Radar Screen:- GICs and Fixed Income
Source: Heather Freil, Fiscal Agents June 5, 2001
Title: Canada Mortgage Bonds benefit housing industry

In February, the Canadian Mortgage and Housing Corporation (CMHC) announced it's plans to introduce a new mortgage funding vehicle to Canadian investors that will provide unique investment opportunities while working to reduce the cost of mortgages.

This housing financing initiative is known as Canada Mortgage Bonds (CMB) and is designed to provide attractive opportunities for investment in Canadian residential mortgages while ensuring that Canadians have access to affordable mortgage financing.

"This product will benefit Canadian home buyers because the bonds will provide the mortgage market with an alternative and competitive source of funds which will help lower mortgage financing," said the Honourable Alfonso Gagliano, Minister responsible for CMHC.

The Canada Mortgage Bond program provides investors with the opportunity to invest in a guaranteed fixed income vehicle that features semi-annual interest payments and repayment of principal at maturity. Backed by the Government of Canada, CMHC guarantees the timely payment of interest and principal to investors. Private lenders and CMHC use the money invested in the bonds to purchase mortgages, increasing the supply of low-cost funding for residential mortgages and resulting in lower mortgage financing costs for Canadians.

According to CMHC, the bonds are to be issued in denominations as low as $1,000, can be issued for any term and are available to both institutional and retail investors. Canada Mortgage Bonds can be purchased through investment dealers, financial institutions and trust companies.

Peter Smith, Chairman of CMHC believes that the Canada Mortgage Bond program will be beneficial not only to Canadians but also to the housing industry in Canada. "Canada Mortgage Bonds will provide Canadians with both an attractive and secure investment opportunity, and an important new source of funds to further enhance the efficiency of the secondary mortgage market," said Smith.