Issued by a Canadian corporation or provincial government, these bonds offer you income payments in U.S. dollars.
Yankee bonds provide income in U.S. dollars, and are issued by provincial governments or Canadian corporations.
Yankee bonds offer the following features:
- Safety - Your investment is backed by the full faith and credit of the issuing provincial government or corporation, and the provincial government's ability to levy and collect taxes.
- Income - You earn a fixed rate of interest in U.S. dollars, usually paid twice a year.
- Liquidity - These bonds can be sold at their current market value at any time before the maturity date.
- Currency risk - You'll have exchange risk (risk of the value of the investment changing due to converting currencies) if you need to convert back into Canadian dollars.
- Price changes - While the amount of your interest will almost always remain the same, the value of your bond will change daily.
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Before investing in bonds, you should understand the risks involved, including credit risk and market risk. Bond investments are also subject to interest rate risk such that when interest rates rise, the prices of bonds can decrease, and the investor can lose principal value if the investment is sold prior to maturity.