Alberta Capital Bonds On Their Way

Albertans are sure to be inundated with marketing on Alberta Capital Bonds in the coming weeks as the Alberta government looks to individuals to raise capital to fund their current deficits. Details of the offering were provided to financial institutions such as ourselves this week. The bonds will go on sale February 16th until March 1.

Unlike Canada Savings Bonds, Alberta Capital Bonds are not redeemable and must be held until maturity except for some very limited circumstances. The bonds will be dated March 15, 2010 and have a 5 year term. Interest can be paid annually or compound annually.

The minimum purchase amount will be $1,000 with a $25,000 maximum regardless of how the bonds are registered. You would not be able to buy $25,000 for yourself, $25,000 for your RRSP account and $25,000 jointly with your spouse. The government will not provide certificates which is also a different format compared to Canada Savings Bonds.

While the bonds are not CDIC insured, they do have the full backing of the Alberta government. They will be eligible for RRSP’s within a Self Directed Plan. The only thing that we don’t know about the bonds is probably the most important number.

What are they going to pay? The highest 5 year GIC is currently 3.30%. Expect the announcement to come in around that level.

If you are interested in higher rates, please don’t hesitate to contact us. We have access to some Alberta Capital Finance Authority which is a government agency accrual notes yielding over 5%.

Your thoughts and comments are always appreciated.