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What are infrastructure bonds?

Infrastructure bonds are issued by such entities as road and bridge operators, universities, school boards and even hospitals. It is important to note that none of the issues have government guarantees but it is generally felt that the governments would not allow the issuers to fail to meet their obligations. The entities involved are virtual monopolies and are unlikely to be takeover targets. Interest rates tend to be higher than those offered by government securities.

For example, Concordia University in Montreal has approached the market for long-term capital, borrowing $200 million. Like other bond issues, Concordia has been given a rating by Moody’s (in this case, A1) and Dominion Bond Rating Service (A). The bonds will be sold by underwriters, including RBC Capital Markets, BMO Nesbitt Burns, National Bank Financial, CIBC World Market, Scotia Capital and Laurentian Securities. For investors, these university issues will usually earn a higher interest than a comparable provincial bond.