Canada's international transactions in securities

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Non-residents added $5.5 billion of Canadian securities to their portfolios in July, on par with the amount acquired in June. Canadian bonds again accounted for the majority of foreign inflows. Meanwhile, Canadians sold $3.0 billion of foreign securities in July, mainly US federal government bonds.

Foreign acquisitions of federal bonds remain strong

Foreign investment in Canadian bonds slowed but remained robust at $5.2 billion in July. Foreign inflows were mainly the result of secondary market activity in Canadian dollar-denominated bonds. In July, the Canadian dollar rose 3.3 cents US, the second largest monthly appreciation since July 2009.

Non-residents added $3.9 billion of outstanding federal government bonds to their portfolios, with a concentration on shorter term-to-maturity instruments. In July, Canadian long-term interest rates exceeded those in the US by the widest differential since January 2009. Canadian private corporate bonds also attracted $1.7 billion of foreign inflows on secondary markets, driven by mortgage-backed securities.

In addition, non-residents purchased $966 million of Canadian money market instruments in July. Foreign investors placed $1.6 billion of funds in federal government Treasury bills, following a divestment of $2.2 billion in June. In July, the Bank of Canada raised its target overnight rate by another 25 basis points, the second rate increase since June. Meanwhile, non-residents continued to divest themselves of provincial paper for a seventh straight month.

Foreign investors reduce their holdings of Canadian stocks

Non-residents sold $655 million of Canadian stocks in July, their first divestment in five months. Activity over the month was mainly composed of secondary market transactions, driven by the selling of Canadian technology shares. In July, Canadian equity prices increased for the first time in three months, up 3.7%

Residents sell US government bonds for a fourth month

Canadians divested themselves of $3.0 billion of foreign bonds in July, more than offsetting the amount acquired in June. The divestment focused on US government bonds, as Canadians lowered their exposure to these instruments for a fourth straight month. Canadian purchases of maple bonds, the Canadian dollar-denominated foreign bonds, issued by overseas financial institutions moderated the divestment in US government bonds in July.

As for short-term debt securities, Canadians acquired $519 million of foreign money market instruments in July. Outflows were focused on foreign government Treasury bills, mostly US T-bills.

Canadians sell foreign shares

Canadian investors reduced their holdings of foreign stocks by $546 million in July, the first reduction since January. The divestment in July was in non-US foreign stocks as residents sold $1.5 billion, the largest inflow since September 2009. On the other hand, Canadian investment in US stocks remained strong at $977 million, as a result of secondary market and cross-border acquisition activities. In July, US equity prices appreciated more than in any of the previous 11 months.

Available on CANSIM: tables 376-0018 to 376-0029, 376-0042, 376-0058 and 376-0063.

Definitions, data sources and methods: survey number 1535.

The July 2010 issue of Canada's International Transactions in Securities (67-002-X, free) will soon be available.

Data on Canada's international transactions in securities for August will be released on October 18.

For more 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 (613-951-2057; yiling.zhang@statcan.gc.ca), Balance of Payments Division.