Personal Finance

What is the Canada Yield Price?

  • Last Updated:
  • Jun 27th, 2005 6:41 pm
Sr. Member
Dec 1, 2002
841 posts

What is the Canada Yield Price?

I've searched the internet and could not find an answer, was wondering if anyone had any ideas.

Many Canadian corporate bonds have an early redemption option, with
the call price determined at the greater of "Canada Yield
Price" and par.

If someone in the know could give me a real world example of how the Canada Yield Price is calculated, I'd much appreciate it.
1 reply
Dec 27, 2004
62 posts
1 upvote
When corps are issued, they are usually priced by comparing to a reference Government of Canada Bond. So for example, if Bell Canada were to issue 5 a year plain vanilla bond, they might price it 100 bps over a Canada with a similar maturity (e.g. 4% 01Sep10, yield 3.30%) => Issue a 4.30% 30Jun10 at par.

The Canada call would say Bell is allowed to call the bond by paying Canada 4% 01Sep10 + 150bps, or par.

So in 2 years time, if that same Canada is at 2.50%, Bell would price up their own bond at a 4.00% yield, thus giving a call price of 100.84.