Deep Discount: Canadian Bond Traded at 89.845% of Face Value
A Canadian government bond maturing in December 2031 has caught attention for its deep discount. As of September 15, 2026, this 1.5% coupon bond traded at 89.845% of face value, below 90 for every C$100 that will be repaid at maturity.
This is not a credit risk issue, but rather the mismatch between its low coupon and current market yields. With about 5.2 years left to run, this off-the-run bond's yield to maturity stands at 3.657%, more than double the coupon.
The Bank of Canada has kept its overnight rate target at 2.25% since September 2026, and is prepared to adjust monetary policy as needed to balance inflation and growth. Inflation remains a concern, with headline consumer price inflation at 3.0% year on year in August 2026.
The bond's price could be affected by changes in interest rates or inflation expectations, which would impact its yield to maturity.