Case study

A Bond for CMHC

by Professor Ian H. Giddy
New York University

The Canada Mortgage and Housing Corporation has issued a $500 million, AAA US dollar bond on the international markets. The bond pays 3.875% and matures in April 2010. You have been put in charge of investing the funds temporarily. You are told to invest the money in a U.S. Treasury bond that approximately matches the maturity of the CMHC debt. A brief description of the bond may be found here:

cmhc_usd_3.875% bond.pdf

Prices and other details of U.S. Treasury bonds can be found at

The bonds listed below were found using's screener tool on the same Yahoo page.

T-NOTE 5.000 15-Feb-2011
T-BOND 13.875 15-May-2011
T-BOND 14.000 15-Nov-2011

With these data sources, you should be able to decide which bond makes the most sense for CMHC.

  • Which bonds offer the best returns? How would you assess the risk of callable features in some of the bonds?
  • The money is expected to be invested in a pool of home loans in 6 to 12 months. Does it make sense to invest the funds in a 2010-11 bond, or a shorter-term investment? Explain. | | | | contact
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