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Owning bonds is a grind these days – literally.

The prospect of a long and potentially sharp rise in interest rates has been grinding down the price of bonds and bond funds. But if you’re putting new money into bonds, you’ll find yields are well up from levels of a year ago.

Yields on guaranteed investment certificates are on the rise as well, which presents a question for investors. Are bonds the best way to extract the most yield in the current market, or GICs?

I ran a quick field test at one of the big digital brokerages recently in search of an answer. Using a five-year term, I compared the yield available from a $10,000 investment in GICs as well as bonds issued by the federal government, provincial governments and corporations financially solid enough that their bonds are considered investment grade. Here’s what I found:

Federal government bonds: A bond maturing on June 1, 2027, was available with a yield of 1.6 per cent. The coupon, or yield at the time the bond was first issued, was 1 per cent. As a result, this bond was available for sale at a price set at a slight discount to its value on redemption. (Bond prices and yields move in opposite directions.)

Provincial bonds: Alberta and Ontario bonds maturing in early June of 2027 offered yields of 2.1 per cent. Both have coupons in the 2.5 per cent area, and were selling at prices a bit higher than the redemption value.

Corporate bonds: A RioCan REIT bond maturing March 10, 2027, offered a yield of 3.1 per cent. The coupon is 2.4 per cent, so the bonds are available at a discount to redemption value. A higher-rated TC Energy bond (listed under its old name, TransCanada PipeLines) offered a 2.9 per cent yield.

GICs: The best five-year rate available from the many issuers listed by this broker was 2.75 per cent from Manulife Bank of Canada. If you’re willing to deal directly with an online bank rather than having a GIC in your brokerage account, you could get 3 per cent on a five-year term from Wealth One Bank of Canada and 2.95 per cent from EQ Bank and Wyth Financial as of mid-February.

Corporate bonds offered the best yield in this comparison, but GICs are worth a look for investors who would prefer not to see the value of their fixed income holdings going down as interest rates rise. Bonds win, hands down, if you might need to sell before maturity.

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