RIP to the Canada Savings Bond

ONCE PRIZED

BARBARA SHECTER The Canada Savings Bond, once a prized interest-bearing gift from grannies everywhere, will cease to exist.

The symbol of safe savings and a secure source of government funding since its creation, the year after the end of the Second World War, the CSB has been in severe decline since its peak in the late 1980s, losing ground to a plethora of competing retail investments.

Once valued at more than $50 billion, the program has declined to about $5 billion, and now accounts for less than one per cent of total federal market debt.

The government reviewed the program, and determined it would be phased out this year, with no new sales in 2017, according to the federal government’s budget document published Wednesday.

“Your grandmother bought Canada Savings Bonds, but nobody’s buying them anymore … There’s no point to keeping them around,” said Avery Shenfeld, chief economist at CIBC Capital Markets.

He said it will be cheaper and more efficient to roll the demand for Canada Savings Bonds in with other Canadian bonds, and added that there is “not a political issue at this point” because there are alternative guaranteed investment products such as GICs.

“There’s a fixed cost (to the Canada Savings Bond program) that starts to loom large … You have to pay for all those nice commercials to tell people how to buy them,” Shenfeld said.

However, the Canada Savings Bond isn’t just a victim of its waning popularity, blamed on the proliferation of higher-yielding alternative retail investments such as guaranteed investment certificates (GICs), mutual funds, and low-commission trading accounts.

Even with the precipitous decline in the bond program, there may have been sentimental reasons to maintain it — given Canadians’ connection to the certificates they proudly displayed in their youth, and held onto over the years in boxes and safety deposit boxes.

But it’s become expensive for the government compared to other funding.

“The program is no longer a cost-effective source of funds for the government,” the budget document declares.

What’s more, it says phasing out the CSB program “will result in cost savings from reduced program management and administration costs and allow the government of Canada to focus on less-costly funding options.”

While there will be no new sales of Canada Savings Bonds in 2017, all outstanding debt will continue to be honoured.

The bond received a lowkey send-off.

In the back half of the 278-page budget document, its ending was detailed on just one page — including a graphic that clearly illustrates its mountain-shaped boom and bust.