US Treasury Bills - where can we buy in Canada | GIC discussions | Discussion forum

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.

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.

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.

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.

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.

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.

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.

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.

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.