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Email this12:24 pm
April 6, 2013
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CRA gives an example of the capital gain/loss calculation for treasury bills in Treasury bills (T-bills) and stripped bonds.
The calculation for multi-year strip bonds is more complicated. Taxtips.ca: Tax Treatment of Income From Investments in Non-Interest Paying Bonds has the details.
3:39 pm
March 30, 2017
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con6450 said
And the yield looks great too: on October 11 2022 the yields for treasury bills auctions were similar or even better than many financial institutions:
3 month: 3.83%
6 month: 4.11%
1 year: 4.31%When 3 month CAD T-bill is yielding 3.83%, I don't even want to bother chasing the HISA promotions.
Those are NOT retail rate. You wont get that rate. My guess is if u get 20bps less at a retail level and small size (as in not in the $millions), thats as good a level retail will ever get.
11:37 am
March 26, 2023
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co said
Let's say for whatever reason the CDIC insurance just won't cut it (e.g. did not win Tangerine lottery; believe in imminent financial collapse, etc.) and I want the theoretically safest place to put my CAD: Government of Canada bonds.My questions are:
1. Is there a way to buy T-Bills/bonds directly? Like the Canada Savings Bonds. Online stock brokers seem to charge a ridiculous bid-ask spread/commission. Anyone knows a good broker for bonds?
2. Alternatively, are there any ultrashort duration ETF/funds for Government of Canada bonds? Like SGOV and BIL in USD.And the yield looks great too: on October 11 2022 the yields for treasury bills auctions were similar or even better than many financial institutions:
3 month: 3.83%
6 month: 4.11%
1 year: 4.31%When 3 month CAD T-bill is yielding 3.83%, I don't even want to bother chasing the HISA promotions.
Longer duration are inverted, but just for the record, the benchmark bond yields on October 13 2022:
2 year: 4.11%
3 year: 4.03%
5 year: 3.59%
7 year: 3.44%
10 year: 3.41%
Long-term: 3.33%
Real return bond long-term: 1.58%
Did you find a good way to buy T-bills?
6:04 pm
August 6, 2018
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hsswurfd said
Did you find a good way to buy T-bills?
The pricing of all brokers are all extremely non-transparent, except for Scotia iTrade's $1 per $1,000 Face Value, $24.99 min/$250 max. I called in many of them and asked for a known quote that I got from iTrade and they all are extremely non-transparent and terrible. I think Scotia iTrade is the only broker whose marketing and platform (that actually quotes what appears to be read bid/ask) make it appear that they actually care about fixed income trades from individual self-directed investors. You can judge for yourself depending on what bond you are looking for and how much you are investing if Scotia iTrade is worth it.
5:51 am
April 6, 2013
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The transparency is overrated. I find it is a nuisance to have to calculate the net yields at Scotia iTRADE for bonds.
As well, their $24.99 minimum makes them really lousy for smaller purchases. I've found BMO InvestorLine better for smaller purchases and shorter maturities.
BMO InvestorLine may end up charging more than $1 per $1,000 bond. But, something like $1.50 per $1,000 with no minimum would be $7.50 instead of Scotia iTRADE's $24.99 on $5,000 of bonds. I've also paid something more reasonable like $0.40 per $1,000 on 6-month municipal bonds at BMO InvestorLine.
6:01 am
March 30, 2017
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Norman1 said
The transparency is overrated.
Totally. All I care is "show me the price and effective yield", and I make the decision whether to buy it or not. Thats how Investor Edge does it, no other transaction cost/fee etc. The only requirement is min. $5k for Cad bonds, $10k for Usd. How much they charge on bid/offer is irrelevant, as even the mid price is subjective. They are the market maker for that bonds at that instance when you want to trade, so its either you like their price or you dont.
Also what I find is most of the time, the price they use to mark to market the bonds in your portfolio may not even be remotely be close to the actual tradeable price anyway. But then one should only buy with the intention to hold it to maturity.
11:01 am
April 5, 2023
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Norman1 said
But then one should only buy with the intention to hold it to maturity.
Is that because otherwise a commission, calculated in the same way, would also be charged on the sell (thus decreasing yield even more)?
11:33 am
April 6, 2013
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Yes, there will be a commission to sell. As well, one will be forced to accept what your broker's bond desk is willing to pay for the bond.
Kind of like what would happen if one could only sell one's car to the car dealer it was purchased from.
12:32 pm
April 5, 2023
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The commission structure and other roadblocks to self-directed retail investment in Canada in CAD T-bills have me searching for an alternative very low risk and high liquidity (preferably daily and max 60-day) investment of potential home down payment funds.
I can't convince myself, after substantial research, to go the HISA ETF route for this.
Anyone know whether a Canadian government (federal and/or provincial) T-bill ETF exists? Or something very similar?
12:42 pm
August 6, 2018
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mtnbikekayakski said
The commission structure and other roadblocks to self-directed retail investment in Canada in CAD T-bills have me searching for an alternative very low risk and high liquidity (preferably daily and max 60-day) investment of potential home down payment funds.I can't convince myself, after substantial research, to go the HISA ETF route for this.
Anyone know whether a Canadian government (federal and/or provincial) T-bill ETF exists? Or something very similar?
What are your concerns with HISA ETF? Credit risk?
