~ F f Reviewof FinancialEconomics 1998, Vol. 7, No. I. 65-86 Seasonality in Canadian Treasury Bond Returns: An Institutional Explanation George Athanassakos Wilfrid Laurier University, Canada Yisong Sam Tian University of Cincinnati This paper empirically investigates the seasonality in quarterly bond returns in the Canadian government bond market. Four equally weighted bond return indices were calculated for each quarter in the period from 1963:Q2 to 1990:Q3. The seasonality in these quarterly returns was tested and the results support the existence of seasonality in quarterly bond returns in the Canadian government bond market. It appears that bond returns in the last quarter of the year are significantly higher than in any other quarter of the year. This finding contrasts to the results in U.S. studies on Treasury bond returns. An institutional expla- nation is offered for the documented seasonality in bond returns, linking it to the annual Canada Savings Bond campaign in the last quarter of the year, a unique Canadian phenomenon. This hypothesis is supported by empirical evidence based on a regression analysis. Such finding is consistent with the fact that no seasonality in Treasury bond returns is found in the U.S., as the U.S. Savings Bonds are sold regularly through- out the year. Introduction Finance literature contains substantial evidence of seasonality in risky mar- ketable securities. For example, stocks tend to exhibit unusually high returns in January, not only in the U.S., but around the world (Gultekin and Gultekin, 1983). The January effect is also found in options markets (Maloney and Rogalski, 1989). A weekend effect appears to exist in the options and futures markets as Direct all correspondence to: George Athanassakos, The Mutual Group Financial Services Research Centre, School of Business and Economics, Wilfrid Laurier University, Waterloo, Ontario, Canada, N2L 3C5 <gathanas@mach I .wlu.ca>. Copyright © 1998 by JAI Press Inc. 1058-3300 65