Canada's international transactions in securities

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Non-resident investors resumed the pattern of significant acquisitions of Canadian securities in July as they added $11.8 billion to their holdings, mainly in the form of federal Treasury bills. Canadian holdings of foreign securities edged up $1.3 billion, led by further acquisitions of foreign corporate shares.

Chart description: Foreign portfolio investment in Canadian securities

Foreign investors focus on Canadian short-term debt instruments

Non-residents acquired $7.3 billion of Canadian money market instruments in July, led by federal Treasury bills. Foreign investment in the Canadian money market has picked up in recent months, with non-residents purchasing $12.7 billion worth of these instruments since April. This activity occurred against the backdrop of an increase in the supply of Treasury bills, a narrowing of the spread between long and short-term rates, and a weakening of stock prices in most major world markets.

Foreign investors resumed acquisition of Canadian bonds in July, adding $2.0 billion to their portfolios following large government bond retirements in June. Activity in July was focused on Canadian private corporate bonds, split between new issues and secondary market acquisitions. However, non-residents divested Canadian government bonds for a second straight month, this time led by secondary market sales.

Foreign investment in Canadian equities largely related to mergers and acquisitions

Non-resident investors added a further $2.5 billion of Canadian corporate shares to their holdings in July. However, the increase in July was mostly a result of Canadian direct investment acquisitions of foreign firms, and the resulting new issues of Canadian shares to foreign shareholders of the acquired firms. Foreign sales of Canadian stocks on the secondary market moderated the overall inflows in the month, as Canadian stock prices declined a further 2.7% in July.

Canadians acquire foreign equities for a seventh straight month

Canadian investors continued to acquire foreign equities in July, although this was the lowest level of investment in three months. The $2.8 billion investment primarily targeted US corporate shares, as US stock prices fell 2.1% with losses mostly occurring in the last days of the month.

Residents further reduce their holdings of foreign bonds

Canadian divestment of foreign bonds continued in July but at a slower pace. This activity was again concentrated in US government bonds and targeted mid to long-term instruments. The $1.7 billion decline in holdings of foreign bonds in July marked the fifth month of divestment of these instruments totalling $12.1 billion. US long-term interest rates have fallen by nearly half a percentage point since March.

Canadian investment of $191 million in foreign money market instruments reflected acquisitions of sovereign debt and non-financial corporate paper. These outflows were moderated by a reduction in holdings of paper issued by foreign banks.

Chart description: Canadian portfolio investment in foreign securities

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 2011 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 17.

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 Brian Law (613-951-3835; brian.law@statcan.gc.ca) or Éric Boulay (613-951-1872; eric.boulay@statcan.gc.ca), Balance of Payments Division.