1:43 pm
April 5, 2023
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Not so much ultimate credit risk (although of course there's more than with T-bills), but the lower assurance of liquidity, and the related potential for market value to drop below NAV, conceivably right before I need my funds back.
Although HISA ETFs generally backstop low market liquidity with rights of the unitholder to exchange or redeem, those rights are subject to several manager discretions and, in the case of redemption, could result in receiving only 95% of market value. I was considering T-bills instead because, although providing a lower yield, with them--so long as I were to hold them to the short-term and known maturity that I'd be looking at--I would have virtually risk-free assurance of getting both my capital back and the yield established when I bought them.
HISA ETFs come across like simple bank accounts, but are more complex and include significant discretion for their managers and, so, have many more uncertainties to my mind.
2:19 pm
August 6, 2018
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mtnbikekayakski said
Not so much ultimate credit risk (although of course there's more than with T-bills), but the lower assurance of liquidity, and the related potential for market value to drop below NAV, conceivably right before I need my funds back.Although HISA ETFs generally backstop low market liquidity with rights of the unitholder to exchange or redeem, those rights are subject to several manager discretions and, in the case of redemption, could result in receiving only 95% of market value. I was considering T-bills instead because, although providing a lower yield, with them--so long as I were to hold them to the short-term and known maturity that I'd be looking at--I would have virtually risk-free assurance of getting both my capital back and the yield established when I bought them.
HISA ETFs come across like simple bank accounts, but are more complex and include significant discretion for their managers and, so, have many more uncertainties to my mind.
From my own practical experience HISA ETF liquidity has been extremely good. Bid-ask is 1 cent apart and usually at most 1 or 2 cents above NAV, so 0.02%-0.04% premium.
The only exception is HSAV which generally trades above NAV and should be avoided if it is significantly above HSAV unless you have a crazy high marginal tax rate. However, when HSAV is at par, it is an excellent vehicle for tax benefits. And I have never seen HSAV trade below NAV.
In my personal definition, HISA ETF is very liquid in terms of ability to get filled for any volume and daily liquidity, not complex for my taste, and very transparent in pricing compared to some HISA promo with complex terms and rules. The redemption backstop term is standard for all ETFs I believe.
Buying individual T-Bill for all practical purposes mentioned above does not allow early redemption. I guess you already know that. I pretty much gave up on this route.
Lastly if you are curious my recent discovery which I do not actually recommend is RBC Target 2023 Corporate Bond Index ETF which holds 17.3% "CANADIAN TREASURY BILL NOV 09, 2023" and the rest mostly apparently in bank bonds. I do not recommend because the MER is high (0.28%) and I'm not sure how's the bid-ask spread, but otherwise it might be a reasonable low risk place to park funds in broker accounts if HISA ETFs must be somehow avoided.
8:29 am
April 16, 2023
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mtnbikekayakski said
The commission structure and other roadblocks to self-directed retail investment in Canada in CAD T-bills have me searching for an alternative very low risk and high liquidity (preferably daily and max 60-day) investment of potential home down payment funds.I can't convince myself, after substantial research, to go the HISA ETF route for this.
Anyone know whether a Canadian government (federal and/or provincial) T-bill ETF exists? Or something very similar?
There is now CBIL
https://horizonsetfs.com/ETF/cbil/
4:35 pm
August 6, 2018
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n5 said
There is now CBIL
https://horizonsetfs.com/ETF/cbil/
That’s a great find. There’s a companion UBIL.U. I don’t see why UBIL.U would be better than the US equivalents but maybe it’s useful for some.
5:14 pm
October 27, 2013
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co said
That’s a great find. There’s a companion UBIL.U. I don’t see why UBIL.U would be better than the US equivalents but maybe it’s useful for some.
IF one is trying to avoid being caught up in US Estate law, especially from a tax filing perspective, then the US equivalent is not desirable.
9:44 am
February 8, 2023
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mtnbikekayakski said
The commission structure and other roadblocks to self-directed retail investment in Canada in CAD T-bills have me searching for an alternative very low risk and high liquidity (preferably daily and max 60-day) investment of potential home down payment funds.I can't convince myself, after substantial research, to go the HISA ETF route for this.
Anyone know whether a Canadian government (federal and/or provincial) T-bill ETF exists? Or something very similar?
FWIW, CIBC has a cdn goc t-bill fund w/ decent yield, if that's what you're interested in: Current yield 4.23%, effective 4.32%
F-class can be bought in TDDI (webbroker) w/o any commissions.
It is NOT 100% t-bills, but it is mostly t-bills, and the rest is rock solid. Check the holdings before considering buying.
Alternatively, another possibility is buying a Govt of Canada bond with a near maturity. e.g. there's a 0.75% coupon (cusip 135087M92) maturing Feb. 1st 2024. TDDI shows an offer price of 97.462. You would be buying it at a discount, so depending on your marginal, the after-tax yield would be equivalent to a much higher rate GIC or t-bill. Unlike t-bills, the gain would be considered a capital gain and taxed at only 50% of your marginal. To my mind, that makes more sense than buying a t-bill where the entire gain is taxed as interest income. But remember, due to the wide spreads and commissions w/ the online brokers, I wouldn't buy any of these unless planning on holding to maturity.
5:22 pm
December 12, 2009
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You bet! All in a single ticker. Minimal duration risk, as the maturity is 0-3 months. 🙂
https://horizonsetfs.com/ETF/cbil/
Cheers,
Doug
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