Ukraine Sovereignty Bond

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Overview

To offer Canadians an opportunity to directly support Ukraine, the Government of Canada announced that it will issue a Ukraine Sovereignty Bond. The five-year, $500 million bond, denominated in Canadian dollars, will be issued in late November 2022.

Subject to negotiations with Ukraine, an amount equal to the proceeds from the bond will be transferred to Ukraine through the International Monetary Fund's (IMF) Administered Account for Ukraine, which Canada played a leading role in creating.

The funds will support the Government of Ukraine to continue to operate in the face of Russia's illegal invasion, including by providing essential services to Ukrainians, such as pensions, the purchasing of fuel before winter, and restoring energy infrastructure. The Government of Canada has partnered with participating financial institutions to offer Canadians the opportunity to purchase a Ukraine Sovereignty Bond in denominations of $100.

The Ukraine Sovereignty Bond builds on the Government of Canada's $2 billion in direct financial assistance to Ukraine so far in 2022, all of which has already been disbursed. Canada has also committed more than $2.5 billion in military, humanitarian, and development assistance to Ukraine this year. This brings Canada's assistance in 2022 to more than $5 billion.


What are bonds?

Government of Canada bonds are debt instruments issued by the government to raise funds.

The bond investor lends money to the Government of Canada, which commits to make interest payments to the investor on specific dates, and repay the principal amount in full on the set maturity date.


How the Ukraine Sovereignty Bond will work

Canadians who participate in the Ukraine Sovereignty Bond will, in effect, be purchasing a regular five-year Government of Canada bond at roughly the current 3.3 per cent rate of return, subject to the market conditions at the time of issuance. To provide investors with confidence about the safety of their funds, the Ukraine Sovereignty Bond will likewise be backed by Canada's AAA credit rating.

The bond will pay interest twice per year, on February 24 and August 24, until the bond matures in 2027. For example, a $1,000 investment at a yield of 3.3 per cent should expect to receive $16.50 every February and August through 2027.

The bond will mature on August 24, 2027, Ukrainian Independence Day, at which time bondholders will receive the full repayment of their initial investment.


How to purchase a Ukraine Sovereignty Bond

Participating financial institutions will make the Ukraine Sovereignty Bond available to Canadians in $100 denominations.

If you are interested in purchasing a bond, please contact your financial institution. They can assist you in accessing the bond through an investment account, and help you to set up the right kind of account if you don't already have one.

Participating financial institutions

The Ukraine Sovereignty Bond will be available through the participating financial institutions listed below. These financial institutions can explain how to access the bond via an investment account, and how to set up the necessary account if you don't already have one.

After contacting your financial institution, the final step is to purchase the bond in the amount of your choice ($100 denominations) through a registered dealer.

Once purchased, the bond will mature on August 24, 2027, a term of approximately five years. Interest will be paid twice per year.

Canadians interested in purchasing this bond when it is initially issued by the government should contact their investment advisor or financial institution before November 29.

Following this date, Canadians may still be able to purchase this bond, subject to availability.


Frequently asked questions

What is the Ukraine Sovereignty Bond and why is Canada issuing it?

  • The Ukraine Sovereignty Bond is a special Government of Canada bond to support Ukraine. The Ukraine Sovereignty Bond will provide an opportunity for individual Canadians, and institutional investors around the world, to provide financial assistance to the Government of Ukraine while maintaining confidence in the safety of their funds through an investment backed by Canada's triple-A credit rating.

How will the bond work?

  • The government will issue a five-year bond totalling C$500 million, while making a commitment that equivalent funds from this issuance will be passed on to Ukraine in the form of a loan through the IMF's Administered Account for Ukraine.
  • Subject to negotiations with Ukraine, the loan to Ukraine will be provided on similar terms as the bond, while respecting the spirit of the debt service suspension agreed by the Group of Creditors of Ukraine (see below).
  • The government will focus on promoting retail investor participation in the bond in order to give Canadians the opportunity to provide direct support to Ukraine.
  • A five-year term structure was judged to be a good balance between Ukraine's preference for a longer term loan and retail investors' preference for a shorter term investment.
  • The interest rate offered to the retail investors remains to be determined, by the market. However, we expect it could be around the yield of a five-year regular Canadian bond. Interest payments to bond holders would be on a semi-annual basis, with full repayment of principal upon expiration of the five-year term.

How is this different from a regular Government of Canada bond?

