Rothenberg Capital Management has relationships with major dealers across the country, which gives us access to a huge inventory of federal, provincial, municipal, and corporate bonds.
From Short term bankers acceptances and treasury bills, to long term bonds and structured products, we can get you the diversification you need for your fixed income portfolio.
For definitions and approximate current rates, click on one of the tabs below:
Federal and provincial bonds are marketable securities that are periodically sold at auction by the various Finance Ministers. They are purchased by investment dealers, who then re-sell them to retail investors.
- have terms to maturity ranging from 1 year to 30 years;
- have a fixed semi-annual interest payment; and
- can be usually purchased in denominations as low as $1,000.
These bonds have a guaranteed return if held to maturity but, unlike the Canada Savings Bonds, can be bought or sold prior to maturity at market prices, which vary from day to day.
Municipal bonds are issued by various municipalities and are not automatically guaranteed by the provinces in which they are domiciled, except in a few rather specific cases. If they were guaranteed by their provinces, then all municipalities would be rated the same as the province that guaranteed them. Such a guarantee by the provinces would in turn lower the provinces’ ratings. Instead, municipal bonds may vary in ratings depending, among other factors, on the tax revenues it can raise to pay the interest on its debt issues.
Terms to maturity generally range from a few months to 30 years. The most liquid issues are the larger recent issues with terms of 5, 10, and 30 years.
Businesses rely on a variety of means to raise funds in order to finance operations and projects. To raise capital, a business can borrow from banks, issue common or preferred stock, or issue debt. In fact, corporate bonds, debentures, notes and commercial paper have been used to finance business innovations since the 1930s.
In order to recover both the interest and the principal due to them in the case of default, corporate bondholders have a prior legal claim (to both income and assets of the corporation) over common and preferred stockholders. Within this broad category of ‘prior claim,’ however, each issue has its own ranking with respect to priority. A bond classified as senior debt, for example, will rank ahead of subordinated debt. A first mortgage bond will rank ahead of a debenture. A corporate note will have the least claim among the group of prior claimants.
While bonds in most other sectors have common characteristics and generally deviate only as to term and coupon, each corporate issue should be regarded as unique. A careful analysis of corporate bond variables is therefore essential.
Dominion Bond Rating Service (DBRS) Bond and Long-Term Debt Rating
As is the case with all DBRS rating scales, long-term debt ratings are meant to give an indication of the risk that the borrower will not fulfil its full obligations in a timely manner, with respect to both interest and principal commitments. DBRS ratings do not take factors such as pricing or market risk into consideration and are expected to be used by purchasers as one part of their investment process. Every DBRS rating is based on quantitative and qualitative considerations that are relevant for the borrowing entity.
AAA – Highest Credit Quality
Bonds rated AAA are of the highest credit quality, with exceptionally strong protection for the timely repayment of principal and interest. Earnings are considered stable, the structure of the industry in which the entity operates is strong, and the outlook for future profitability is favourable. There are few qualifying factors present, which would detract from the performance of the entity, the strength of liquidity and coverage ratios is unquestioned, and the entity has established a credible track record of superior performance. Given the extremely tough definition that DBRS has established for this category, few entities are able to achieve an AAA rating.
AA – Superior Credit
Quality Bonds rated AA are of superior credit quality, and protection of interest and principal is considered high. In many cases, they differ from bonds rated AAA only to a small degree. Given the extremely tough definition, which DBRS has for the AAA category (which few companies are able to achieve), entities rated AA are also considered to be strong credits which typically exemplify above average strength in key areas of consideration and are unlikely to be significantly affected by reasonably foreseeable events.
A – Satisfactory Credit Quality
Bonds rated “A” are of satisfactory credit quality. Protection of interest and principal is still substantial, but the degree of strength is less than with AA rated entities. While a respectable rating, entities in the “A” category are considered to be more susceptible to adverse economic conditions and have greater cyclical tendencies than higher rated companies.
BBB – Adequate Credit Quality
Bonds rated BBB are of adequate credit quality. Protection of interest and principal is considered adequate, but the entity is more susceptible to adverse changes in financial and economic conditions, or there may be other adversities present which reduce the strength of the entity and its rated securities.
BB – Speculative
Bonds rated BB are defined to be speculative, where the degree of protection afforded interest and principal is uncertain, particularly during periods of economic recession. Entities in the BB area typically have limited access to capital markets and additional liquidity support, and in many cases, small size or lack of competitive strength may be additional negative considerations.
B – Highly Speculative
Bonds rated B are highly speculative and there is a reasonably high level of uncertainty, which exists as to the ability of the entity to pay interest and principal on a continuing basis in the future, especially in periods of economic recession or industry adversity.
CCC / CC / C – Very Highly Speculative
Bonds rated in any of these categories are very highly speculative and are in danger of default of interest and principal. The degree of adverse elements present is more severe than bonds rated “B”. Bonds rated below “B” often have characteristics which, if not remedied, may lead to default. In practice, there is little difference between the C to CCC categories, with CC and C normally used for lower ranking debt of companies where the senior debt is rated in the CCC to B range.
D – In Default