Which investment option typically pays a higher rate than Canada Savings Bonds?

Canada Premium Bonds, while they are a type of government-backed investment, are generally designed to offer interest rates that are competitive in comparison to other savings options but may not consistently exceed that of corporate bonds.

In contrast, corporate bonds are issued by private companies and often carry higher interest rates to compensate for the additional risk they represent when compared to government securities, including Canada Savings Bonds. Since corporate bonds come from a range of companies, the potential for higher returns is associated with the varying credit risks of those companies. This can lead to corporate bonds generally paying more than Canada Savings Bonds due to the perceived credit risk.

Government bonds are another viable alternative, which is issued by various levels of government. Though they are low-risk investments, the interest rates they provide can sometimes overlap with or be higher than those of Canada Savings Bonds, depending on prevailing economic conditions and market interest rates.

Tax-Free Savings Accounts (TFSAs) allow investments that can include different types of investment options, such as stocks, bonds, and mutual funds. The earnings within a TFSA are tax-free, which may appeal to investors seeking tax efficiency, but the rate of return is not guaranteed and varies based on how the funds are allocated within the account.

Overall, corporate bonds are inherently