Demand low on first day of bond issue

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Alberta’s new capital bonds went on sale Tuesday but, according to one retailer, demand was low on the first day.

The government hopes to raise $100 million for seniors housing by floating its first capital bond issue in 13 years.

“At this point we haven’t seen a heck of a lot of interest but it is the first day,” said Servus Credit Union spokesman Mike Dickinson.

The province announced Friday afternoon the five-year bonds would carry an interest rate of 3.3 per cent.

It’s too early to judge the level of investor interest because most people usually take time to shop around and determine whether the rate is a good deal, Dickinson said.

The bonds are being offered at a premium over other similar investments, such as five-year GICs, he said. His firm’s website advertises these for a return of 2.05 per cent. Five-year Government of Canada bonds currently offer a two per cent yield.

The Canadian Taxpayers Federation is asking Albertans to boycott the bonds because the organization feels the interest rate is too high and the bonds represent irresponsible borrowing.

“Selling Alberta Capital Bonds is the government taking on old-fashioned, 1980s-style debt,” said Scott Hennig, the federation’s Alberta director.

“Albertans shouldn’t be encouraging their government to take on this debt; they should boycott the bonds and send the government a message.”

The government is hoping to raise $100 million to help build seniors’ accommodations such as long-term care and supportive living facilities.

“Alberta Capital Bonds are a safe, competitive option for Albertans looking to invest in their province,” said Ted Morton, Minister of Finance and Enterprise.

The bonds are available at various financial institutions, including the major banks, until March 1 or they sell out. The bonds are only available to Alberta residents, and Alberta-based companies. The minimum purchase amount is $1,000 and the maximum is $25,000.

There are two options for interest payout on the bonds: equal annual instalments every March 15 or compounded annually and paid at maturity. Someone who invests $1,000 would either earn $165 in total interest, paid out in five equal annual payments of $33 or $176.26 paid out when the bond matures after five years.

More information on the bonds is available online at www.capitalbonds.alberta.ca

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