An Investment Dealer is comparing provincial bonds from various Canadian provinces. Why do provincial bonds generally offer a higher yield than Government of Canada (GoC) bonds with the same maturity?

Question

Accepted Answer

Because provinces cannot print money and have varying fiscal health, they carry a slightly higher credit risk and lower liquidity than GoC bonds, necessitating a higher yield (spread).

An Investment Dealer is comparing provincial bonds from various Canadian provinces. Why do provincial bonds generally offer a higher yield than Government of Canada (GoC) bonds with the same maturity?

Discussion