Canada's international transactions in securities, January 2014
Canadian investors added $2.3 billion of foreign securities to their holdings in January, a fourth straight month of such investment. At the same time, foreign investors acquired $1.1 billion of Canadian securities, led by equities. As a result, cross-border transactions in securities generated a net outflow of funds for a second consecutive month.
Canadian investors add US bonds and equities to their holdings
Canadians continued to invest in foreign securities in January but at a slower pace compared with the previous two months, adding $2.3 billion worth to their holdings. Acquisitions in the month focused on US bonds and equities, but this activity was moderated by a reduction in Canadian holdings of US money market instruments.
Canadian investment in foreign bonds totalled $1.5 billion and was again led by US government bonds. These acquisitions were partly offset by a $0.8 billion divestment in US Treasury bills, the largest since December 2012. US short- and long-term interest rates both declined in January.
Canadian investors also acquired $1.6 billion of foreign equities in January, all US shares. This marked the highest investment in US shares in a year. The US stock market was down by 3.6% in January, following four straight months of increases.
Foreign investors divest Canadian debt securities and acquire Canadian equities
Foreign investors reduced their holdings of Canadian debt securities by $1.8 billion in January, mainly short-term debt instruments. This followed a $6.6 billion divestment in December.
Non-residents withdrew $1.4 billion from the Canadian money market, led by federal and provincial government paper. This marked the fourth straight month of divestment in federal government paper. During this time, non-residents reduced their exposure to these instruments by $10.2 billion, led by retirements. Foreign purchases of new Canadian private corporate paper moderated the overall divestment in the month.
Foreign holdings of Canadian bonds edged down by $330 million in January. Cross-border activity in Canadian government bonds was subdued in January after a sizable divestment in December. Activity in January reflected a divestment in private corporate bonds, mainly retirements, largely offset by foreign purchases of new federal government business enterprises bonds. Canadian short- and long-term interest rates were both down in January, the latter declining by 36 basis points by month-end. The Canadian dollar depreciated further against the US dollar, down 4.2 US cents at the end of the month.
Foreign investment in Canadian equities was $2.8 billion in January, a fifth straight month of acquisitions totalling $25.5 billion. The Canadian equity market was up for a seventh consecutive month in January and reached its highest level since May 2011.
Note to readers
The data series on international transactions in securities cover portfolio transactions in equity and investment fund shares, bonds and money market instruments for both Canadian and foreign issues. This activity excludes transactions in equity and debt instruments between affiliated enterprises, classified as foreign direct investment in the international accounts.
Equity and investment fund shares include common and preferred equities as well as units/shares of investment funds.
Debt securities include bonds and money market instruments.
Bonds have an original term to maturity of more than one year.
Money market instruments have an original term to maturity of one year or less.
Government of Canada paper includes treasury bills and US-dollar Canada bills.
All values in this release are net transactions unless otherwise stated.
Data on Canada's international transactions in securities for February will be released on April 16.
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