  • The Ukraine Sovereignty Bond is a regular Government of Canada bond backed by Canada's triple-A credit rating. Timely repayment to bondholders will be guaranteed by the Government of Canada.

Should bondholders be worried that the Government of Ukraine will not pay them back?

  • Those who choose to invest in a Ukraine Sovereignty Bond will, in effect, be purchasing a regular Government of Canada bond backed by Canada's triple-A credit rating. Timely repayment to bondholders will be guaranteed by the Government of Canada.

When will it be issued?

  • We are seeking to issue this bond near the end of November, subject to operational and market considerations. Canadians interested in purchasing this bond when it is initially issued by the government should contact their investment advisor or financial institution before November 29.

Can I buy this bond after November 29?

  • After November 29, Canadians should contact their participating financial institution to express interest in the bond.

How and when will the money flow to Ukraine?

  • An amount equal to the proceeds from the bond will flow to Ukraine in the form of a loan through the IMF's Administered Account for Ukraine as soon as possible once the bond issuance process has been completed, subject to negotiations with Ukraine.

What will Ukraine use this money for?

  • The money is expected to provide Ukraine with general budgetary support, such as to help sustain basic government operations including essential services.
  • Consistent with the terms of Canada's financial assistance to Ukraine to date, the funds cannot be used for lethal activities or purchases, and must be consistent with relevant sanctions laws and regulations.

When will the bond mature?

  • The Ukraine Sovereignty Bond will mature on August 24, 2027, Ukrainian Independence Day, at which time bondholders will receive the full repayment of their initial investment.

I am not a Canadian, how do I buy the bond?

  • The sale of the Ukraine Sovereignty Bond will be subject to securities laws applicable in your jurisdiction if you are outside of Canada. Should you be an investor outside Canada and interested in supporting Ukraine through Canada's Ukraine Sovereignty Bond, we suggest you contact a financial institution in your jurisdiction to express your interest.

Will Ukraine be paying interest payments on the bond?

  • The Government of Canada will be responsible for all interest and principal repayments to bondholders.
  • Canada will provide an amount equal to the proceeds from the bond issuance to Ukraine in the form of a loan provided through the IMF Administered Account for Ukraine, subject to negotiations with Ukraine. Ukraine will be obligated to make interest payments to Canada on this new loan consistent with the terms agreed between Canada and Ukraine. Canada expects that the new loan will respect the spirit of the debt service suspension agreed by the Group of Creditors of Ukraine (see below).

What is the IMF Administered Account for Ukraine?

  • Canada worked with IMF staff, the Ukrainian government, and other interested countries to establish a new Multi-donor Administered Account for Ukraine at the IMF in April 2022.
  • This facility provides pass-through bilateral loans and/or grants to the Ukrainian government to help meet Ukraine's urgent balance of payments and budgetary needs. The account helps to reduce administrative pressure on Ukraine and gives Ukraine flexibility to convert contributions to a currency of their choosing.
  • Canada was the first country to announce and provide a contribution to Ukraine through the Administered Account, and to date has disbursed C$1.45 billion through the Account. Germany has provided a €1 billion grant through the Account, Belgium has provided a €5 million grant, and contributions from other donors including the Netherlands are expected soon.
  • Consistent with the terms of Canada's financial assistance to Ukraine to date, the funds from this new loan cannot be used for lethal activities or purchases, and must be consistent with relevant sanctions laws and regulations.

Why is Canada using the Administered Account for this loan?

  • The Administered Account is a proven, safe and efficient means to channel financial support to Ukraine.
  • The IMF will administer the loan on a pass-through basis. Disbursements will be transacted by the IMF in accordance with the lending terms agreed by Canada and Ukraine.
  • As with a typical sovereign loan, Canada will assume the credit risk associated with the loan.

What is the debt services suspension for Ukraine?

  • Canada, with the Group of Creditors of Ukraine (Canada, France, Germany, Japan, the United Kingdom and the United States), has provided Ukraine with a temporary debt service suspension.
  • The Group of Creditors have agreed to defer all interest and principal payments from August 2022 to December 2023, which is expected to provide Ukraine with approximately US$300 million in temporary debt deferral during the suspension period. Canada is providing US$18.6 million in temporary debt deferral.
  • Canada expects that the new loan to Ukraine will respect the spirit of the debt service suspension. This will have no impact on interest payments to bondholders, who will continue to receive coupon payments on a semi-annual basis from the outset.

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