Canada's international transactions in securities, October 2012

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Non-residents acquired $13.3 billion of Canadian securities in October, led by corporate and government bonds. Meanwhile, Canadian investors added $3.2 billion of foreign securities to their portfolios, also focusing on bonds in October.

Foreign investment in Canadian debt led by new issues of corporate bonds

Foreign acquisition of Canadian debt securities strengthened for a fourth straight month, reaching $12.5 billion in October. Investment was entirely comprised of bonds, as non-residents reduced their holdings of short-term paper.

Non-residents acquired $15.5 billion of bonds, led by Canadian private corporate debt. Foreign investors purchased $8.9 billion of Canadian private corporate bonds, mainly new bonds denominated in US dollars and placed in the United States. This inflow was the largest in more than 10 years and coincided with significant overall net new issue activity over the month. Corporate bond yields in the United States were down to near record-low levels in October, while the Canadian dollar traded above par against its US counterpart for a third straight month.

The remainder of the activity in the Canadian bond market was in government debt, both provincial and federal instruments. Non-residents added $4.4 billion of provincial bonds to their holdings, mainly US dollar-denominated new issues. They also acquired $3.6 billion of federal bonds on the secondary market, primarily comprised of shorter-term bonds for a second month.

Chart description: Foreign portfolio investment in Canadian bonds, by issuer

CSV version of chart 1

Non-residents reduced their holdings of Canadian money market instruments by $3.0 billion in October. Treasury bills accounted for $1.5 billion of the divestment, as the overall supply decreased over the month. Foreign holdings of provincial paper were also down by $1.6 billion, the second monthly divestment since December 2011.

Foreign investment in Canadian stocks slows

Non-residents added $0.7 billion of Canadian equities to their portfolios in October, down from a $3.5 billion acquisition in September. Foreign investors were focused on shares of oil and gas extraction firms. Canadian stock prices rose 0.9% in October, ending the month at the highest level since February.

Canadian investment in foreign securities led by bonds

Canadian investors acquired $2.9 billion of foreign bonds in October. Investment in US government bonds was $1.5 billion and targeted instruments with shorter-term maturities. In October, US government bond yields increased to their highest level since April. Canadians also acquired $1.0 billion of non-US foreign bonds with the majority in asset-backed debt securities.

Chart description: Canadian portfolio investment in foreign securities

CSV version of chart 2

Canadian investors added $0.8 billion of non-US foreign stocks to their portfolios while reducing their holdings of US stocks by the same amount. This followed sizeable investments in US stocks in September. US equity prices were down 2% in October while other major world equity indices moved up.