What are the risks of RRBs?
All securities, including bonds that are guaranteed by the Government of Canada, carry some risks. However, RRBs are among the least risky investments. Like nominal fixed-coupon marketable bonds, if you sell an RRB prior to maturity the price you realize will be based on the prevailing interest rate and could be less than what you originally paid. In addition, if you buy an RRB on the secondary market, it’s possible that after a period of deflation you may receive a principal repayment that’s based on a lower index ratio than when you bought the bond. Moreover, even if you buy an RRB at issue, in the unlikely event that there is net deflation over the 30-year holding period, you could receive less than face value. But keep in mind that even if you were to get less than face value at maturity, your purchasing power would still be preserved. Indeed, if you had reinvested the coupons in more RRBs inside a tax-sheltered account, at maturity the purchasing power of your initial investment w
