Canada needs to change its regulatory approach on the trading of corporate bonds. Regulators and major participants believe that the bond market is mostly institutional and over the counter (OTC) and therefore does not require the same transparency levels as the equity markets. But changes in demographics, technology and market structure are pressuring changes in other jurisdictions.
Corporate bonds are an important investment for retail and institutional investors. Corporate bonds offer investors relatively secure (e.g. investment grade bonds) and predictable cash flows compared to equity. Bonds also offer predictable cash flow that is superior to returns on bank deposits.
Corporate bonds in particular also provide higher returns than government bonds. In Canada it is essential for retail investors, pension funds and life insurers to have access to corporate bonds to build diversified, efficient risk-return portfolios of predictable and relevant streams of income.
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Federico Knaudt – Globe and Mail – October 30, 2014.
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