1. What are the payment characteristics of the GOC RRB’s?

GOC RRB’s are bonds which bear interest adjusted in relation to the All-items Consumer Price Index for Canada (the CPI). Interest on the GOC RRB’s consists of both:

• an inflation compensation component (Inflation Compensation) which, in effect, causes the nominal principal amount of the GOC RRB’s (the Principal), payable on maturity, to be increased or decreased based on changes in the CPI, and
• a cash entitlement (Coupon Interest) calculated based on Principal and accrued Inflation Compensation, which Coupon Interest is payable in semi-annual instalments on June 1 and December 1 of each year. At maturity, in addition to Coupon Interest payable on such date, a final payment equal to the sum of Principal and Inflation Compensation (whether positive or negative) will be made.

1. What are the margin requirements for GOC RRB’s?

The margin requirement for GOC RRB’s is calculated based on the margin requirements for bonds and money market instruments guaranteed by the GOC as stipulated in subsection 5210(1) of the IIROC Rules1
.

1. Is there a margin reduction for offsets involving GOC RRB’s?

Where a Dealer Member is long (short) GOC RRB’s and short (long) GOC straight bonds within the same maturity band, the margin requirement may be calculated based on the “greater of” the margin requirement applicable to each position on a stand alone basis. The margin requirement is calculated on a “greater of” basis instead of a “net” basis due to the fact the return distributions of these two types of bonds is too dissimilar and as the result the calculation of the margin requirement on a “net” basis would not provide sufficient margin coverage.

1. Applicable Rules

IIROC Rules this Guidance Note relates to:

• Rule 5200.

1. Previous Guidance Note

This Guidance Note replaces C-99 - Government of Canada - Real Return Bonds.

1. Related documents

This Guidance Note was published under Notice 21-0190 - IIROC Rules, Form 1 and Guidance.

• 1In this Guidance, all rule references are to the IIROC Rules unless otherwise specified.