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US Treasury Bills - where can we buy in Canada
April 6, 2024
6:50 pm
zgic
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Does anyone here invest in US treasuries like Bills, Notes or Bonds. How and where can we buy these?

April 6, 2024
8:09 pm
mordko
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zgic said
Does anyone here invest in US treasuries like Bills, Notes or Bonds. How and where can we buy these?  

Don’t think you can but them directly, not unless you are American. You can buy ETFs like GOVT and SCHP. At any brokerage.

April 6, 2024
8:31 pm
zgic
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mordko said

Don’t think you can but them directly, not unless you are American. You can buy ETFs like GOVT and SCHP. At any brokerage.  

Thanks mordko.

I was trying to read on Bonds vs GICs as I have never invested in Bonds.
Bonds have better returns due to the tax advantages on capital gains + returns if interest rates have peaked. Any example of a safe bond and do we just buy the Canadian Govt bonds in the brokerage account?
GICs are simple, no hassle investments but the tax is huge.

April 6, 2024
11:55 pm
Norman1
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BMO InvestorLine offers US treasury bills and US$ bonds. One can browse their inventory during the trading day. Unfortunately, one cannot look at their bond quotes after hours. The quotes disappear shortly after their bond desk closes for the day.

Scotia iTRADE doesn't offer any US treasury bills or US$ bonds online. Not sure if any would be available if one calls in.

April 7, 2024
3:55 am
kesa
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zgic said
Does anyone here invest in US treasuries like Bills, Notes or Bonds. How and where can we buy these?  

ibkr.ca

the rest don’t hold a candle.

April 7, 2024
4:26 am
savemoresaveoften
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zgic said

Thanks mordko.

I was trying to read on Bonds vs GICs as I have never invested in Bonds.
Bonds have better returns due to the tax advantages on capital gains + returns if interest rates have peaked. Any example of a safe bond and do we just buy the Canadian Govt bonds in the brokerage account?
GICs are simple, no hassle investments but the tax is huge.  

Capital gain on bonds is only a small component of return unless u buy really discounted bonds due to much lower coupon than market.
As for safety vs return, it’s universally true, safe and high return do not belong in same sentence,
And when you buy bonds, plan to hold it to maturity, you won’t be able to trade it regularly for capital gain. Dealers spread will eat up most of what you think is profit.

April 7, 2024
5:08 am
mordko
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zgic said

Thanks mordko.

I was trying to read on Bonds vs GICs as I have never invested in Bonds.
Bonds have better returns due to the tax advantages on capital gains + returns if interest rates have peaked. Any example of a safe bond and do we just buy the Canadian Govt bonds in the brokerage account?
GICs are simple, no hassle investments but the tax is huge.  

Thats true. If rates have peaked then lots of bonds are more tax efficient than GICs.

Yes, government of Canada bond is the “safest” we can buy in Canada. You can buy them through your broker for a fairly high fee. They are not freely traded in real time like stocks. US government makes it easy for Americans to buy newly offered bonds directly from the government. I don’t think the same option is available for GOC bonds, unless you are a bit “special”. Could be wrong. Going for second hand offerings through your broker isn’t very attractive because of extra costs.

You can buy GOC ETFs like XGB on the stock market. Thats easy and cost effective. To maximize cap gains you can buy discount bond ETFs like ZDB. Less safety with commercial bonds but a lot of potential cap gains. Particularly attractive in corp accounts.

You also get liquidity with bond ETFs which you dont have with GICs. Bonds themselves can be sold, so more liquid than GICs. But you pay your broker’s heafty fee twice.

April 7, 2024
7:18 am
RetirEd
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Keep in mind that most Canadians won't get the tax advantages of US federal, state or municipal bonds, unless they have some US status or income. Or some other obscure link I don't know about.

As far as I know, there's no tax-free status for Canadian Government bonds unless they're in a registered account.

RetirEd

April 7, 2024
7:24 am
mordko
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RetirEd said
Keep in mind that most Canadians won't get the tax advantages of US federal, state or municipal bonds, unless they have some US status or income. Or some other obscure link I don't know about.

As far as I know, there's no tax-free status for Canadian Government bonds unless they're in a registered account.  

Like Zdic says, if you are buying discount bonds (which many are right now) then a lot of your income will come in the form of capital gains rather than interest. Which is more tax efficient than GICs. That will always be true if you hold a discount bond to maturity but could also be true for bond funds, although less certain.

April 7, 2024
7:54 am
ryanc
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AFAIK, most (if not all) brokers have such high explicit/implicit commission on bond trades that it offsets any benefits of buying an individual bond as an individual investor.

If you are looking at the ultra-short term end using it like a savings account, I suggest looking at SGOV, UBIL.U (if you want to stay on the TSX), and the like.

If you are looking at investing beyond that, I suggest looking into iShares iBonds ETFs. The table in the middle of the page explains its various advantages.

Beware of the tax implications of investing in the US, which might involve withholding tax, etc. (I'm not sure), which may sway you back to holding CAD investments instead.

April 7, 2024
2:44 pm
zgic
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Thanks everyone for your valuable inputs. Looks like Bonds are not really worth the effort and gains for an individual investor.
Looks like the investment options available for extra cash are: (after I have enough in Stocks and don't want to increase it more, but just allow it to compound)
1. GICs
2. ISAs
3. Real Estate in US (for capital appreciation) - need more detailed analysis on this

The options currently I am trying to find out are not for income generation. Also mortgage has been paid off. RESP closed. RRSP not interested in. TFSAs maxed out.

Are there any other options for extra cash as I am finding that the GICs are HIGHLY tax inefficient, as I have found out after investing for the last 2 years.

