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Ottawa, October 6, 1995
1995-079

Terms of New Canada Savings Bond Issue Announced

Related document:

• The 1995 CSB Issue.

Finance Minister Paul Martin today announced the interest rates on the 1995 Series of Canada Savings Bonds (CSBs) at 5 1/4 per cent for the first year, 6 per cent for the second year and 6 3/4 per cent for the third year.

"Interest rates on Canada Savings Bonds are very competitive especially when compared to rates currently offered on other financial instruments in the marketplace," Mr. Martin said. "And a unique feature for CSB holders is that the rate will be increased during the year if market conditions warrant. Canadians who purchased CSBs last year benefitted from two rate increases during the year".

Mr. Martin also announced that the individual purchase limit for bonds of the new series has been set at $100,000. This limit includes regular cash purchases as well as contributions to the new CSB-RRSP option, which allows Canadians to buy Canada Savings Bonds directly in the form of a Registered Retirement Savings Plan, without needing a self-directed plan.

The new bonds will be on sale from Tuesday, October 10 to Wednesday, November 1, 1995. As with past series of CSBs, the Minister of Finance reserves the right to terminate the sales period anytime at his discretion.

All outstanding issues of Canada Savings Bonds (Series 42 - 49, issued from 1987 to 1994) will continue to benefit from the second- and third-year rates announced a year ago. These series are guaranteed to earn no less than 6 3/4 per cent for the coming year and 7 1/2 per cent the following year.

A backgrounder is attached.

___________________
For further information:

J.R. LaBrosse
Department of Finance
(613) 992-9214

Backgrounder
The 1995 CSB Issue

The new issue of Canada Savings Bonds (Series 50) offers the guaranteed interest rates of:

5.25 per cent for the year beginning November 1, 1995

6.00 per cent for the year beginning November 1, 1996

6.75 per cent for the year beginning November 1, 1997

Rates for the remaining nine years to maturity in 2007 will be announced when the terms of future issues are released.

These interest rates are fully guaranteed by the Government of Canada. In addition, the rates will be increased if market conditions warrant but investors will never earn less than these guaranteed rates. Therefore, the bond values and interest payments specified below are guaranteed minimum amounts. CSBs are cashable anytime.

Holders of Regular Interest Bonds will receive annual interest payments per $1,000 bond for the next three years of at least:

Values for each $1,000 Compound Interest Bond as of November 1 are as follows:

The new bonds will be on sale from Tuesday, October 10 to Wednesday, November 1. Investors purchasing bonds during this period will be able to date their payments November 1, the day the new bonds start earning interest.

As with past series of CSBs, the Minister of Finance reserves the right to terminate sales at any time. Applications already arranged with payment dated November 1 will be honoured even if the bonds are withdrawn from sale before November 1. The deadline for establishments offering the Payroll Savings Plan to submit bulk employee applications to an authorized issuing agent will be Wednesday, November 15, even though cash sales may be terminated earlier.

For income tax purposes, interest earned on CSBs (other than in your RRSP) must be declared annually in the year in which it is earned. To facilitate the reporting of interest income, an annual T-5 tax information slip showing the amount of interest earned in that year will be mailed to all Regular Interest Bond holders, and to holders of Series 45 to 50 Compound Interest Bonds.

NEW RRSP OPTION

Starting this year, Canada Savings Bonds will be available from sales agents directly as a single-purpose Registered Retirement Savings Plan (RRSP), with no need for a self-directed plan. There are no administrative fees or service charges.

Only Compound Interest Bonds may be purchased through the CSB-RRSP option. Compound Interest Bonds are ideally suited for RRSPs because the interest is automatically re-invested.

CSB-RRSP bonds earn the same competitive interest rates as other Series 50 bonds. They are available in denominations starting at $100, and investors may contribute up to their maximum RRSP contribution limit, subject to the overall $100,000 individual purchase limit. To purchase a CSB-RRSP, investors need only fill out a special application form at any sales agent which sells CSBs.

For investors who buy CSBs through the Payroll Savings Plan, they will have the opportunity to convert their Compound Interest Bonds into CSB-RRSP form next year, once their bonds are fully paid for through payroll deductions.

RATES ON OUTSTANDING BONDS OF SERIES 42 TO 49

Reflecting the second- and third-year minimum guaranteed rates established last year, the rates on outstanding, unmatured series of Canada Savings Bonds, Series 42 to 49 inclusive, issued from 1987 to 1994, are:

6.75 per cent for the year beginning November 1, 1995

7.50 per cent for the year beginning November 1, 1996

Bonds of these series also earned an average of 6.375 per cent for the year beginning November 1, 1994, because the originally announced first-year rate of 5.75 per cent per annum was increased to 7.50 per cent per annum for the three months beginning February 1, 1995, and to 6.50 per cent per annum for the three months beginning May 1, 1995.

Holders of Regular Interest Bonds of Series 42 to 49 will receive annual interest payments per $1,000 bond as follows :

Values for each $1,000 Compound Interest Bond as of November 1 are as follows:

ALL SERIES UP TO THE 1986 SERIES (S41) HAVE MATURED

No previous issues of Canada Savings Bonds come due this November 1. All CSBs issued prior to 1987 (S1 to S41) have matured and are no longer earning interest. Holders of CSBs should check their bonds to see if they have any of these matured series.

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