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With interest rates stuck at generational lows, retail investors are on the hunt for the best bond yields they can snare. In Canada, bagging the best-paying bonds is tough because, unlike stocks, bonds are not bought and sold on a centralized, formal exchange. Rather, most retail bond trades are executed over-the-counter at the bond trading desk of one of the six major Canadian banks.

Typically, clients are offered bonds from the bank's own bond inventory and transaction costs are built into the bond price. Clients often don't know whether a bond is priced competitively or how much commission they are paying. Fortunately, a small but growing marketplace for Canadian bonds aims to change the status quo.

CBID is an online, fixed-income marketplace that provides investors with access to the best offer prices and yields for Canadian bonds from the six investment dealers who participate in its market. At CBID's retail website,, investors can view the daily closing price for 800 bonds ranging from federal, provincial and municipal government to corporate and strip bonds. Prices are quoted before commissions and are based on a retail investor-sized purchase of $5,000 face value.

Access to CBID's complete inventory of some 1,500 of the approximately 30,000 active bonds in the Canadian universe is available by subscribing to CBID's Bondview service. This subscription includes real-time pricing, detailed bond information and analytical tools.

The CBID website is a great source for bond pricing, but individual investors cannot buy or sell bonds at the site. They will need to have an account at one of the more than 50 investment firms that subscribe to the CBID marketplace. According to Lawrence McCann, vice-president for CBID at Perimeter Markets Inc., in the discount brokerage space this includes Qtrade, Scotia iTrade, HSBC InvestDirect and Virtual Brokers.

To see whether transparent bond prices and commissions result in a better deal for investors, the cost for the same two bonds was compared at Bondview and at the websites of discount brokers Qtrade, TD Waterhouse, RBC Direct Investing and BMO InvestorLine. Of the four brokers, only Qtrade shows commissions separately from the bond price.

The first bond was a Government of Canada issue, 4 per cent coupon, maturity date June 1, 2017. Quotes for a bond with $5,000 face value, the minimum usually required to make a trade, were obtained from the four firms within minutes of each other. The total cost ranged from $5,696.99 to $5,732.19. Qtrade listed the exact price shown in the Bondview inventory. This firm quoted the lowest total cost (bond plus commission), whereas BMO InvestorLine was the most expensive. The cost to buy $25,000 face value of the same bond returned similar results: Qtrade was the cheapest at $28,420.20 and BMO InvestorLine the most expensive at $28,660.95.

The second bond was a corporate issue by Fairfax Financial Holdings Ltd., 7.50 per cent coupon, maturing on August 19, 2019. For $5,000 face value, the total cost ranged from $5,856.99 to $5,905.99, with BMO InvestorLine quoting the lowest price and Qtrade the highest. A quote for this second bond was not available from TD Waterhouse.

It would seem that in the current bond trading environment – one that mixes a competitive marketplace with over-the-counter – transparent bond and commission pricing does not always guarantee the lowest total cost for a trade.

Price isn't everything. Depth of bond selection is important, too. In the searches run for the aforementioned two bonds, all the brokers returned a similar number of offerings. On request, a broker's bond desk will usually try to secure any bond not listed in its online inventory by contacting other dealers. The cost for this service will be built into the bond price, or if commissions are separated out, there may be an additional charge. At Qtrade, such broker-assisted trades attract a fee of $40 in addition to the regular commission.

Educational resources available at a discount broker's site could be a deciding factor in choosing where to trade bonds. Those new to bond trading will want a broker that provides information on the types of bonds, credit quality, maturity dates and how to execute a trade, as well as insight into how economic factors affect bond returns.

Having handy access to the right tools can contribute to better bond trades. RBC Direct Investing offers clients a practice account where they can simulate buying and selling bonds (and other investments). This is an excellent way for aspiring active bond traders to test trading strategies without losing their capital. TD Waterhouse has a tool for building a bond ladder that buy-and-hold investors would find useful. It even calculates the total monthly income that the chosen bonds will generate.

While there is a growing transparent, competitive bond marketplace in Canada, a formal market for bonds that is as efficient and as open as the Toronto Stock Exchange is some ways off. For now, bond investors who insist on the lowest price for a particular bond will have to shop the various brokerages. Everyone else would be well advised to open an account at the broker that offers the best value proposition for their overall investing needs.

Gail Bebee is the author of No Hype: The Straight Goods on Investing Your Money.