I notice this morning that TD Direct is offering a re-opening of a province of Manitoba bond maturing in about 10 years. The coupon is only 3.8%. But the yield to maturity is 4.57% since the price is 94.09 cents per dollar of face value.
If you are interested in accessing new issues like this you should sign up for alerts from your broker since they usually sell out quickly.
If you are interested in holding individual bonds then buying at the issue like this means you are not paying a broker commission. The issuer (in this case Manitoba) pays the commissions and broker fees in the case of new issues.
Normally bonds bought and sold from the likes of TD Direct (TD Waterhouse) have a wide bid / ask spread that acts as a hidden commission that can be quite hefty.
In my view if you buy a government bond like this you should be prepared to hold until maturity since you will face that high commission if you sell early. And maturity in this case is a long ways off.
Interest is fully taxable in taxable accounts. In this case the modest increase in value from 94.01 to 100 at maturity would be taxed as a capital gain.
Given taxation, I’d prefer to hold this in a non-taxable account such as an RSP, or RIF.
I do not hold and am not looking to buy any individual bonds but I wanted to pass along this information in case some readers are interested.