ISAs and GICs are basically same correct? In terms of taxation

April 7, 2024
5:25 pm
mordko
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Bonds absolutely are a worthwhile asset class for individuals. Although I would buy them in an ETF wrapper rather than individually.

And RRSPs = something one should be interested in.

Yes, ISAs and HISAs pay interest which is taxed like GICs.

You should have an overall asset allocation strategy. I think that for the fixed income portion, a mix of bonds, cash and GICs can work well. Funds made up of discounted bonds are a smart asset for taxable accounts.

Another tax efficient instrument to consider is preferred shares, but one has to educate himself on them before jumping in.

You also need to decide what is your purpose of having fixed income. Its not really for making money, so GICs breaking even with inflation on an after tax basis aren’t as terrible as you suggest.

April 7, 2024
7:26 pm
zgic
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mordko said

You also need to decide what is your purpose of having fixed income. Its not really for making money, so GICs breaking even with inflation on an after tax basis aren’t as terrible as you suggest.  

Thanks a lot mordko. Your inputs are very much appreciated.
Yes - working on an overall asset allocation strategy.
For capital preservation & inflation protection:
Fixed Income: GICs, ISAs, HISAs, will try to read on Bond ETFs (ryanc has given 1 link, treasuries mentioned by Norman1)

April 8, 2024
6:56 am
Norman1
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zgic said
Thanks everyone for your valuable inputs. Looks like Bonds are not really worth the effort and gains for an individual investor.

That's generally true because of the commissions on bonds charged by the brokerages for small bond orders. One needs to obtain some actual quotes and see if that is true for specific bonds.

Commissions on bonds can be better for large orders. For example, Scotia iTRADE's $1 per $1,000 bond commission has a $250 maximum. On a $500,000 bond order, the commission would be $250 or $0.50 per $1,000 bond.

Scotia iTRADE will quietly waive the commission on small buy orders ($25,000 or less) of bonds maturing within 89 days.

April 8, 2024
7:55 am
zgic
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Norman1 said
Scotia iTRADE will quietly waive the commission on small buy orders ($25,000 or less) of bonds maturing within 89 days.  

So can I say that including all commissions and fees if a bond return is NOT higher than an ISA it is of no use.
Also do you think any Bond currently has a higher return than the 5.15% USD for Ren HISA

April 8, 2024
8:24 am
mordko
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Its apples and oranges. Bonds have different characteristics. For example the rate is guaranteed for duration. Your bond becomes more valuable if inflation subsides and rates drop. HISA does not. Bonds often do well when stocks are in trouble, which helps to reduce portfolio volatility better than cash.

April 8, 2024
8:50 am
Norman1
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zgic said

So can I say that including all commissions and fees if a bond return is NOT higher than an ISA it is of no use.
Also do you think any Bond currently has a higher return than the 5.15% USD for Ren HISA

Lots from BMO InvestorLine. These are three of them:

Security Days to maturity Available quantity
$
Price
/$100
Semi-annual yield
%
Annual yield
%
Halted Minimum purchase
RBC U$ BAIL-IN 0.65% 29JUL24 110 609,000 98.662 U 5.131 5.197 No 1,000
RBC U$ BAIL-IN 0.75% 07OCT24 180 273,000 97.875 U 5.182 5.249 No 1,000
CIBC U$ BAIL-IN 1% 18OCT24 191 321,000 97.878 U 5.170 5.237 No 1,000
April 8, 2024
10:14 am
zgic
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Thanks Norman1.
Wow this is all greek to me. Looks like my Bonds' knowledge is 0.
I have to learn and understand a lot before I even think of these bonds like BAIL-IN what is it? Available Qty?
I guess, I was going for a straightforward comparison like:
ISA Ren USD 5.15%
US Treasury 2 year (like a GIC) is it 5.25% or 5% - where Can I find this information to do a compare
Basically 1 to 1 : Risk wise comparison
I know the US 2 treasury is guaranteed 2 year term compared to an ISA but that would be my starting point.
Today, If I go to CNBC I can see a US Treasuries chart with yields: Can I buy these today at these rates in Canada? If yes can you give me a link to a US 6-Month?
US-Treasuries-2024-04-08-131734.jpg

April 8, 2024
2:29 pm
savemoresaveoften
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Norman1 said

zgic said
Thanks everyone for your valuable inputs. Looks like Bonds are not really worth the effort and gains for an individual investor.

That's generally true because of the commissions on bonds charged by the brokerages for small bond orders. One needs to obtain some actual quotes and see if that is true for specific bonds.

Commissions on bonds can be better for large orders. For example, Scotia iTRADE's $1 per $1,000 bond commission has a $250 maximum. On a $500,000 bond order, the commission would be $250 or $0.50 per $1,000 bond.

Scotia iTRADE will quietly waive the commission on small buy orders ($25,000 or less) of bonds maturing within 89 days.  

My advice for anyone thinking of buying bonds as investment is to look at the yield and decide if that’s good enough for u given the issuer name and duration. Don’t fret over commission or how much the brokerage makes off you, As a retailer investor trading small size (anything less than $1mm is small in the bond world), you have to accept you can only be a price taker, never a maker.

April 8, 2024
2:40 pm
mordko
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I would definitely “fret” over the kind of commissions and spreads charged by brokers for bonds. Particularly so that they charge it on the way in and out. Unless you are planning to hold this bond for decades, its likely to be a large chunk of change. If I could buy new issues direct from the government, like they can in the states, it would be another matter. In Canada its hard to make an argument for straight bonds when you can buy bond ETFs for next to nothing.

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