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Canada's international transactions in securities
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For a 17th consecutive month, Canadian investors continued their heavy acquisitions of foreign securities, purchasing $4.0 billion in June. Meanwhile, foreign purchases of Canadian securities declined substantially from $5.9 billion in May to a nominal $343 million in June.
Canadians make record purchases of foreign bonds
Canadian investors surpassed the record set in March by acquiring a further $5.6 billion worth of foreign bonds in June. Buying has been strong in 15 of the past 20 months, bringing the total investment over that time to $56.5 billion.
June's record was a result of continuous heavy purchases with sales toned down. Acquisitions were equally split between US bonds and overseas bonds; the Canadian investment in overseas bonds was an all time high.
Related market informationIn June, Canadian short-term interest rates climbed 14 basis points to 4.43%, the highest over the past five years. Meanwhile, US short-term rates only edged up 7 basis points to 4.79%, further narrowing the differential between the two countries to 0.47%. After a 7 basis points decrease in May, Canadian long-term rates regained 18 basis points to 4.63% in June. US long-term rates increased 13 basis points to 5.25%. The differential between Canada and US long-term rates decreased to 0.62%, favouring investment in the United States. Canadian stock prices declined for the second straight month. June ended with the S&P/TSX composite index falling 1.1% to 11,612.9. Following a 3.1% decrease in May, US stock prices remained virtually unchanged in June with the Standard and Poor's Composite Index settling at 1,270.2. After hitting a 28-year high in May, the Canadian dollar retreated 1.20 US cents in June. The dollar closed June at 89.6 US cents. Definitions The data series on international security transactions cover portfolio transactions in stocks, bonds and money market instruments for both Canadian and foreign issues. Stocks include common and preferred equities, as well as warrants. Debt securities include bonds and money market instruments. Bonds have an original term to mature of more than one year. Money market instruments have an original term to maturity of one year or less. |
Meanwhile, Canadian investors sold $864 million of foreign money market paper in June, the highest sell-off since August 2005. This was largely driven by a divestment of $1.0 billion in non-US paper. Moreover, the selling of $244 million of US treasury bills was offset by the purchase of $389 million in US corporate paper.
Sell-off of non-US shares reverses the investment trend in foreign equities
Canadian investors switched to sell $702 million worth of foreign equities in June. This reversed a trend of net buying over the past 16 months to a peak of $5.9 billion in May.
June's deviation from the past investment trend resulted from sales of $2.6 billion in non-US shares. Nevertheless, acquisitions remained strong in US shares in June, totalling $1.9 billion.
Non-resident purchases of Canadian equities cool off
Following strong purchases of Canadian equities since January 2006, non-residents decreased their holdings by divesting $846 million worth in June.
Foreign investors paused from the heavy acquisitions of outstanding Canadian shares that they had been making in consecutive months for almost a year. June's sell-off amounted to $1.1 billion. Overall, investors from other European Union countries alone sold $2.4 billion worth. Purchases by US residents declined by almost three-quarters to $938 million in June, followed by purchases of $691 million by residents of the United Kingdom.
Foreign investors turn to short-term Canadian paper
Non-residents bought a record $4.5 billion of Canadian money market paper in June. The acquisitions were concentrated in paper issued by the federal government and their enterprises, amounting to a 10-year high of $4.1 billion. Heavy purchases of provincial government paper added another half a billion into non-resident portfolios.
American and British residents led the investment in Canadian short-term paper, acquiring $3.8 billion and $1.1 billion respectively. Purchases by US residents were the second highest on record while purchases by United Kingdom residents hit the highest point since April 2002.
Foreign holdings of Canadian bonds dipped by $3.3 billion, due mainly to a $3.7 billion sell-off of federal government issues. Non-residents did acquire $1.6 billion of federal enterprise bonds which was largely offset by the selling of provincial and corporate issues.
On a currency basis, the foreign divestment was roughly split between Canadian bonds denominated in Canadian dollars and those in US dollars. Against this, non-residents acquired $1.7 billion of bonds denominated in other foreign currencies. Geographically, dispositions of Canadian bonds were concentrated in the United States as well as in emerging economies. In contrast, European investors acquired $2.6 billion in Canadian bonds.
Available on CANSIM: tables 376-0018 to 376-0029, 376-0042, 376-0058 and 376-0063.
Definitions, data sources and methods: survey numbers, including related surveys, 1532, 1534, 1535 and 1537.
The June 2006 issue of Canada's International Transactions in Securities (67-002-XIE, free) will soon be available.
Data on Canada's international transactions in securities for July will be released on September 18.
For general information or to order data, contact Client Services (613-951-1855; infobalance@statcan.gc.ca). To enquire about the concepts, methods or data quality of this release, contact Yiling Zhang (613-951-1864), Balance of Payments Division.
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