I don't even consider it to be an investment.


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## Guigz (Oct 28, 2010)

crazyjackcsa said:


> Older folks love CSB's. Probably liken it to "War Bonds". My parents buy my kids 10 year CSB's every year. $100 each, no great shakes, but I'm not going to look a gift horse in the mouth. Truth be told, I do kinda like how they are physical, you get to hold the paper and put them somewhere safe. 10 years later you can pull them out of hiding and cash them in.


I understand the sentiment of tangible assets. However, would you rather not double your money every 30 years instead of every 60 years?

Is it like a gift from taxpayers to the government to carry the costs of servicing the national debt?


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## Quotealex (Aug 1, 2010)

Guigz said:


> Why would anyone buy CSBs?:stupid:


I think with GIC you need to invest a minimum of $500 whereas you can buy CSB for as little as $100. Anywho, why buy GIC at at 2.00% when you can get the same rate in many HISA?


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## GoldStone (Mar 6, 2011)

CSB program launched in 1946. Like most government programs, once they get going, they become nearly impossible to discontinue.



Wikipedia said:


> In 2004, consultants gave the Department of Finance a report suggesting the CSB program be scrapped, giving an overall program cost savings of about $650 million in 9 years. And with record budget surpluses recorded by the Liberal government since 1997, the importance of CSBs to finance the government had waned.
> 
> Then-finance minister Ralph Goodale rejected the recommendation, and opted to have the program changed to be more competitive and attract investors. The intentions of the current Conservative government are not known.


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## sags (May 15, 2010)

I don't know if the rules are still the same..........but you used to be able to cash in the CSB at any time, while I think GICs would be locked in for the whole period.

If that is the case, CSB holders could cash out low interest bonds and re-invest in higher ones......if interest rates rise.

My mom had CSBs that paid almost 20% a year................nice while it lasted.

GICs are insured.........but I wonder how long it would take to actually get the money. Likely there would be months of investigations and delays.

I turned in my licence plates.........and they told me it would take 2-3 months just to get that money back.


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## OhGreatGuru (May 24, 2009)

There are cashable GIC's now - specifically to compete with CSB's. But they either have lower interest rates or charge interest penalties if cashed early. 

CSB's have been non-competitive for some years because of our record low interest rates. During the Martin years the government also didn't need the public to lend them any more money because they were running surpluses and paying down debt.


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## andrewf (Mar 1, 2010)

OGG, the federal government is always rolling over debt as it matures, even when it has a surplus.


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## jamesbe (May 8, 2010)

Saw a sign for these at work and laughed, why would I do this? Take some from my pay to invest in a CSB lol


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## bgc_fan (Apr 5, 2009)

jamesbe said:


> Saw a sign for these at work and laughed, why would I do this? Take some from my pay to invest in a CSB lol


For some who do not have the discipline to save on their own, that is not a bad way for them to accumulate some savings. At least they could pay themselves first as it is taken off the pay and they never see it to spend it. It's not optimal, but it is better than nothing.


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## cjk2 (Sep 19, 2012)

jamesbe said:


> Saw a sign for these at work and laughed, why would I do this? Take some from my pay to invest in a CSB lol


Funny enough, I just saw a poster at my work today too, right as I was leaving! Seems like they are really trying to promote CSBs now...


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## Islenska (May 4, 2011)

This thread sure takes me back. When I first started my career in pharmacy at our local hospital we had a bi-weekly pay plan that included deductions for CSB's and what a thrill to receive your crisp bonds at year's end.

This was in 77 there abouts so interest rates would be 6% range but I am sure they were cashed in quickly with all the cash needed just starting out. Actually an excellent plan and a bit of forced savings, doesn't really matter the interest rate. I think my hair was long and red then!


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## Quattrorocket (Oct 8, 2012)

In a non registered portfolio either choice is pretty much financial suicide these days.

Your 3% GIC minus taxes of say 30% only earns 2.1% over 12 months on a net basis and inflation is teetering closer to 3% meaning your gonna go broke ... but at least its guaranteed :rolleyes2:


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## Eclectic12 (Oct 20, 2010)

Quattrorocket said:


> In a non registered portfolio either choice is pretty much financial suicide these days...


For those with discipline and who understand money - sure.
For those who otherwise would blow that part of the pay cheque on restaurants or entertainment - not so much.


That's where knowing oneself and working with what one will *actually* do is more important IMO than seeking the "best" option.



Cheers


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## sprocket1200 (Aug 21, 2009)

why would you do either??


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## Eclectic12 (Oct 20, 2010)

sprocket1200 said:


> why would you do either??


If you are referring to the "blow the pay cheque on restaurants or entertainment" - I woudn't and don't.

However, I know several people who blow incredible sums that way. 

The one that sticks out, had already had supper and a couple of drinks at one restaurant when he liked the suggested bar to keep bar hopping. In total, four went to the next bar where he bought the first round. 

His version of this was sixteen rye & cokes (i.e. 4 drinks per person).


Cheers


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## getchanceandluck (Jul 5, 2012)

I don't think it really makes sense to buy even GICs right now. A HISA will give you a better yield. If you're feeling confident one could even go for preferred shares, no?


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